EU and National Law Withholding Tax Reclaims: No Time Like the Present
Over the past few years there have been numerous developments in the withholding tax space, owing to several notable cases which have been brought before the Court of Justice of the European Union (CJEU), as well as the relevant EU Member States’ National Courts. The applicants in these cases range from investment funds to pension funds and the subject thereof covers mostly one important principle: the free movement of capital.
The European Commission’s FASTER Directive: Transforming Withholding Tax Procedures in the EU
On 19 June 2023, the European Commission published a legislative proposal for a Council Directive (hereinafter “the Directive”) that aims to make withholding tax procedures in the European Union (EU) more efficient and secure for investors, financial intermediaries and Member States.
A Consequence of War: A look into the effects of the Russia-Ukraine Conflict on Double Taxation Treaties and Withholding Tax Recovery
When thinking of the factors that may affect one’s ability to recover excess withholding tax, war is not usually one that springs to mind. However, in a world as complexly intertwined as ours, socio-political events have widespread ramifications. The recent, major escalation of the Russo – Ukrainian War stands testament to this. Alongside the extensive humanitarian consequences the military predicament has wreaked on the region and the world, diminished withholding tax recovery may be another unfortunate side-effect of the changing political landscape.
Spanish Supreme Court Confirms Discrimination Against Foreign Hedge Funds
The Spanish Supreme Court, being the highest court of appeals, laid down two separate judgements regarding the withholding tax rate which is currently levied on foreign hedge funds, also referred to as alternative investment funds (“AIFs”) or non-harmonised funds, which are resident in the European Union. The Court confirmed that the disparity between the withholding tax rate levied on non-Spanish hedge funds and that levied on comparable Spanish hedge funds is contrary to the Free Movement of Capital in Article 63 of the Treaty on the Functioning of the European Union (TFEU).
Spanish National Court Reaffirms US RIC’s Entitlement to Withholding Tax Refunds Under EU Law Precedent
On 7 March 2023, it was once again confirmed by the Spanish National Court (SAN 773/2023) that a United States (US) Regulated Investment Company (“RIC”) qualifies for the reduced Spanish withholding tax rate of 1% applicable to Spanish and EU/EEA undertakings for collective investments in transferable securities (“UCITS”) investment funds. What makes this ruling noteworthy is that the Court clarified that it is irrelevant under EU law whether a US fund or its investors can claim a tax credit of the Spanish withholding tax in the US. The case addressed the so-called “neutralisation argument”...
Preparing for the German Tax Authority Electronic Filing Portal: Implications for Custodian Banks and End-Investors
The German Tax Authorities (GTA; Bundeszentralamt für Steuern (BZSt)) have confirmed that their new electronic filing procedure will become mandatory for exemption certificate applications and withholding tax (WHT) reclaims as of 1 July 2023. This new electronic filing procedure (BZSt OnlinePortal (BOP)) will replace the previous process of submitting hardcopy paper-based applications. Although the introduction of the BOP was effective as of 1 January 2023, and mandatory as of July 2023, the GTA confirmed that hard-paper reclaim applications are still permissible until 30 September 2023, for...
Levelling the Playing Field: CJEU Ruling Ends Discriminatory Tax Treatment of Foreign Property Funds in Germany
In the judgment of L Fund v. Germany, C-537/20 (CJEU 2023) on 27 April 2023, the Court of Justice of the European Union (CJEU) determined that Germany’s tax legislation contravened Article 63 of the Treaty on the Functioning of the European Union (TFEU), which safeguards the free movement of capital. The court found that Germany’s corporate tax exemption for domestic specialized property funds, while excluding foreign specialized property funds from the same benefit, resulted in a less favorable tax treatment for the latter group when they received income from properties in Germany.
German Supreme Court Denies Canadian Pension Fund’s Appeal in ECJ Reclaim Case
The Supreme Court of Germany issued a ruling on December 1st, 2022 concerning the European Court of Justice (ECJ) reclaim submitted by the College Pension Plan of British Columbia, a Canadian pension fund. The Supreme Court dismissed the appeal against the rejection of the ECJ reclaim by the Federal Tax Court of Munich in December 2021, which meant that the German withholding taxes levied on dividends could not be refunded. The Supreme Court justified its decision by asserting that the Federal Tax Court of Munich had fulfilled the requirements outlined by the ECJ.