On March 3, 2017 the Dutch Supreme Court decided to follow the opinions of the Dutch Advocate General to stay the proceedings of 2 somewhat similar cases and to refer questions to the Court of Justice of the European Union (CJEU). The cases regard the denial of a repayment of Dutch dividend withholding taxes to a foreign investment fund that invested in Dutch shares. Both cases initially were conducted before the Rechtbank Zeeland-West-Brabant (The court of Zeeland-West-Brabant, hereafter: the court). The court decided to stay the proceedings and to refer questions for a preliminary ruling to the Dutch Supreme Court. In his opinions of November 9, 2016 the Dutch Advocate General proposed the Dutch Supreme Court to stay the proceedings and to refer questions to the CJEU for a preliminary ruling. On March 3, 2017 the Dutch Supreme Court subsequently decided to follow the opinions of the Advocate General and to stay the proceedings and to refer questions to the CJEU for a preliminary ruling.
Facts
Facts of ECLI:NL:RBZWB:2016:4828
The facts of ECLI:NL:RBZWB:2016:4828, of which the court decided to stay the proceedings and to refer questions to the Dutch Supreme Court for a preliminary ruling, are as follows:
· The concerned party (X) is an “open-end” investment fund with variable capital that is a resident of the United Kingdom. The activities of X consist of investing the fund’s assets. A limited is the so-called authorized corporate director and in that capacity responsible for managing the concerned party in accordance with the so-called COLL Sourcebook.
· The participants in X can participate in its assets by purchasing shares. The shares are available as “Income shares” (on which dividend is distributed) and “Accumulation shares” (on which dividend is credited).
· X is not a withholding agent in the Netherlands for dividend withholding tax.
· X has requested a repayment of dividend withholding tax that has been withhold at his expense over dividends distributed in the financial years 2003, 2004, 2005 and 2006 on shares held in Dutch entities.
· The Dutch tax authorities have denied these requests.
· X has appealed against the decisions of the Dutch tax authorities.
· X is of the opinion that, especially based on Article 56 EC (nowadays Article 63 of the Treaty on the Functioning of the European Union (Free movement of capital)), he is entitled to a repayment of the Dutch dividend withholding tax withheld at his expense. X is of the opinion that he is comparable to a Dutch resident investment fund that has the status of a fiscale beleggingsinstelling (fiscal investment fund) as meant in Art 28 of the Dutch corporate income tax Act (DCITA).
· The court has come to the conclusions that because of the position of X in the underlying case it has to be assessed whether X is objectively comparable with a Dutch resident fiscale beleggingsinstelling as meant in Article 28 of the DCITA.
Facts of ECLI:NL:RBZWB:2016:4829
The facts of ECLI:NL:RBZWB:2016:4829, of which the court decided to stay the proceedings and to refer questions to the Dutch Supreme Court for a preliminary ruling, are as follows:
· The concerned party (Y) is an investment fund that was incorporated under German law that is a resident of Germany. Y is a so-called UCIT, an institution for collective investment in securities (Directive 2009/65/EC of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS)). The activities of Y consist out of investing the fund capital. Y issues shares that are listed on the German stock exchange, but the trading of the shares takes place via the so-called ‘global stream system’. Y has issued only one sort of shares.
· B GmbH is the management company of Y and acts to third parties as Y’s representative. The securities in which is invested for the account for and risk of Y are held by Sparkasse KölnBonn. The legal rules governing A and Sparkasse KölnBonn are since 2004 laid down in the Investmentgesetz (and before that in das Gesetz über Kapitalanlagegesellschaften).
· Y a.o. invested in shares in entities that are resident in the Netherlands. With taking into account Article 13 of the Dutch German DTA 15% Dutch dividend withholding tax has been withheld over the dividends that Y has received on these shares in the financial years 2002/2003, 2004/2005, 2005/2006, 2006/2007 and 2007/2008.
· Y is not a withholding agent in the Netherlands for dividend withholding tax.
· In the underlying financial years in Germany Y was exempted from German income taxes as Sondervermögen.
· Based on a fiction private participants in a Sondervermögen are considered to have received a certain minimum amount of dividends for German tax purposes. The (additional) amounts that as a consequence of that are taxed (next to the amounts that were actually distributed) are being called Ausschüttungsgleiche Erträge’. For all the financial years involved half of the tax base (actual distributions received plus the possible ‘Ausschüttungsgleiche Erträge’) was tax exempt at the level of German private investors.
· Until 2004, under the German law then in place, private participants in a Sondervermögen could fully settle the Dutch dividend withholding tax that was withheld with the German taxes due over the half of the tax base that was taxed in Germany. For the years 2004 to 2008, due to a change in German law, this settlement was limited to 50% of the Dutch dividend withholding tax withheld. Furthermore for those years (2004-2008) settlement was not allowed if the Sondervermögen opted to deduct the foreign source taxes from its income.
