Double taxation and double non-deductibility of losses: impediments to the freedom of establishment. An analysis of the regulations and practices in the UK and Poland

This thesis addresses the question of the implementation of the freedom of establishment (Article 49 Treaty on the Functioning of the European Union) in two EU member states with particular emphasis on impediments to the freedom. It is argued that despite a very long-standing and clear legal prohibition on restrictions to the freedom of establishment, there remain many practical obstacles which inhibit the right. This thesis’ hypothesis is that double taxation and double non-deductibility of losses constitute hurdles to a complete freedom of establishment. As far as the methodology is concerned the approach chosen to test the hypothesis is as follows: first to set out a theoretical framework based on the non-Discrimination principle, the basic principles of the freedom of establishment right and the exemptions to that right. Then, right of freedom of establishment is tested as against the practice in three ways, each considered in a chapter: the requirement of the nationality prerequisite; the double taxation of companies operating in more than one EU member state; and the practice of double non-deductibility of losses. The research is inspired by the case study of an author’s businesses, SMEs who trade cross-border in the United Kingdom (UK) and subsequently in Poland. From a study of the implementation practices of both the UK and Poland this thesis suggests that the following form serious restrictions: double taxation and non-deductibility of losses. Moreover, case law and existing literature identify taxation as a core impediment to the exercise of the freedom of establishment as taxation matters deter companies from relocating their whole business. This thesis examines how to balance the freedom of establishment and the tax powers of the EU member states. Taxation also plays a fundamental role in the development of the EU’s internal market. The thesis seeks a pragmatic solution which might be implemented effectively without resorting to substantial international harmonization