Global

Details

  • Service: Tax, International Tax
  • Type: Regulatory update
  • Date: 6/3/2014

Netherlands - Taxation of dividends received by EU insurance companies 

June 3:  The European Commission has requested that the Netherlands to end what is perceived to be the discriminatory taxation of dividends received with respect to shares held by insurance companies established in other EU Member States or in a European Economic Area (EEA) country (Norway, Lichtenstein, and Iceland).

Background

Dutch insurance companies are not taxed on dividends received on shares held in the framework of “unit-linked insurances." Dutch insurance companies can deduct, from the amount of dividends received, any increase of their commitment to pay dividends to their policyholders. In turn, this reduces the corporate tax base concerning these dividends to zero, while any withholding tax is credited.


On the other hand, the Netherlands subjects to tax those insurance companies established in the EU or the EEA and receiving Dutch dividends on shares held in the framework of unit-linked insurances. Tax is whether on gross dividends, with no opportunity for these insurance companies to apply for a tax credit in their country of residence.

EU reasoned opinion

The EC found that this tax treatment of insurance companies established elsewhere in the EU/EEA is incompatible with the free movement of capital under Article 63 of the Treaty on the Functioning of the European Union and with Article 40 of the EEA Agreement.


The EC request is in the form of a “reasoned opinion.” If the Netherlands does not provide a satisfactory response within two months, the EC may refer the Netherlands to the Court of Justice of the European Union (CJEU).

KPMG observation

Tax professionals believe that this reasoned opinion may be a positive sign for EU and non-EU resident insurance companies and pension funds that have invested in the Netherlands or in other countries having similar laws, and these insurance companies may want to consider filing protective claims for refunds of unduly paid withholding tax.


Read a June 2014 report [PDF 57 KB] prepared by the KPMG member firm in Luxembourg: Dutch rules on dividends paid to EU/EEA insurance companies contradict EU Law




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