The Right To Claim A Refund Of Dividend Tax Among Entities In A Comparable Situation

Author:Ms Christina Scicluna
Profession:GANADO Advocates

In response to a request for a preliminary ruling from the Supreme Court of Netherlands, the Court of Justice of the European Union (Seventh Chamber) ("CJEU") delivered its opinion on the 30 January 2020, regarding the important issues between, on the one hand the autonomy of Member States' power to impose taxes and on the other hand the requirement to ensure that the fundamental freedoms laid down within Article 63 TFEU1 are adhered to.

The request to the Court in the present case was made in proceedings between Köln-Aktiendfonds Deka ("KE Deka") and the State Secretary for Finance, Netherlands concerning the refund of dividend tax withheld from KA Deka in respect of share dividends received from companies established in Netherlands.

By means of background, the Netherlands regime relating to fiscal investment enterprises ("FIEs") is intended to enable natural persons and small investors to make collective investments in certain type of assets. The aim of this regime is to bring the tax treatment applicable to private individuals who invest through an FIE in line with the tax treatment of private individuals who make investments on an induvial basis. For this purpose, FIEs are subject to a zero corporation tax rate and also benefit from the refund of dividend tax withheld on dividends received in the Netherlands. The FIE regime is regulated by a particular law in the Netherlands which states that an FIE is to meet certain conditions in order for an investment undertaking to qualify as an FIE, one of those conditions being the obligation on the investment undertaking to distribute income to its shareholders or participants within a certain time period.

The dispute which arose in the main proceedings of this case, and the questions which were referred to the CJEU for a preliminary ruling related to the fact that KA Deka, an investment fund constituted under German Law, had received dividends which were distributed by companies established in Netherlands, which dividends were subject to a tax of 15% which was withheld at source. KA Deka, unlike an investment fund established in the Netherlands meeting the conditions enabling it to qualify as an FIE, was not able to benefit from the repayment of that tax.

KA Deka applied to the Netherlands tax authorities for a refund of the 15% tax deducted from its dividends, however the Netherlands Inspector of Taxes rejected the application and KA Deka proceeded with bringing an action before the District...

To continue reading