As set out in our previous Taxand’s Take – in which we discussed the AG conclusion for this case –foreign investment funds have filed over 24,000 refund requests for Dutch dividend tax based on the EU free movement of capital (article 63 TFEU). The Supreme Court decision of 10 July 2015 will have significant impact on the tax practice since it will most likely affect the majority of the EU based claims on behalf of non-resident funds.


In 2007 and 2008, a Luxembourg fund for collective investment (SICAV), received Dutch portfolio dividends on which Dutch dividend tax was withheld.


Due to the fact that the SICAV was not subject to tax in Luxembourg, it could not offset the Dutch dividend tax with the Luxembourg corporate tax. Furthermore, the Dutch regime did not provide for a refund mechanism for the SICAV.

In a domestic Dutch situation, a Dutch FBI would have been able to either request for a refund of the dividend tax (regime as applicable during 2007) or benefit from the so-called rebate regime (regime as applicable as per 2008). Under the rebate regime, the dividend tax withheld at the expense of the FBI can be offset against the dividend tax that the FBI has to withhold on distributions to its participants (i.e. the FBIdoes not have to remit the dividend tax withheld on re-distributions).


The SICAV was however excluded from the refund regime as applicable in 2007 (foreign resident funds could not qualify as FBIs in 2007). Furthermore, the SICAV could effectively not benefit from the rebate regime as applicable in 2008, due to the fact that the SICAV was not required to Dutch withhold dividend tax on distributions to its participants.


The SICAV therefore argued that the Dutch regime was incompatible with article 63 TFEU (free movement of capital) and requested a refund on this basis.


Supreme Court decision


The Supreme Court ruled that to determine whether article 63 TFEU requires the Netherlands to refund the Dutch dividend tax, it should be assessed whether the SICAV is objectively comparable with a FBI.


In this respect, the Supreme Court stated that the FBI regime aims to facilitate a similar effective tax burden for individual investors on income from portfolio investments through an investment vehicle compared to a direct investment.

The Supreme Court considered that non-resident individual investors are in principle not entitled to a refund of the 15% Dutch dividend tax in case they invest directly in Dutch companies. For non-resident individual investors that have invested through an Dutch FBI, the Dutch dividend tax withheld by the FBI to the participant is also 15%.


The Supreme Court considered that a refund of dividend tax would result in a position where non-resident investors are better off investing through the investment fund than investing directly. As a result, the Supreme Court of the Netherlands ruled that the SICAV and the FBI are not comparable and the refund of Dutch dividend tax will be denied.

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Taxand's Take

As mentioned, this Supreme Court decision will have significant impact on the thousands of refund requests filed by non-resident investment funds. These are the key attention points:


  • The verdict is rather short and no prejudicial questions have been raised by the Supreme Court. This is rather disappointing as the exact impact of the Supreme Court ruling is not fully clear
  • The Supreme Court did not refer either to the pending ECJ case in which AG Jääskinen recently issued its opinion on how to determine whether non-resident investors are worse off compared to resident investors owning portfolio investments. We refer to our Taxand’s Take on this conclusion for more background
  • The SICAV case focuses on individual investors that have invested through a non-transparent investment fund. We expect that claims filed by other foreign investment funds with individual investors that have claimed a refund on the case basis will be dismissed if these funds are not obligated to withhold Dutch dividend tax
  • We expect that the Dutch tax administration will proceed with rejecting the majority of refund requests that are similar to the SICAV case shortly.

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Article tags

International Tax | Netherlands

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