ECJ in favour of cross-border rental losses
The ECJ has delivered its judgment in case C-152/03 Ritter Coulais, concluding that German tax legislation may not hinder taxpayers who are subject to unlimited tax liability in Germany from taking into account rental losses realized abroad.
The case deals with a German couple who earned income in Germany from employment as school teachers but lived in a private family house in France. They requested that negavite income deriving from the property in France would be taken into account in Germany when determining their income tax rate.
According to the German-French tax treaty the income deriving from an immovable property was only taxable in the state where the property was situaded, France. The tax treaty provided, however, that this did not limit the right of Germany to take into account such income when determining the rate applicable to German income taxes. Accordingly, foreign income could be taken into account in Germany for the purposes of determining the rate of taxation. No account would however be taken to foreign losses. Yet this would be the case in a purely domestic situation.
The ECJ conluded that the application of different rules to non-residents infringed the free movement of workers. Read the full text.
