Dutch Supreme Court rules on dividend withholding tax exemption in two Belgian cases

Dutch dividend withholding tax exemption

If a Dutch company pays dividends to a foreign company, an exemption from Dutch dividend withholding tax applies under certain conditions. However, this exemption has an anti-abuse provision consisting of the subjective test and the objective test. If both tests are met, the dividend withholding tax exemption is not applicable and Dutch dividend tax must be withheld.

Under the subjective test, the interest in the Dutch company must be held by the foreign company for the main purpose or one of the main purposes of avoiding the levying of Dutch dividend withholding tax from another person. Under the objective test, there is an artificial construction or transaction or series of constructions or combination of transactions.

Background cases

Both cases involved a Belgian holding company with an interest in a Dutch company. The shareholders of the Belgian holding companies were families resident in Belgium. The Dutch company paid dividends and the question was whether the dividend withholding tax exemption could be applied. In one case, the Belgian holding company was not performing substantial economic activities. In the other case, the Belgian holding company had office space and a management fee was in place. 

Rulings Dutch Supreme Court

The Dutch Supreme Court ruled (inter alia) on the application of the objective test in both cases as follows:

·        The anti-abuse provision must be interpreted on the basis of EU law and the case law of the CJEU on abuse.

·        An arrangement may have been set up for valid business reasons reflecting economic reality, but the arrangement may also contain steps or parts that should be considered artificial.

·        A step or part is artificial if that step or part cannot be justified by related economic and commercial benefits. It is up to the tax inspector to confirm this or make it a defensible argument.

·        The taxpayer may provide contrary evidence if there are valid business reasons, such as benefits other than the dividend withholding tax benefit of the withholding exemption.

·        In assessing whether the arrangement (or a step or part of the arrangement) is artificial, facts and circumstances that occurred after the arrangement was set up should also be assessed.

·        It is insufficient that the holding company is carrying out a business. The equity interest in the Dutch company must be attributable to the holding company's material business. The holding company must carry out economic activities in respect of the shareholding. This means that passively holding an equity interest (in the Dutch company) by a material business (of the foreign holding company) is insufficient.

The Dutch Supreme Court concluded that both cases were abusive due to the intermediary Belgian holding company. 

Consequences

Should you consider paying dividends from a Dutch company to a foreign company, it is advisable to carefully examine the consequences of this dividend distribution. For the application of the Dutch dividend withholding tax exemption, it is important that there is a sufficient link between the shareholder and the Dutch company (and its investments). The judgments are relevant to dividend payments in international family structures and international corporate structures. It is also advisable to review any previous assessment of the structure. Your advisor at Forvis Mazars will be happy to help you with this. 

Source: Supreme Court 18 July 2025, Case 22/02691 (ECLI:NL:HR:2025:1162) and Case 22/02695 (ECLI:NL:HR:2025:1163).