Under current Dutch law, domestic investment funds benefit from a favorable tax regime, being entitled to a reduction in dividend withholding tax on dividends received, which allows them to offset this tax against the withholding tax they are required to levy on distributions made to Dutch investors.
However, this preferential treatment does not extend to foreign (non-resident) investment funds, which cannot offset the Dutch withholding tax levied on dividends from Dutch companies, resulting in a disparity in tax treatment between domestic and foreign funds. As a consequence, Dutch investors are less incentivized to invest in non-resident investment funds.
Non-resident funds have brought legal challenges against this unequal treatment, particularly following two key judgments by the Dutch Supreme Court dated 23 October 2020 and 9 April 2021. These decisions have raised concerns about potential incompatibility with EU law.
As a result, several complaints were filed with the European Commission (“Commission”), requesting intervention to address the potential breach of EU principles and ensure equal treatment across member states.
On 25 July 2024, the Commission announced the opening of an investigation into the Dutch regime. While it did not confirm the merits of the complaints at that stage, it found sufficient grounds to examine potential violations of EU law.
