InJ. B. G. T. Miljoen(C-10/14),X(C-14/14), and Société Générale SA(C-17/14) vStaatssecretaris van Financiën(17 September 2015), the CJEU found that Dutch legislation which imposes withholding tax on non-residents, without an appropriate mechanism for its deduction or refund, is in breach of EU law principles.
Both Mr Miljoen and X were Belgium resident and had been paid dividends on shares they owned in Dutch listed companies. The Dutch tax authorities considered that withholding tax was due on the dividends under Dutch law. However, both Mr Miljoen and X contended that, as non-resident taxpayers, they had suffered discriminatory treatment prohibited by TFEU Art 63.
Société Générale, a French company, owned shares in Dutch listed companies and had suffered withholding tax on dividends at the rate of 15%. Société Générale had been allowed to offset the withholding tax against its corporation tax liability in France until it had been loss making. The Dutch tax authorities had then refused to reimburse it. Société Générale also contended that it had suffered discriminatory treatment.
Dutch withholding tax on dividends is applied to resident shareholders and to non-resident shareholders at the same flat rate. The issue was therefore whether by making the mechanism for deducting or reimbursing the withheld tax solely available to resident taxpayers, the Dutch legislation was in breach of TFEU as a restriction on the movement of capital.
The CJEU noted that it was for the referring court to decide whether the burden imposed on non-residents was heavier than that imposed on residents. In relation to natural persons, it observed that the comparison must be run on a yearly basis by reference to all dividends paid by Dutch companies to a taxpayer; and taking into account the exemption of capital provided for under Dutch legislation. For the purpose of comparing the tax burden of companies, only expenses which were directly linked to the actual payment of the dividends must be taken into account.
In the event that a difference in treatment was established, it could be justified neither by a difference in situation between resident and non-resident taxpayers, nor by the effects of the relevant double tax treaties, as neither of them fully eliminated the effect of the withholding tax.
Why it matters: The case is generally good news for taxpayers who hold shares in Dutch companies. However, it remains to be seen whether in these particular three cases, the domestic courts will find that a difference in tax burden between residents and non-residents is established.
InJ. B. G. T. Miljoen(C-10/14),X(C-14/14), and Société Générale SA(C-17/14) vStaatssecretaris van Financiën(17 September 2015), the CJEU found that Dutch legislation which imposes withholding tax on non-residents, without an appropriate mechanism for its deduction or refund, is in breach of EU law principles.
Both Mr Miljoen and X were Belgium resident and had been paid dividends on shares they owned in Dutch listed companies. The Dutch tax authorities considered that withholding tax was due on the dividends under Dutch law. However, both Mr Miljoen and X contended that, as non-resident taxpayers, they had suffered discriminatory treatment prohibited by TFEU Art 63.
Société Générale, a French company, owned shares in Dutch listed companies and had suffered withholding tax on dividends at the rate of 15%. Société Générale had been allowed to offset the withholding tax against its corporation tax liability in France until it had been loss making. The Dutch tax authorities had then refused to reimburse it. Société Générale also contended that it had suffered discriminatory treatment.
Dutch withholding tax on dividends is applied to resident shareholders and to non-resident shareholders at the same flat rate. The issue was therefore whether by making the mechanism for deducting or reimbursing the withheld tax solely available to resident taxpayers, the Dutch legislation was in breach of TFEU as a restriction on the movement of capital.
The CJEU noted that it was for the referring court to decide whether the burden imposed on non-residents was heavier than that imposed on residents. In relation to natural persons, it observed that the comparison must be run on a yearly basis by reference to all dividends paid by Dutch companies to a taxpayer; and taking into account the exemption of capital provided for under Dutch legislation. For the purpose of comparing the tax burden of companies, only expenses which were directly linked to the actual payment of the dividends must be taken into account.
In the event that a difference in treatment was established, it could be justified neither by a difference in situation between resident and non-resident taxpayers, nor by the effects of the relevant double tax treaties, as neither of them fully eliminated the effect of the withholding tax.
Why it matters: The case is generally good news for taxpayers who hold shares in Dutch companies. However, it remains to be seen whether in these particular three cases, the domestic courts will find that a difference in tax burden between residents and non-residents is established.
