Tax & Legal

In a request for a preliminary ruling from Italy, the European Court of Justice (ECJ) held that a national legislation providing for tax being levied on more than 5% of the amount of the dividends that financial intermediaries receive, as parent companies, from their subsidiaries resident in other Member States is contrary to EU law. This also applies in the case of a tax which is not a tax on corporate income but which includes in its basis of assessment those dividends or a part thereof.

Following a request for a preliminary ruling from the Tax Disputes Commission of the Republic of Lithuania, the European Court of Justice has commented in some detail on the general anti abuse provision (GAAR) of the Parent Subsidiary Directive (PSD).

On 26 February 2019, the ECJ issued its judgements in the joined cases T Denmark and Y Denmark -v- the Danish Ministry of Taxation (C-116/16 and C-117/16) and N Luxembourg 1, X Denamrk A/S, C Danmark I and Z Denmark ApS -v- the Danish Ministry of Taxation ( C115/16. C-118/16, C-119/16 and C-299/16).

On 25 June 2018, the European Court of Justice published its decision of 14 June 2018 concerning the current version of the German anti-treaty /anti-directive shopping legislation.

On 20 December 2017 the European Court of Justice (ECJ) took the view that Section 50d (3) Income Tax Act prohibiting certain intermediary foreign companies from (full or partial) refund of German withholding tax was incompatible with both the Parent-Subsidiary Directive and the freedom of establishment. The German Tax Authorities have recently issued a circular on its application of the rules.

The subject-to-tax provision of the Parent-Subsidiary Directive, whereby distributed dividends are exempt from withholding tax, requires that the dividends are taxed in the hands of the parent company. In practice, this necessitates actual payment of the tax.

The finance ministry has announced the arrangements for claiming withholding tax exemption under the EU Parent/Subsidiary Directive on dividends on shares held in the custody of a bank.