The Supreme Court has ruled that a Finnish investment fund is not entitled to a refund of withheld Dutch dividend withholding tax. This is the conclusion reached in the judgment rendered on November 15, 2013, in proceedings initiated by a Finnish investment fund.

Relevant facts and the dispute

The taxpayer is a Finnish resident open-end investment fund without legal personality that is comparable to a Dutch common fund (fonds voor gemene rekening). The fund was not subject to a profit tax in Finland. In 2008, it held shares for investment in companies resident in the Netherlands. In that year, the fund received dividends of EUR 235,492.30 on those shares, on which 15% dividend withholding tax was withheld. It was not possible to credit this dividend withholding tax in Finland. The taxpayer filed a request with the Dutch tax authorities for a full refund of the withheld dividend withholding tax, presenting various arguments to support its position. The tax inspector rejected the request, which resulted in legal proceedings being initiated before the District Court Breda, the Court of Appeals Den Bosch, and the Supreme Court.


On the basis of Dutch law:

  1. a Dutch resident legal entity not subject to corporate income tax − with the exception of investment funds (but including, for example, pension funds and charities) − is entitled to a full refund of withheld Dutch dividend withholding tax;
  2. as of 2008, Dutch resident investment funds are no longer eligible for a refund of Dutch dividend withholding tax. However, as of 2008, investment funds with the status of a fiscal investment institution (fiscale beleggingsinstelling; “FBI”) can apply the remittance reduction. In practice, the remittance reduction often boils down to an entitlement to have Dutch dividend withholding tax refunded (Dutch dividend withholding tax is not levied if Dutch parties invest through an FBI).

The Supreme Court judgment

The Supreme Court has ruled that the Finnish investment fund is not objectively comparable to a Dutch resident company that is entitled to a refund. According to the Supreme Court, one fact in particular negates that comparability: the fact that the fund would have been subject to Dutch corporate income tax had it been resident in the Netherlands. The fact that the fund was exempt from profit tax in Finland is irrelevant: the Netherlands is not obliged to adopt the tax relief granted by the other Member State. Furthermore, the fact that the Finnish investment fund did not distribute its 2008 profit to its shareholders within eight months, was reason for the Supreme Court to conclude that the fund is also not comparable to an FBI that is eligible to apply the remittance reduction. The Supreme Court therefore ruled that the fund was not discriminated against and therefore the Finnish investment fund was not entitled to a refund of Dutch dividend withholding tax.

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