The Dutch Supreme Court (Hoge Raad)) today issued judgments in cases concerning the Dutch dividend withholding tax as imposed on foreign shareholders. The Dutch high court reached a favorable conclusion for dividends distributed to foreign individuals, finding that the imposition of the withholding tax on these dividend distributions was a restriction on the free movement of capital. However, the court found no similar violation with respect to the withholding tax imposed on dividends distributed to a foreign company.
The cases concern the Dutch dividend withholding tax levied with regards to dividends distributed to two Belgian individuals and to a French company—all held portfolio shareholdings in a Dutch company.
At issue was whether levying the dividend withholding tax resulted in a restriction of the free movement of capital. Although the dividend withholding tax rate was the same for non-residents and residents, the dividend withholding tax was a final levy for non-residents—whereas residents could credit it against their individual (personal) or corporate income tax.
Previously, the Dutch Supreme Court had referred these matters to the Court of Justice of the European Union (CJEU) which, in September 2015, issued a judgment finding: (1) on comparing the tax treatment of resident and non-resident shareholders, the corporate income tax / individual income tax paid by resident shareholders must be included in the comparison; and (2) the final tax burden in both situations must then be compared.
With guidance from the CJEU, the Dutch Supreme Court found the effective tax burden on the Belgian individuals (according to this manner of comparison) was greater, so that there is a violation of the free movement of capital. The individuals, thus, would be entitled to a refund of the dividend withholding tax.
Concerning the French company, the Dutch Supreme Court concluded that the tax burden was not greater than that of a resident company. Therefore, there was no violation of the free movement of capital.
Read a March 2016 report prepared by the KPMG member firm in the Netherlands: Supreme Court renders final judgments in the Miljoen, X and Société Générale cases
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