UK pension funds which received dividends from Dutch companies on or before 31 December 2006 can now reclaim tax that was withheld on those dividends by the Netherlands tax authorities. It is expected that claims will be possible for tax withheld as far back as 2003.
To make sure that the reclaim isn't refused for being out of time, funds should submit the claim as soon as possible. Refund claims need to be made by submitting a form to the Dutch tax authority. The form presently available for download from the site is stated to be for refunds of tax withheld from 1 January 2007. This should be updated shortly.
The Netherlands has not withheld tax on dividends since 1 January 2007 as a result of a European Court of Justice case. The case held that EU member states that imposed higher withholding taxes on foreign investors (compared to their domestic equivalents) breached the free movement of capital principle of the European Commission treaty.
The Netherlands had to change the law to comply with this case because dividends paid to Dutch pension funds do not have tax withheld from them. However, they have not formally accepted that the previous law, allowing tax to be withheld, was in breach of EU law. So, until this week, the Netherlands refused to refund tax withheld on dividends paid before that date.
Funds should also keep in mind that the European Commission is currently taking action against thirteen other member states which have imposed a similar withholding tax on dividends paid to tax exempt pension funds. For example, Spain withholds 18% from such dividends and Portugal withholds 25%. Claims for refunds of tax withheld on dividends from these countries should be possible once these countries have complied with the Commission's requirements.