Today, the final decision of the Dutch Supreme Court in three cases that had previously been referred to the Court of Justice of the European Union (CJ) for a preliminary ruling (joint cases Miljoen (C-10/14), X (C-14/14) and Société Générale S.A. (C-17/14)) has been published. The cases deal with refund requests of the Dutch 15% withholding tax imposed on dividends paid to two individual taxpayers resident in Belgium and one corporate taxpayer resident in France.
Based on these judgments, individuals residing abroad who have portfolio shareholdings in Dutch companies should review their tax position and could possibly apply for a (partial) refund of Dutch dividend withholding tax provided a tax treaty between the State of residence and the Netherlands doesn’t result in an effective credit of the Dutch withholding tax with the income tax in the State of residence. This refund can be claimed for the past three, and maybe even five years.
The CJ had ruled that a comparison between the tax burdens of resident and non-resident taxpayers with respect to the dividend income has to be made based on the total tax burden suffered by resident taxpayers (i.e. personal/corporate income tax ) and non-resident taxpayers (i.e. final withholding tax). In the cases Miljoen and X, the CJ had decided that capital exempted from income tax (“heffingsvrij vermogen”) must be taken into account in determining the total income tax on shares held in Netherlands companies. The CJ had stated that it is for the Dutch Supreme Court to decide how to take this into account. In today’s judgment, the High Court decided that, when determining the total income tax due on all shares in Netherlands companies held by a non-resident individual, the capital exempted from income tax can fully be attributed to the shares held in Netherlands companies. This means that the capital exempted from income tax does not have to be divided pro rata between all shares held in Netherlands companies and other capital, which is a beneficial outcome for the taxpayer.
In the case of Société Générale, the CJ had ruled that the Dutch Supreme Court can take account (only) of expenses which are directly linked to the actual payment of the dividends. The CJ furthermore had decided that neither financing costs concerning the acquisition of shares, nor purchased dividends are directly linked to the actual payment of the dividends. Following this decision, the Dutch Advocate General rendered a supplemental opinion in which he concluded that the Dutch Supreme Court should disregard the finding of the CJ that (effectively) purchased dividends are not directly linked to the dividends received by Société Générale and advised that the Supreme Court should refer the case back to a court of appeal for further fact finding. However, in today’s judgment the Dutch Supreme Court disregarded the opinion and dismissed the case of Société Générale on the grounds that, when disregarding financing costs and purchased dividends, the total tax burden of Société Générale on the dividends was not higher than the total tax burden of a Dutch resident would have been.