Cross-Border Losses and W AG: The Beginning of the End of the 'Final Loss Exception'?

Abstract

Cross-border loss utilization has been a contentious issue since the Court’s landmark decisions in Marks & Spencer and Lidl Belgium, which assumed comparability between domestic and cross-border situations and embraced the “final loss exception” for foreign subsidiaries and exempt permanent establishments. Following some uncertainty after Timac Agro and Bevola, in its recent judgment in W AG the Court clearly turned its back on Lidl Belgium and found that domestic and treaty-exempt branches are not comparable in the first place. This article critically examines the Court’s reasoning in W AG, its broader implications, and its relation to other lines of the Court’s jurisprudence in the tax area.