European Court of Justice Advocate General Paolo Mengozzi on December 20 issued his opinion that Denmark’s withholding tax regime for foreign investment funds is contrary to EU concepts of free movement of capital.
The Advocate General’s opinion responds to a reference for preliminary ruling by the Østre Landsret (Eastern Regional Court, Denmark) in Fidelity Funds v Skatteministeriet (Case C‑480/16) which challenged a withholding tax imposed on non-Danish undertakings for collective investment in transferable securities (UCITS).
The Advocate General concluded that the Danish regime is contrary to EU concepts of free movement of capital, stating as follows:
“Article 56 EC (now Article 63 TFEU) must be interpreted as precluding a Member State’s tax regime, such as that at issue in the main proceedings, under which undertakings for collective investment in transferable securities in that Member State can obtain an exemption from tax at source on the dividends they receive from resident companies, either because they in fact make a minimum distribution to their members on which tax at source is retained, or because technically a minimum distribution is calculated on the basis of which tax at source is retained in the hands of their members, while non-resident undertakings for collective investment in transferable securities of the same kind are taxed at source on the dividends distributed by resident companies.”
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