Supreme Court requests for more detailed information following CJEU’s Fidelity Funds judgment
Recently, the Court of Justice ruled that the Danish exemption of withholding tax for dividend distributions to investment funds is incompatible with EU law. On the back of this, the Court now asks whether this also answers questions in pending Dutch proceedings.
25 July 2018
Requests for a preliminary ruling on dividend withholding tax
For years now, certain sections of the legislation on the levy of dividend withholding tax are said to be contrary to EU law. One off the issues disputed regards the dividend withholding tax deduction for fiscal investment institutions. The provisions governing this deduction are possibly more favourable to domestic investment institutions than to similar investment funds established in other countries. In 2017, the Supreme Court submitted requests for a preliminary ruling to the European Court of Justice in two cases. It wanted to obtain clarity about whether this tax treatment is indeed permitted under EU law.
On 21 June 2018, the Court of Justice ruled in the Fidelity Funds case, involving a Danish regulation, that this constitutes a violation of EU law. Under Danish tax law, dividend distributions to Danish investment funds were exempted from Danish withholding tax, while such exemptions did not apply to dividends paid to foreign UCITS. This difference in treatment could not be justified.
Court of Justice request
Following the judgment in the Danish issue, the Court of Justice sent the Supreme Court a letter with the question whether it wished to uphold its request for a preliminary ruling in the two Dutch cases. The Court of Justice thus seems to hint at a withdrawal of the Dutch proceedings, as the Danish judgment would provide sufficient clarity to end the Dutch discussion.
On 19 July 2018, the Supreme Court invited all parties involved (the parties to the proceedings, third parties intervening in the proceeding, and the Advocate General) to respond to the request by the Court of Justice. In its initial response the Supreme Court states that it is not immediately certain whether the Fidelity Funds judgment includes all the required useful pointers for clarifying the questions asked in the Dutch proceedings.