EU Tax Alert - Highlights 2024

1. Direct Taxation

Case Law

CJ rules that Dutch 'net taxation' regime restricts the free movement of capital (XX v Inspecteur van de Belastingdienst, Case C-782/22)

On 7 November 2024, the CJ delivered its judgment in case XX v Inspecteur van de Belastingdienst (C-782/22). The case concerned the question whether Dutch legislation, under which dividends distributed by resident companies to non-resident insurance companies are subjected to a withholding tax of 15%, while dividends distributed to resident companies are effectively tax-exempt, is compatible with the free movement of capital.

This case involves XX, a UK-based life insurance undertaking, which received dividend payments from Dutch companies in the context of its 'unit-linked' insurance contracts. For resident taxpayers, Dutch dividend withholding tax acts as an advance levy on corporate income tax. The tax paid on dividends can be fully offset against their corporate income tax liability,