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Court of Justice rules on Amurta case
On 8 November 2007, the European Court of Justice handed down its opinion in the Amurta case.
The case was about the incompatibility of Dutch dividend tax rules dating from before 2007 with EC law.
Amurta SGPS is a company located in Portugal, owning 14 % of the shares in Retailbox, a company situated in the Netherlands.
Netherlands-based Sonaetelecom BV holds 66 % of the shares in Retailbox. On 31 December 2002, Retailbox paid dividends to its shareholders.
No divided tax was withheld on the payment of dividend to Sonaetelecom because an exemption applied to these dividends (within the domestic holding ratio).
The divided distributions to Amurta and two other companies located in Portugal were made subject to 25% dividend tax.
Amurta lodged an appeal against this.
The Court of Justice’s reply was that in a situation as presented in the principal action, such statutory rules are not compatible with the European laws on the free movement of capital.
A Member State (in this case: the Netherlands) cannot circumvent the obligation to avoid economic double taxation with reliance on the existence of a full tax credit unilaterally granted (in this case: to the Portuguese company) by another Member State (in this case: Portugal) in respect of dividends payable to the Portuguese company, if that Member State (the Netherlands) does avoid double economic taxation on dividend paid in recipient companies situated in the Netherlands.
If a Member State relies on a Convention on the avoidance double taxation, entered into with another Member State, the national court is to decide whether such Convention is to be taken into account in the principal action and, if the occasion arises, to verify whether such Convention may neutralize the consequences of limiting the free movement of capital.
For more information, please contact Thijs Clement, Tax Practice.
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