TaxCorporate TaxECJ ruling could set withholding tax precedent

ECJ ruling could set withholding tax precedent

A European Court of Justice ruling on the withholding tax levy in France could see further cases brought against other EU states

ECJ ruling could set withholding tax precedent

A WITHHOLDING TAX RULING is to be handed down from the European Court of Justice (ECJ) and could lead to investment funds making similar claims against countries across Europe.

The ruling concerns the French withholding tax regime, and according to France could see a €4.2bn rebate paid out to thousands of claimants, represented by nine claimants is bringing the case.

Similar cases being made against several EU member states by portfolio investors could reach €20bn, analysts said.

Various EU states – including France, where the rate is set at 15% – enforce a withholding tax on dividend payments to foreign investment funds, while similar domestic investors are exempt.

EU and US-based institutional investors argue that such rules contravene EU law and amount to discrimination – notably of the free movement of capital provisions of the Treaty on the Functioning of the European Union (TFEU).

The TFEU states there must be no restriction on the movement of wealth between member states, and between member states and third party countries.

Kit Dickson, tax partner at Deloitte, said that while the decision by the ECJ on France will be watched closely by tax authorities across the EU and portfolio investors globally alike, the UK exchequer will not be affected as it does not levy a withholding tax on dividends.

He added: “Given the general principles can apply to various types of portfolio investors in the EU and elsewhere the total value of claims by European and non-European investors across the EU could be as high as €20bn.

“The questions facing the ECJ in this case are whether foreign investment funds are sufficiently comparable to French investment funds so as to be treated as tax-exempt and whether non-EEA funds should be entitled to the same benefit and if so, is there any justification for the application of a higher tax burden by the French authorities. Given the potential value of claims, the French tax authorities have also requested that the ECJ consider blocking further claims by applying a temporal limitation.”

The nine claimants in the case are  Santander, Cartera Mobiliaria, Alltri Inka, DBI-Fonds, SICAV KBC Select Immo, SGSS Deutschland Kapitalanlagegesellschaft, International Values Series of the DFA Investment Trust, Continental Small Series of the DFA Investment Trust, SICAV GA Fund B and AMB Generali Aktien Euroland.

The ruling is expected on 10 May.

Related Articles

EU divided over radical tax reforms targeting tech giants

Corporate Tax EU divided over radical tax reforms targeting tech giants

2w Alia Shoaib, Reporter
Post-Brexit surge of EU tax cases expected

Corporate Tax Post-Brexit surge of EU tax cases expected

1y Richard Crump, Writer
CIoT urges government to rethink VAT approach to online traders

Corporate Tax CIoT urges government to rethink VAT approach to online traders

1y Richard Crump, Writer
UK votes to leave EU – accountancy profession reacts

Accounting Firms UK votes to leave EU – accountancy profession reacts

1y Fraser Simpson, Reporter
European inquiry into Panama Papers receives go-ahead

Administration European inquiry into Panama Papers receives go-ahead

1y Fraser Simpson, Reporter
EC plans new measures to improve tax transparency

Corporate Tax EC plans new measures to improve tax transparency

1y Richard Crump, Writer
Roy-Chowdhury: International tax policy should be closely aligned with the EU

Corporate Tax Roy-Chowdhury: International tax policy should be closely aligned with the EU

1y Chas Roy-Chowdhury
Post-Brexit Britain ‘open for business’ as Osborne to slash corporate tax rate

Corporate Tax Post-Brexit Britain ‘open for business’ as Osborne to slash corporate tax rate

1y Fraser Simpson, Reporter