Dutch and Luxembourg dividend withholding tax exemption after CJEU ruling on Gibraltar companies

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May 2020


The Court of Justice of the European Union (CJEU) on April 2 ruled that a company incorporated under the laws of Gibraltar and resident in Gibraltar does not meet the legal form requirement, and is not subject to taxation as provided under article 2, a) of the EU Parent-Subsidiary Directive and the annex thereto. 

Gibraltar and Netherlands structures

Since the withholding tax exemption under Dutch domestic law contains neither the legal form requirement nor the taxation requirement set forth by the EU Parent-Subsidiary Directive, the above ruling is not anticipated to adversely impact the application thereof with respect to distributions from a Dutch subsidiary to a Gibraltar tax-resident parent company.   

Gibraltar and Luxembourg structures

The CJEU mentioned in its decision, in line with the Advocate General’s conclusion, that the judgment is without prejudice to the question of the application of the fundamental freedoms available in the Treaty of the Functioning of the EU (TFEU), which are applicable for all European countries. The CJEU did however not treat this point in further detail. Based on this, companies could still potentially invoke the fundamental freedoms to be entitled to the dividend withholding tax exemption.

The takeaway

Each Dutch and Luxembourg taxpayer must determine whether it meets the requirements for invoking the Dutch or Luxembourg withholding tax exemption based on the specific facts and circumstances. This should be tested applying anti-abuse considerations and a potential restriction of the freedom of establishment.

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Doug McHoney

International Tax Services Co-Leader, PwC US

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