Recent Advocate General Opinions

German Branch Tax

Advocate General Leger issued his opinion in the German CLT-UFA case on 14 April 2005. As expected the Advocate General found that a higher tax rate for companies which are not subject to unlimited taxation, i.e. non-resident companies with German branches, was contrary to the freedom of establishment (Article 43 of the EC Treaty).

Until 2000, German tax law provided that permanent establishments were subject to tax at a rate of 42%, whereas companies were taxed at 45% with regard to retained profits and at 30% with regard to distributed profits. The Luxembourg CLT-UFA SA claimed that this difference in treatment was discriminatory, and therefore applied for a reduction of the tax rate from 42% to 30%. Non-resident companies with German branches should consider formally making all appropriate claims in advance of the ECJ judgement with respect to income arising up until the year 2000.