EU: CJEU Advocate General opinion on loss making nonresident shareholder receiving dividends subject to withholding tax
Member states cannot require nonresident companies receiving dividends subject to withholding tax to calculate loss in accordance with tax rules of source state.
The Court of Justice of the European Union (CJEU) on June 18, 2026, published the opinion of its Advocate General (AG) in case C‑241/25 that Article 63 of the Treaty on the Functioning of the European Union (TFEU) must be interpreted as precluding legislation of a member state under which a nonresident company receiving dividends subject to withholding tax must calculate its loss in accordance with the tax rules of the source state in order to benefit from the same treatment as that available to resident companies in a comparable situation.
Summary
A French company belonging to a tax consolidated group sought a refund for Swedish withholding tax levied on dividends received in 2012, arguing it was in a loss-making position and that a comparable Swedish resident company would not have been taxed. Swedish authorities and national courts rejected the claim, asserting the company needed to provide a detailed calculation of its individual and group profits and losses under Swedish tax rules.
Relying on previous CJEU decisions, the AG confirmed that once a member state levies tax on dividends for both resident and nonresident taxpayers, their situations become objectively comparable. The AG concluded that the Swedish withholding tax regime disadvantages nonresident companies by requiring them to recalculate losses under source state rules, representing a restriction on the free movement of capital under Article 63 TFEU.
The AG rejected arguments from several member states aiming to justify the rules based on the territoriality principle, balanced allocation of taxing rights, and fiscal cohesion. Addressing Sweden's anti-abuse justification in particular, the AG concluded that accepting proof of losses calculated under the law of the state of residence, combined with administrative cooperation under EU Directive 2011/16/EU, is sufficient to achieve the objective of combating tax evasion and avoidance.
Read a July 2026 report prepared by KPMG’s EU Tax Centre