Taxation: European Commission decides to refer Greece to the Court of Justice of the EU regarding its income tax rules for businesses with foreign branches

The European Commission decided today to refer Greece to the Court of Justice of the European Union regarding its income tax legislation, which differentiates tax treatment between business losses incurred domestically and losses in another EU/EEA state. At the same time, both categories of business profits are subject to tax in Greece.

The Greek legislation in question, as interpreted by a Ministerial Circular, differentiates tax treatment with respect to tax loss recognition between resident taxpayers with enterprises established solely in Greece and resident taxpayers with at least part of their enterprises established in other EU/EEA States. While both business profits originating domestically and those originating in another EU/EEA state are subject to taxes in Greece, the treatment of losses incurred abroad is limited.

This difference in tax treatment is contrary to Articles 49(1) TFEU (in conjunction with Article 54 TFEU) and 31(1) EEA Agreement (in conjunction with Article 34 EEA Agreement) and it constitutes a restriction to the freedom of establishment.

Background

The infringement procedure was initiated in 2018. A letter of formal notice was sent in 2018, followed by a reasoned opinion in 2019.

For More Information

The key decisions in the October 2020 infringement package

FAQ on infringements procedures, see MEMO/12/12.

On the EU infringements procedure