Dividend Withholding Taxes after Miljoen, X and Société Générale

Abstract:

The judgment in the cases Miljoen, X and Société Générale is the latest of various judgments regarding dividend taxation and withholding taxes. The ECJ has confirmed its line of reasoning on many issues and given insights on its understanding of other ones.

Concerning the deductibility of non-residents’ directly linked expenses, which have to be granted a deduction according to previous case law, the ECJ held that the direct link must exist to the actual payment of the income. Moreover, the Court confirmed its previous case law according to which residents and non-residents find themselves in comparable situations regarding the tax amount levied by the source state. The possibility of neutralizing different treatment by the source state under application of a double tax treaty was again affirmed by the ECJ.

In the particular cases, however, it could not be clarified whether such neutralization could be achieved. A unilateral neutralization by the residence state was not accepted by the ECJ. Regarding neutralization in subsequent years, i.e., a carry-forward, the ECJ did not give a judgment due to the hypothetical question.