Netherlands: Withholding tax on dividends received by UK company potentially impermissible under EU law (CJEU judgment)
Different treatment in the Netherlands of resident and nonresident companies would constitute an unjustified restriction of the EU free movement of capital.
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November 8, 2024
The Court of Justice of the European Union (CJEU) on November 7, 2024, held in case C-782/22 that the imposition of a 15% Dutch withholding tax on dividends received by a UK life insurance company from “unit-linked” investment products offered in the Netherlands to UK pension schemes would be impermissible under EU law to the extent there is a direct link between the dividends received and an increase in the UK company’s liabilities to unit-linked policy holders.
- The court held that an increase in the UK company's future payment obligations that is directly related to receipt of the dividends and would result in a deduction when calculating taxable income for a comparable Dutch company, must be taken into account in determining the taxable base of the UK company. In other words, a nonresident company must bear the same effective tax burden on the dividends as a Dutch company.
- Different treatment in the Netherlands of resident and nonresident companies, which would occur if there is a direct link between the dividends received and an increase in the obligations to unit linked policy holders, would constitute an unjustified restriction of the EU free movement of capital. The Dutch courts must answer the question of whether such a direct link exists and whether under Dutch law such dividends are effectively exempt from corporate income tax.
Read a November 2024 report prepared by KPMG’s EU Tax Centre