· Y has requested a repayment of the dividend withholding taxes that have been withheld at its expenses over the Dutch dividends that Y has received in the financial years 2002/2003, 2004/2005, 2005/2006, 2006/2007 and 2007/2008.
· The Dutch tax authorities have denied these requests.
· Y has filed letter of contest against these decisions and requested that its contests would be treated as appeals. The Dutch tax authorities have agreed on these requests and forwarded the request to the court.
· Before the court it is dispute whether the Dutch tax authorities rightfully denied Y’s requests for a repayment of the dividend withholding taxes that were withheld at the expenses of Y.
· X is of the opinion that, especially based on Article 56 EC (nowadays Article 63 of the Treaty on the Functioning of the European Union (Free movement of capital)), he is entitled to a repayment of the Dutch dividend withholding tax withheld at his expense. X is of the opinion that he is comparable to a Dutch resident investment fund that has the status of a fiscale beleggingsinstelling (fiscal investment fund) as meant in Art 28 of the Dutch corporate income tax Act (DCITA).
· The court has come to the conclusions that because of the position of X in the underlying case it has to be assessed whether X is objectively comparable with a Dutch resident fiscale beleggingsinstelling as meant in Article 28 of the DCITA.
The questions referred for a preliminary ruling
In line with the opinion(s) of the Advocate General in both cases as delivered on November 9, 2016, the Dutch Supreme Court has decided to stay the proceedings and to refer question to the CJEU for a preliminary ruling.
Questions referred for a preliminary ruling in ECLI:NL:RBZWB:2016:4828
In case ECLI:NL:RBZWB:2016:4828, the Dutch Supreme Court decided to refer the following questions to the CJEU for a preliminary ruling:
1. Does Article 56 EC (currently Article 63 TFEU) preclude that a non-Dutch resident investment fund is denied a repayment of Dutch dividend withholding tax that has been withheld at its expenses over dividends it received from Dutch resident entities, solely because of the fact that said investment fund is not a withholding agent for Dutch withholding taxes, whereas such a repayment of dividend withholding tax is granted to a fiscale beleggingsinstelling that annually distributes its investment results to its shareholders or participants with withholding Dutch dividend withholding taxes over such distributions?
2. Does Article 56 EC (currently Article 63 TFEU) preclude that a repayment of withholding taxes is denied to a non-Dutch investment fund – whereas such a repayment is granted to a Dutch fiscale beleggingsinstelling – if this means that the investment fund is hampered in attracting investors that are residing in the Netherlands?
For further information click here to be forwarded to the decision of the Dutch Supreme Court to stay the proceeding and to refer questions to the CJEU.
Questions referred for a preliminary ruling in ECLI:NL:RBZWB:2016:4829
In case ECLI:NL:RBZWB:2016:4829, the Dutch Supreme Court decided to refer the following questions to the CJEU for a preliminary ruling:
1. Does Article 56 EC (currently Article 63 TFEU) preclude that a non-Dutch resident investment fund is denied a repayment of Dutch dividend withholding tax that has been withheld at its expenses over dividends it received from Dutch resident entities, solely because of the fact that said investment fund is not a withholding agent for Dutch withholding taxes, whereas such a repayment of dividend withholding tax is granted to a fiscale beleggingsinstelling that annually distributes its investment results to its shareholders or participants with withholding Dutch dividend withholding taxes over such distributions?
2. Does Article 56 EC (currently Article 63 TFEU) preclude that a non-Dutch resident investment fund is denied a repayment of Dutch dividend withholding tax that has been withheld at its expenses over dividends it received from Dutch resident entities, on the grounds that the investment fund does not satisfyingly demonstrates that its shareholders or participants meet the conditions as set out in Dutch regulations?
3. Does Article 56 EC (currently Article 63 TFEU) preclude that a non-Dutch resident investment fund is denied a repayment of Dutch dividend withholding tax that has been withheld at its expenses over dividends it received from Dutch resident entities on the grounds that it does not annually fully distributes it investment result to its shareholders or participants no later than the eight month of the financial year, even if in its country of residence based on the laws that are in force the investment result for as far as it has not been distributed (a) is considered to have been distributed and/or (b) is included in the taxable base of its shareholders or participants as if this (non-distributed) investment result was distributed whereas such a repayment of dividend withholding tax is granted to a fiscale beleggingsinstelling that annually fully distributes its investment results to its shareholders or participants with withholding Dutch dividend withholding taxes over such distributions?
For further information click here to be forwarded to the decision of the Dutch Supreme Court to stay the proceeding and to refer questions to the CJEU.
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