The high court’s decisions in two test cases support taxpayer claims for refunds of withholding tax on dividends distributed to foreign investment funds.
Withholding tax - Luxembourg SICAVs
Previously, the lower court in Sweden held that Luxembourg SICAVs were entitled to a refund of Swedish withholding tax.
On appeal by the Swedish tax authorities, the Swedish Supreme Administrative Court of Appeal issued taxpayer-favorable decisions in two test cases:
- One regarding a Luxembourg SICAV
- The other regarding a Finnish investment company
There were 73 other similar cases concerning a withholding tax refund claims field by a range of foreign investment funds—including UK investment funds (OEICs), Norwegian investment funds, and other Luxembourg SICAVs.
In the two test cases, the high court concluded that Swedish law provision concerning this withholding tax issue was contradictory to EU law.
Withholding tax - Luxembourg FCPs
In a separate action, a 2012 decision of a Swedish court (concluding that a Luxembourg FCP is not subject to withholding tax under Swedish law) became final when the high court denied the tax authorities’ motion for leave to appeal.
It has been reported that the Swedish tax authorities are now asserting that the unit holders (and not the FCP itself) are the beneficial owners of the dividends and that they may be liable to Swedish withholding tax. As a consequence, the tax authorities have filed several appeals regarding the FCP withholding tax issue.
Typically, it takes about seven months for the court to whether or not to grant leave to appeal, so a decision in this matter could be expected at sometime in or about the autumn 2013. If the court were to deny the tax authorities’ appeal, the decision would then be viewed as legally binding for Luxembourg FCPs.
Read a May 2013 report [PDF 84 KB] prepared by the KPMG member firm in Luxembourg: Taxation of Investment Funds in Sweden