The Court of Appeal of 's-Hertogenbosch has ordered the Dutch tax authorities to refund approximately €53.8 million in dividend withholding tax to a UK-resident unit-linked insurer, ruling that EU free movement of capital principles override the domestic treatment that left the insurer bearing a 15% withholding tax that a comparable Dutch company would never have paid. The decision clarifies the beneficial ownership analysis for unit-linked structures and sets out the conditions under which foreign insurers can pursue similar refund claims.
A UK-resident insurance company operating unit-linked pension insurance products successfully obtained a refund of Dutch dividend withholding tax on dividends received from shares in Dutch companies. The insurer's clients were primarily institutional pension providers and employers. Premiums collected from policyholders were invested in segregated unit-linked pools, though these pools existed solely as accounting compartments within the insurer's own balance sheet.
The Dutch tax authorities initially denied the refund requests. Following litigation, the Court of Appeal referred questions to the Court of Justice of the European Union, which delivered its preliminary ruling on 7 November 2024 (C-782/22).
The insurer was the beneficial owner of the dividends
The Court held that the insurer, not the policyholders, was both the recipient entitled to the dividends (opbrengstgerechtigde) and the ultimate beneficial owner (uiteindelijk gerechtigde).
The insurer legally and economically owned the shares; the unit-linked funds were purely accounting segregations and did not constitute separate legal or beneficial ownership structures. Policyholders held only contractual claims against the insurer and had no ownership rights in the underlying investments.
Because the insurer retained discretion over investment decisions and dividend proceeds, the Dutch tax authorities failed to demonstrate that it lacked free disposal over those dividends.
The insurer was not comparable to a Dutch exempt pension fund
The Court rejected the insurer's argument that it should be treated like a Dutch tax-exempt pension fund.
Although the insurer ultimately served pension-related purposes, it did not satisfy several core conditions applicable to Dutch exempt pension funds, including requirements relating to permitted activities and profit allocation. A refund on that basis was therefore unavailable.
EU law nevertheless required a refund
Applying the CJEU's preliminary ruling, the Court found that denying the refund violated the free movement of capital under Article 63 TFEU.
A Dutch-resident company in a comparable position would effectively bear no Dutch corporate income tax on the investment returns, because increases in investment income would be directly offset by corresponding increases in liabilities owed to policyholders, reducing taxable profit to nil under ordinary Dutch profit determination rules.
The UK insurer, by contrast, suffered an irrecoverable 15% Dutch withholding tax. That disparity constituted a restriction on the free movement of capital prohibited by EU law.
Outcome
The Court of Appeal allowed the appeal and ordered a refund of approximately €53.8 million in Dutch dividend withholding tax. It also confirmed that refund claims filed by a separate group company (Pensions) were procedurally inadmissible, since that entity remained in existence and had not been succeeded by universal title.
Practical significance for foreign investors and insurers
This judgment carries significant implications for foreign insurance companies and investment structures holding Dutch shares through unit-linked arrangements. It confirms that a unit-linked insurer can itself qualify as the beneficial owner of dividends for Dutch withholding tax purposes, and that such insurers are not automatically comparable to Dutch exempt pension funds.
Nonetheless, where a comparable Dutch taxpayer would effectively bear no corporate income tax due to matching policyholder liabilities, EU law may entitle the foreign insurer to a full dividend withholding tax refund. Affected groups should review their Dutch withholding tax positions and any open assessment periods accordingly.
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