Guide to EU dividend withholding tax reclaims

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European investment funds have been filing claims for refunds of dividend withholding tax (WHT) for many years. The legitimacy of these so-called EU WHT reclaims has been delineated by several rulings from European courts.

In 2012 and 2013, courts have consistently established that it is discriminatory and contrary to the free movement of capital principle for EU Member States to impose a higher level of taxation on dividends from portfolio investments paid to non-residents.

A recent ruling (in the FIM Santander case) bolsters this position further, reinforcing the filing position of EU investment funds with regard to EU WHT reclaims. This increases the likelihood that standing claims will be honored soon — and may clear a path for non-EU resident funds to also file EU WHT reclaims.

9 steps to take for dividend withholding tax reclaims

Billions of Euros may be eligible for dividend withholding tax reclaims. Statutes of limitation, however, restrict the periods for which claims can be made. Funds that don’t monitor these windows may miss opportunities.

We’ve identified nine important actions to help you understand the issue and take action:

  1. Determine EU jurisdictions where non-EU investment funds have suffered WHT on their income.
  2. Ascertain whether the non-EU investment fund can be considered “comparable” to a fund domiciled in the source investment jurisdiction.
  3. Determine whether a “comparable” fund domiciled in the source investment jurisdiction received a higher post-tax dividend than the EU investment fund.
  4. Evaluate whether more-favorable treatment of the domestic fund is compatible with the free movement of capital principle.
  5. Where considered incompatible, quantify the amount of WHT that could be claimed by the non-EU investment fund to put the fund in the same position as the domestic investment fund (taking into account the statute of limitations).
  6. Perform a comprehensive cost-benefit analysis (including the likelihood of success and the potential repayment time frame).
  7. Gather any necessary documentation (which may be held by third parties such as custodians) to support the claim.
  8. Track the progress of filed claims, and consider ongoing annual filings in certain countries.
  9. Monitor case law, as well as legislative and administrative practice developments. Review cost-benefit analyses to identify additional claims opportunities.

Want to learn more? Contact a leader from our Global Asset Management practice, and see how EY can help you with this complex issue.

EY - Dmitri Semenov Dmitri Semenov
+1 212 773 2552
EY - Sarah Belin-Zerbib Sarah Belin-Zerbib
+1 212 773 9835
EY - Christian Rengier Christian Rengier
+1 212 773 1149
EY - Nigel Nelkon Nigel Nelkon
+44 20 7951 6011