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5.2. Treatment of Foreign Profits / Losses

Losses incurred by resident companies from foreign immovable property or profits generated by foreign permanent establishments cannot be offset against income taxable in Denmark. This rule does not apply to resident companies that have elected for cross-border tax consolidation.

In June 2018, the Court of Justice of the European Union (CJEU) held that the Danish tax law on restriction on deduction of losses was incompatible with the freedom of establishment set forth in Article 49 of the Treaty on the Functioning of the EU, because a Danish company was precluded from claiming as a tax deduction in Denmark, a final loss suffered by its permanent establishment (PE) in Finland, subject to certain conditions. Hence, the CJEU allowed a taxpayer to deduct final losses incurred by its permanent establishment in other Member States and European Economic Area (EEA) countries.

Based on the above judgment, Denmark authorized resident companies to claim, effective from the tax year 2019, deductions for final losses of foreign subsidiaries and permanent establishments and in relation to real estate, subject to the fulfillment of certain conditions.