On November 19, 2015 the European Commission published the key decisions of its November infringement package. One of the key decision mentioned is the Commission’s decision to request the Netherlands to amend the Limitation on Benefits (LOB) clause in the Dutch-Japanese Tax Treaty for the Avoidance of Double Taxation, which entered into force on January 1, 2012.

In the press release issued in this respect, the Commission states that it believes that, on the basis of previous cases such as C-55/00 Gottardo and C-466/98 Open Skies, a Member State concluding a treaty with a third country cannot agree better treatment for companies held by shareholders resident in its own territory, than for comparable companies held by shareholders who are resident elsewhere in the EU/EEA.

The Commission furthermore states that it is of the opinion that similarly, a Member State cannot agree better conditions for companies traded on its own stock exchange than for companies traded on stock exchanges elsewhere in the EU/EEA. According to the European Commission however, under the current terms of the LOB clause, some entities are excluded from the benefits of the tax treaty. This means that they suffer higher withholding taxes on dividends, interest and royalties received from Japan than similar companies with Dutch shareholders or whose shares are listed and traded on “recognised stock exchanges”, which include certain EU and even third-country stock exchanges.

The Commission's request takes 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 EU.

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