In Emerging Markets Series of DFA Investment Trust Company v Dyrektor Izby Skarbowej w Bydgoszczy (C-190/12 – 10 April 2014) the CJEU ruled that the levy of withholding tax on dividends paid to investment funds established outside the EU was in breach of European law principles.
The court first noted that the tax treatment of the dividends must be assessed in the light of TFEU art 63 (free movement of capital) not art 49 (freedom of establishment). The national rules at issue did not apply exclusively to situations where the parent company exercises decisive influence on the company paying the dividends.
Under Polish corporation tax dividends paid by a Polish company to an investment fund established outside the EU were subject to a 19% withholding tax at source whereas those dividends were exempt when paid to a Polish investment fund.
The court considered that this difference...
