Foreign tax losses can be accounted for
ECJ rules that foreign losses can be used to offset tax
European Union tax authorities must take into account financial losses
incurred by taxpayers in a foreign EU member state, the European Court of
Justice has ruled.
Judges said Germany broke European rules guaranteeing the freedom of movement
of EU citizens between member states by refusing to allow a German couple
working in Germany to claim financial losses associated with living in a house
in France, rather than renting it out. Such housing costs can be legitimately
set against tax if the home is in Germany.
The court said EU law ‘precludes national legislation’ that prevents EU
citizens working in their home country from having ‘income losses relating to
their own use of a private dwelling in another member state to be taken into
account’ when assessing taxation. ‘Unfavourable treatment of non-resident
taxpayers is not justified’ in this way,’ it added.