Developing Issues on Withholding Tax on Outgoing Dividends in the European Union
(2015) HARN60 20151Department of Business Law
- Abstract
- The European Court of Justice has repeatedly held that it is contrary to EU-law to charge withholding tax on cross-border dividend payments when comparable, domestic transactions are not taxed at the corresponding burden. Therefore, the question of withholding taxes compatibility with EU-law has been the topic of extensive legal literature over many years. However it seems that this is a non-stopping issue without a solution.
The field of direct taxation is only partially harmonized to the extent of the implementation of the internal market. In order to achieve an internal market the EU has implemented limitations on the Member States, such as the Fundamental Freedoms. Therefore, the Member States have the right to charge withholding... (More) - The European Court of Justice has repeatedly held that it is contrary to EU-law to charge withholding tax on cross-border dividend payments when comparable, domestic transactions are not taxed at the corresponding burden. Therefore, the question of withholding taxes compatibility with EU-law has been the topic of extensive legal literature over many years. However it seems that this is a non-stopping issue without a solution.
The field of direct taxation is only partially harmonized to the extent of the implementation of the internal market. In order to achieve an internal market the EU has implemented limitations on the Member States, such as the Fundamental Freedoms. Therefore, the Member States have the right to charge withholding tax on dividends as long as they do no treat non-resident taxpayers less favourably than resident taxpayers. Here the question of comparability on dividend payments between resident and non-resident taxpayers becomes important. However, this is an uncertain matter, even though the assessment of comparable situations on dividend payments has been up for questioning several times.
First, this thesis presents an overview of the relationship between withholding taxes and the internal market and correspondingly the Fundamental Freedoms.
Second, it analyses previous and upcoming case-law from the European Court of Justice on dividend payments, showing how important and uncertain the question of comparable situation is.
Third, the thesis presents what factors must be analysed in order to make a correct assessment in the terms of whether comparable situations exists or not. Thereafter, possible restrictions in the aspects of dividends payments will be presented. This leads to the conclusions that the situation of how to determine a comparable situation and how to calculate a restriction are unpredictable and uncertain matter.
Finally, the thesis analyses future aspects of withholding tax on dividend payments, suggesting abolishment of the rules and harmonization of the system, as the situation is uncertain and must be resolved on a case-by-case basis. This can be solved by replacing the withholding tax system with an effective information exchange between the Member States, as this would lead to a more effective internal market. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/5434781
- author
- Uddenäs, Joel LU
- supervisor
- organization
- course
- HARN60 20151
- year
- 2015
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Withholding tax, Internal market, Tax Sovereignty, Dividend payments, Comparable Situation
- language
- English
- id
- 5434781
- date added to LUP
- 2015-06-12 15:57:24
- date last changed
- 2015-06-12 15:57:24
@misc{5434781,
abstract = {{The European Court of Justice has repeatedly held that it is contrary to EU-law to charge withholding tax on cross-border dividend payments when comparable, domestic transactions are not taxed at the corresponding burden. Therefore, the question of withholding taxes compatibility with EU-law has been the topic of extensive legal literature over many years. However it seems that this is a non-stopping issue without a solution.
The field of direct taxation is only partially harmonized to the extent of the implementation of the internal market. In order to achieve an internal market the EU has implemented limitations on the Member States, such as the Fundamental Freedoms. Therefore, the Member States have the right to charge withholding tax on dividends as long as they do no treat non-resident taxpayers less favourably than resident taxpayers. Here the question of comparability on dividend payments between resident and non-resident taxpayers becomes important. However, this is an uncertain matter, even though the assessment of comparable situations on dividend payments has been up for questioning several times.
First, this thesis presents an overview of the relationship between withholding taxes and the internal market and correspondingly the Fundamental Freedoms.
Second, it analyses previous and upcoming case-law from the European Court of Justice on dividend payments, showing how important and uncertain the question of comparable situation is.
Third, the thesis presents what factors must be analysed in order to make a correct assessment in the terms of whether comparable situations exists or not. Thereafter, possible restrictions in the aspects of dividends payments will be presented. This leads to the conclusions that the situation of how to determine a comparable situation and how to calculate a restriction are unpredictable and uncertain matter.
Finally, the thesis analyses future aspects of withholding tax on dividend payments, suggesting abolishment of the rules and harmonization of the system, as the situation is uncertain and must be resolved on a case-by-case basis. This can be solved by replacing the withholding tax system with an effective information exchange between the Member States, as this would lead to a more effective internal market.}},
author = {{Uddenäs, Joel}},
language = {{eng}},
note = {{Student Paper}},
title = {{Developing Issues on Withholding Tax on Outgoing Dividends in the European Union}},
year = {{2015}},
}