On December 14th, a Dutch court of appeals issued a decision in which it referred the case to the European Court of Justice (ECJ) for a preliminary ruling.
Facts of the case
The case concerns a UK resident (investment) company which receives dividends on shares in Dutch (listed) companies. The investment results that this company achieves are matched by obligations arising from contracts with clients of that company. If the company achieves positive investment results, its liabilities to clients increase by approximately the same amount.
The court is of the opinion that the claimant is the beneficiary (meaning the claimant is not tax transparent and can enjoy the income) as well as the beneficial owner (meaning the claimant has the full right to use and enjoy the income) of the income. Moreover, the Claimant cannot be compared with a subjectively exempt pension body in the Netherlands that is entitled to a refund of dividend tax.
The court of appeals is faced with the question of how to assess which costs, as directly related to dividends, should be taken into account when comparing a non-resident taxpayer with a resident taxpayer. In view of the case law of the ECJ (and in particular in view of Société Générale and College Pension Plan), it is not possible to determine unequivocally on the basis of which legal standard that question should be answered. Therefore, after a discussion of the existing case law in European law, the court of appeals poses the following question.
Referral for preliminary ruling from the ECJ
Does Article 63(1) TFEU preclude legislation such as the present one, according to which dividend payments by (listed) companies established in the Netherlands to a company established in another Member State, which, to cover future payment obligations, include shares in that ( listed companies are subject to a withholding tax at a rate of 15% on the gross amount of those dividend payments, while the tax burden on dividend payments to a company established in the Netherlands would be nil in all other equal circumstances, because the calculation of the tax base for the profit tax to which the latter company would be subject, account is taken of the costs entailed by an increase in the future payment obligations of the company, which increase corresponds almost entirely to a (positive) change in the value of the investments, also even if the receipt of dividend does not as such lead to a change in the value of those liabilities?
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