A resident of the Netherlands owned shares in a company resident in Belgium and received dividends on those shares. If the dividends had been paid by a company resident in the Netherlands their treatment for income tax in his hands would have been more beneficial, because a limited exemption from income tax applied to dividends paid by Dutch companies. The first question for the court was whether the availability of this exemption only in relation to dividends paid by Dutch companies was inconsistent with Article 1 of the 1988 Directive. The Court held that the acquisition of shares in an undertaking was a capital movement within the scope of the Directive, that the receipt of dividends on such shares presupposed participation in the undertaking, and that therefore the receipt by a resident of one Member State of dividends on shares in a company resident in another Member State was within the Directive. It then held that the refusal of the first Member State to extend to such dividends an exemption from tax which applied in relation to dividends on shares in companies resident in the first Member State had the effect of dissuading nationals of the first Member State from investing their capital in companies established in other Member States and, conversely, presented an obstacle to such companies from raising capital from residents of the first Member State. Accordingly, such a provision constituted a restriction on the movement of capital prohibited by Article 1 of the Directive.
Citations:
C-35/98, [2002] ECR I-4071, [2002] STC 654, [2000] EUECJ C-35/98
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Cited – Pirelli Cable Holding Nv and others v Inland Revenue HL 8-Feb-2006
Under s247 of the 1988 Act, a company paying dividends to a parent company need not withhold ACT. This option was not offered where either subsidiary or parent was not UK resident until the decision in Hoechst which found the restriction contrary to . .
Lists of cited by and citing cases may be incomplete.
European, Corporation Tax
Updated: 04 July 2022; Ref: scu.231697