The case concerned German thin capitalisation provisions, in relation to a loan made from a Dutch company to a German subsidiary company.

The German thin capitalisation rules stated that if a German company's level of debt compared to its equity exceeded a certain ratio, then interest on the debt was recharacterised as non-tax deductible.

But these rules did not apply where the lender was entitled to a German imputation credit. And since only German residents were entitled to such a credit, the exemption from the thin capitalisation rules was only available where one German resident company borrowed from another German resident company.

'I strongly advise multi-national groups with UK, German, French or Spanish subsidiaries which have borrowed cross-border from EU group companies, and have suffered an interest disallowance or have had to put more equity in due to application of thin capitalisation rules, to consider seeking damages for the additional tax they have paid,' said Peter Cussons, international corporate tax partner, at PricewaterhouseCoopers. 'Such a claim could result in damages amounting to hundreds of million of pounds.'