Fund Taxation Alert 2025-13

On Monday, 18 August 2025, a draft legislative proposal was issued that allows Dutch resident taxpayers, both individuals and entities, who are shareholders in foreign investment funds investing in Dutch shares (referred to as U-turn investors) to request a refund of Dutch dividend withholding tax paid by the foreign fund. The proposed effective date for this change is 1 January 2027. It follows the Dutch Supreme Court’s judgment of 13 September 2024, which affirmed that U-turn investors are entitled under EU law to relief from economic double taxation on Dutch dividends received through foreign investment funds.

Key aspects of the refund process include:

• The refund amount will correspond to the investor's pro rata share of the Dutch dividend withholding tax paid by the foreign fund, based on the investor's shareholding at the time of profit distribution.
• Dutch shareholders must submit refund requests themselves, as funds are not permitted to do so on their behalf. The statute of limitations is five years for individuals and three years for entities.

The government has opened an internet consultation regarding this proposal, meaning that non-resident investment funds can participate in the consultation via the following link. The deadline for submitting responses is 18 September 2025.

Currently, Dutch investment funds benefit from a regime that eliminates economic double taxation of dividends, creating an uneven playing field. Moreover, the proposal applies only to Dutch resident investors, excluding those from other countries.

Input from non-resident investment funds is particularly crucial, as Dutch resident investors will require information from these funds to support their refund requests. Specifically, they will need:

• The percentage of entitlement of the Dutch investor in the profit distribution, which is based on the number of outstanding shares at the time of distribution.
• Detailed information regarding the Dutch dividend withholding tax paid by the fund and the amount of Dutch dividend income for the relevant financial year.

Moreover, it is believed that the limitation to Dutch resident investors may contravene EU law, as non-resident investors would face a higher tax burden on Dutch dividends under the proposed rules.