The Court of Justice of the European Union (CJEU) has struck down the controversial “fairness tax” of Belgium, based upon violations of the Parent-Subsidiary Directive and the freedom of establishment.
Taxpayers who have paid this tax should file a claim for refund, and all taxpayers should be aware of any similar “fairness” provision that unfairly discriminates taxpayers based on enacted EU legislation.
EY’s Global Tax Alert provides additional details.
EY’s notice provides details re: an opportunity to receive a refund of the 5% French tax for dividends received from EU subsidiaries. The French rule was not consistent with the freedom of establishment principle of EU law.
A refund of such French taxes can be filed for taxes paid within the last two years.
The 3% dividend tax for dividend distributions by a French parent to a non-EU subsidiary, versus intra-group French dividends, may encounter discrimination challenges due to its dissimilar application.
Accordingly, protective refunds should also be considered re: the French 3% dividend tax and similar EU unilateral legislative provisions to ensure potential opportunities are not lost due to timing as to when the taxes were paid.
“On 2 September 2015, the Court of Justice of the European Union (CJEU) rendered its decision on the Steria case, relating to the French taxation of dividends from European Union (EU) subsidiaries. The CJEU ruled that fully exempting dividends received from French, tax consolidated subsidiaries, but including a 5% fraction of dividends received from EU subsidiaries in the French taxable income, amounted to a discrimination infringing the freedom of establishment.”
The KPMG News Flash reveals: “The AG concluded that the French rules that allow a French parent company a full exemption in respect of dividends received from domestic subsidiaries under a group taxation regime, but effectively tax 5% of dividends received from shareholdings in EU subsidiaries, is in breach of the freedom of establishment. The CJEU now has to decide the case.”
It is hopeful the CJEU follows this legal conclusion, thereby restoring a consistent participation exemption regime in France for domestic and foreign subsidiaries. Other Member States will also be following this case to the extent similar arrangements are in place.
Strategizing Multinational Tax Risks 