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AG: loss-making parents keep foreign tax credit for later profits
AG Norkus proposes a loss-making parent whose Greek dividends cut its loss carryforward must be able to credit the Greek tax once those dividends produce domestic tax; Article 4(1) of Directive 90/435 has direct effect.
By Taxxa AI OyPublished 5 November 2026
Advocate General Rimvydas Norkus proposed on 5 November 2026, in his Opinion in Case C-546/25
Europa (Beteiligungsgesellschaft v Finanzamt B) on a Bundesfinanzhof reference, the following: Article 4(1), second indent, of Directive 90/435/EEC precludes definitively refusing to credit Greek tax on Greek dividends received by a German parent in loss years, where those dividends reduced its loss carryforward and later produce German taxEuropa; and the parent can invoke the provision directly before national courts where a conforming interpretation of domestic law is impossible.
The German company SA was the sole shareholder of the German company C SA until their 1997 merger; C SA held 76.8% of the Greek company AE, and SA's stake reached 93.1% in 1999. Both German companies were loss-making, SA from 1993 to 2001 and C SA from 1993 to 1996. The Greek dividends, taxed in Greece, were added to the German taxable result, which stayed negative, and so cut the loss carryforwardsEuropa; Germany refused any credit for the Greek tax, whether in the receipt years 1997 to 1999 or in 2002, the first year SA turned a profitEuropa. German law allowed the credit only in the dividend yearEuropa, and the Greek-German double-taxation convention credited 30% of gross dividends.
On the first question, the cap in Article 4(1), limiting the credit to the amount of the corresponding domestic tax, is an amount cap, not a time barEuropa: it requires no refund in the loss yearEuropa and no credit beyond the corresponding domestic taxEuropa, the limit the Court confirmed for the credit method in FII, Accor and Haribo. But where the dividends are taxed in effect later, through the reduced loss carryforward, the credit must be able to follow that deferred effectEuropa, since the credit is the corollary of taxing the dividends. The Advocate General transposes the exemption-method case law, Cobelfret, KBC Bank and Brussels Securities, which looks at concrete fiscal effect rather than formal relief mechanisms, to the credit method: the domestic annuality principle cannot trap the relief in a loss year while the burden of the dividends spans several yearsEuropa, and effet utile forbids keeping the disadvantage across periods while confining the relief to one where it necessarily failsEuropa.
On the second question, once Germany had chosen the credit method, the obligation is unconditional and sufficiently preciseEuropa, following Becker, Marks & Spencer and Cobelfret: dividends may be taxed, but the subsidiary's tax on the same profits must be credited up to the corresponding domestic taxEuropa. Carrying the credit forward is not a new stand-alone benefit but the necessary form the Article 4(1) credit takes when the corresponding domestic tax appears only laterEuropa; the national court must disapply the blocking ruleEuropa. Direct effect founds neither a right to refund of excess foreign tax nor a credit exceeding the domestic tax on the dividends at issue, nor necessarily a refund in the loss yearEuropa.
At the Court's request the Opinion addresses only the first two questionsEuropa; the freedom-of-establishment questionEuropa and the question on dividends received indirectly, through the merged domestic subsidiaryEuropa, are left over. The Opinion proposes that the Court answer both questions affirmatively, capped in each case at the corresponding domestic tax produced by the dividendsEuropa.
Legal basis: Article 4(1), second indent, of Directive 90/435/EEC.
A loss-making German parent that received intra-EU dividends should claim the foreign tax credit against the later domestic tax generated by the loss-carryforward reduction, invoking Article 4(1) directly if the tax office refuses a carryforward.