Danish withholding tax exemption for dividends to solely domestic UCITS incompatible with EU law | Deloitte Nederland


Danish withholding tax exemption for dividends to solely domestic UCITS incompatible with EU law

The CJEU ruled that dividends to nonresident UCITS that are comparable to Danish UCITS should be able to benefit from the same tax exemption.

22 June 2018

Facts and circumstances

On 21 June 2018, the CJEU has ruled that the Danish rules on the dividend withholding tax exemption applicable to resident UCITS are incompatible with the free movement of capital principles.

Danish rules

Under Danish law, dividend distributions made by Danish resident companies to qualifying Danish UCITS are exempt from withholding tax. The aim of the Danish legislation is to ensure equality of the tax burden on individuals, whether investing in Danish companies through a UCITS or directly. Danish UCITS that are eligible for the withholding tax exemption are under the obligation to distribute dividends on or to provide an overview to their participants, following which Danish tax is levied from the participants. Dividend distributions to non-resident UCITS, even if they are comparable to Danish UCITS, cannot benefit from the withholding tax exemption.

CJEU judgment

According to the CJEU, this differential treatment infringes the free movement of capital principles. Even though the aim of the Danish rule could in principle justify a differential treatment of non-resident UCITS, Danish law goes beyond what is necessary to achieve that goal. According to the CJEU, the aim of the Danish system could also be achieved if Denmark would provide for the extension of the exemption to qualifying non-resident UCITS, under the condition that these non-resident UCITS fully co-operate with the Danish tax authorities in making clear that they pay a comparable withholding tax upon the distribution of the dividend over a comparable tax base. As long as Denmark does not act in that way, it should extend the withholding tax exemption to non-resident UCITS.


The CJEU’s decision is probably also relevant for the Netherlands. The tax treatment of Dutch fiscal investment institutions (FIIs) has a comparable objective as the Danish rules that were subject to CJEU review: As the tax burden on an individual investing in a Dutch resident company should not be different based on whether he invests directly or via a Dutch resident FII, the withholding tax burden in the latter situation is to be reduced so the tax will be withheld only once. Different from the Danish rules, under which an exemption applied on the dividend distribution to UCITS, the Netherlands rules apply a reduction at the moment the FII distributes the dividends on to its participants.

Despite of these technical differences, a similar decision may be expected from the CJEU when the Dutch FII system is being ruled upon. In relation to this issue, cases are already pending before the CJEU (C-156/17, Köln-Aktienfonds Deka; and C-157/17, X). It is anticipated that this CJEU decision will trigger many non-resident investment funds to consider filing (further) claims for refund of Dutch dividend withholding tax in the Netherlands.

Source: CJEU 21 June 2018, C-480/16 (Fidelity Funds), ECLI:EU:C:2018:480

Vond u dit nuttig?