Netherlands: Referral to CJEU of issue relating to taxation of dividend income received by non-resident

The Court of Appeals in ‘s-Hertogenbosch today issued an opinion referring to the Court of Justice of the European Union (CJEU) the issue of whether the CJEU’s judgment in the Société Générale case (C-17/14, 17 September 2015) applies to all cases when a non-resident receives dividend income from another member state.

The taxpayer is a UK-based life insurance company that received dividend income from the Netherlands subject to 15% Dutch withholding tax. The taxpayer sought to deduct costs directly related to such dividend income (i.e., costs attributable to the increase in the company's future payment obligations) in determining the amount of its income subject to Dutch tax.

In the Société Générale case, a French bank received dividend income from the Netherlands subject to 15% Dutch withholding tax, and the CJEU held that the bank was only entitled to a deduction of the costs relating to the collection of the dividends, and not to the directly related expenses.

The Dutch tax authorities have used the CJEU’s judgment in the Société Générale case as a guiding precedent for all cases concerning non-residents that receive dividend income from the Netherlands. A similar approach has also been taken by tax authorities in many other member states.

The taxpayer argued before the Dutch Court of Appeals that although the CJEU’s judgment in the Société Générale case is not necessarily wrong, the facts in Société Générale are fundamentally different from its facts because the dividend income was critical to its business model and the services it offered its clients. In light of this difference, the Société Générale case is not the leading case for resolving the dispute, and other CJEU net taxation judgments providing for a deduction of the directly related expenses must be used as guidance here.

Read a December 2022 report prepared by the KPMG member firm in the Netherlands