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France: Appeal Court ruling on the deduction in France of foreign final losses



Jacques Taquet

Emmanuel Raingeard

The administrative appeal court of Versailles rendered a decision on February 26 2013 regarding final losses of foreign subsidiaries of a French company. The Court held that French legislation, which does not allow a French parent to deduct tax losses of EU subsidiaries which the latter cannot carry forward because of local legislation which limit the period for the carryover of tax losses, is actually compatible with EU law. The French taxpayer had offset losses of its Italian and Polish subsidiaries. These losses could not be carried forward locally because of Italian and Polish legislation which limit the period for the carry forward of losses.

The court ruled that the restriction is justified and does not go beyond what is necessary to attain the objectives pursued. The Court seems to imply that the decision would have been different had the losses become "final" following a liquidation of the EU subsidiary.

This decision will probably be examined by the French Supreme Court. This will give an opportunity to clarify the Marks & Spencer (C-446/03) ruling that was recently confirmed in the A Oy case (C-123/11). It seems now clear that where the loss of tax losses results from the liquidation of an enterprise, they can be considered as final losses. On the other hand, the solution is far less clear where tax losses are lost as a result of local legislation which limits the period during which losses can be carried forward.

Jacques Taquet (

Tel :+33 1 56 578360

Emmanuel Raingeard (

Tel: +33 1 56 574014

Landwell & Associes – member of the PwC network

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