The European Commission has requested The Netherlands to end the discriminatory taxation of dividends received on shares held by insurance companies established in another Member State or in a European Economic Area (EEA) country (i.e. Norway, Lichtenstein and Iceland).
Dutch insurance companies are not taxed on dividends received on shares held in the framework of unit-linked insurances. They can deduct from dividends received the increase of their commitment to pay dividends to their policyholders. This reduces the corporate tax base concerning these dividends to zero, while any withholding tax is credited.
However, the Netherlands tax insurance companies established in the EU or the EEA receiving Dutch dividends on shares held in the framework of unit-linked insurances, by applying a withholding tax on gross dividends, without the possibility for them to apply for a tax credit in their country of residence.
The Commission considered that a higher taxation of insurance companies established elsewhere in the EU/EEA is incompatible with the free movement of capital under Article 63 of the Treaty on the Functioning of the European Union and with Article 40 of the EEA Agreement.
The request is in the form of a reasoned opinion. In the absence of a satisfactory response within two months, the Commission may refer the Netherlands to the Court of Justice of the European Union (CJEU).
This request is in line with the taxation on the net basis principle as set forth under the CJEU case law in the Commission v. Finland (C-342/10) case.
Therefore, we believe that this request is a very positive sign for EU and non-EU resident insurance companies and pension funds having invested in the Netherlands and other countries having a similar legislation to file withholding tax reclaims against unduly paid withholding tax.
We would advise concerned parties to take the necessary steps as soon as possible in order to safeguard their rights to a reimbursement.
For further information, please do not hesitate to contact us.
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