Dutch withholding tax on dividend distributions to a Netherlands Antilles parent company was declared compatible with EU law
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Dutch withholding tax on dividend distributions to a Netherlands Antilles parent company was declared compatible with EU law

The Court of Justice of the European Union (CJEU) has recently released a judgment in two joined cases (C-24/12 and C-27/12) regarding the possible infringement the free movement of capital principle in the Treaty on the Functioning of the European Union caused by the levy of 8.3% withholding tax on dividends paid by Dutch company to the resident of the Netherlands Antilles (its 100% parent company).

 

The CJEU has ruled that such levy compatible with EU law as it is may be needed to prevent tax avoidance, though it is now up to the Dutch Supreme Court to determine whether this tax measure is also effective and proportionate.

 

Thus, under CJEU decision, the Netherlands may levy dividend withholding tax on payments made to parent companies in the (former) Netherlands Antilles. However, each specific situation should be examined on a case-by-case basis.

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