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Withholding tax reclaims - Aberdeen/Santander case

The Aberdeen case - the opportunity for funds

The issue - funds have paid unduly withholding tax for years

Withholding tax reclaims - Aberdeen/Santander caseDividend payments obtained by Luxembourg domiciled investment funds, i.e. FCP or SICAV, from other European Member nation could be subject to domestic withholding tax levied on outward dividends, unless provided otherwise by a Double Tax Treaty. However the tax treatment imposed to dividends paid to resident investment funds and comparable non-resident investment funds may differ and, as a result, this may give rise to a discriminatory treatment.

Following the ECJ decision in the Aberdeen case (C-303/07) dated 18 June 2009, and Santander case (C-338/11) dated 10 May 2012, investment funds have the possibility to claim back discriminatory withholding tax taken on EU source dividends. The ECJ resolved that the difference in treatment between non-resident investment fund (such as Luxembourg SICAV or even non-EU funds like U.S. investment trusts) and local investment funds represents a restriction to the freedom of establishment and the free movement of capital.

Investment funds might, on the basis of this law, claim a refund on the discriminatory withholding tax by which they have been charged. To demonstrate the discriminatory treatment, the investment funds will firstly have to be comparable to resident investment funds or corporations. Secondly, an effective discrimination in the tax treatment of non-resident vs. resident funds will have to be proved, along with an « effective prejudice ». Thirdly, the reclaims will have to be filed within the time limitation period enclosing the required documentation.

The above however implies a significant document and data collection process aiming at allowing Tax Practices to submit the Tax Reclaims by the different local tax authorities.

Challenges involve intricacy

Following the Aberdeen and Santander decisions, there are opportunities to reclaim Withholding Tax (“WHT”) suffered at source within  12 European Countries for Luxembourg Funds: Belgium, Finland, France, Germany,  Hungary, Italy, Netherlands, Norway, Poland, Romania, Spain and Sweden on dividends paid to a Luxembourg regulated fund (UCITs or non-UCITs, e.g. SIF). This process will be burdensome but manageable when disposing with the appropriate human capital and tools.

Complexity

We are providing tailor-made solutions to our clients from the feasibility study phase up to the effective filing of tax reclaims including reconciliation of recovered amounts.

Deloitte Luxembourg tailor-made solutions

Deloitte answer

  • Deloitte local tax practices – know-how

Trust

  • New opportunities for funds, management companies and promoters

New opportunities for funds, management companies and promoters

  • Our services indeed usually focus on the following: cost/benefit analysis based on the client’s situation, assistance with the filing of tax reclaims (i.e. collection of supporting documentation, filing of the claims, liaising with the local competent authorities, etc.) as well as proper monitoring of the reclaims.

Our solutions: creating value and efficiency

We offer to be at the centre of the tax reclaim process, acting as:

  • A single point of contact for all stakeholders
  • A project manager and quality assurer
  • The entity in-charge of documents collection and delivery
  • A hands-on document collection coordination service aiming at maximizing the efficiency of the document collection and communication process.

A single point of contact for all stakeholders

Contacts

  • Benjamin Collette
    Partner - Strategy & Corporate Finance Leader
  • Michel Guilluy
    Partner - Tax - International Tax-GFSI Leader
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    Eric Centi
    Partner - Tax - International Tax-GFSI
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    Gérard Lorent
    Directeur - Corporate Strategy

Focus on

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Learn more

  • EU Withholding Tax Reclaims - 14/04/2014
    EU Withholding Tax Reclaims: Positive decision rendered for Non-EU/EEA funds pursuing withholding tax reclaims in Europe.
  • Press article: The Aberdeen case : Taking it to the next level
    Many players in the fund industry, and more specifically the fund managers, are aware that the European Court of Justice’s Aberdeen case was ruled last year on 18 June 2009.
  • Withholding tax reclaims opportunities | Deloitte solution
    There are significant opportunities based on EU Treaty and Court cases for Luxembourg investment funds to reclaim withholding tax suffered at source on either dividends.
  • French tax authorities guidelines regarding the filing of the Aberdeen / Santander reclaims - 26/11/2012
    Further to the Santander case decided by the European Court of Justice, the FTA have recently issued a letter including practical comments and guidance on the filing process.

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