Double taxation of Dutch dividends: right to refund in case of disadvantage

1. Double taxation treaties offer no relief

Although Belgium has an extensive network of double taxation avoidance agreements (or double tax treaties), they do not provide for a solution to this problem. Indeed, based on these treaties, double taxation of dividends remains allowed, although possibly mitigated by the limitation of withholding tax in the country of origin. 

This is the case, for example, for dividends from French or Dutch shares, where the respective double taxation treaties each provide for a maximum withholding tax of 15%. But, since French and Dutch dividend withholding taxes are only 12.8% and 15% anyway, a Belgian taxpayer will not be able to benefit from the application of these double taxation treaties. 

However, this does not mean that one will simply have to accept this double taxation. 

For dividends from French shares, it is now well enough known that this double taxation can be avoided by crediting a lump-sum part of the Foreign Tax, the so-called FBB, against the Belgian withholding tax. Although the Belgian tax authorities refused this set-off for a long time, they are now forced to do so by the Supreme Court. 

2. Right of restitution for detriment - a solution for Dutch shares

Less well known is that a solution also exists for dividends from Dutch shares. 

This solution stems from a 2015 ruling of the European Court of Justice. This ruling assessed the situation of a Belgian taxpayer who argued that the withholding tax withheld from his dividends from Dutch shares constituted an obstacle to the free movement of capital.  Under Dutch law, both dividends paid to a Belgian taxpayer as well as  those paid to a Dutch taxpayer are subject to a 15% withholding tax. However, in the case of the Belgian taxpayer, that levy is final, while the Dutch taxpayer can deduct the relevant (pre-)levy from the Dutch income tax or obtain a refund of it if the amount of income tax due is lower than that (pre-)levy. 

The Court of Justice has consistently held that measures which dissuade non-residents from making investments in a Member State, or discourage residents of that Member State from making investments in other States, are prohibited because they restrict capital movements. 

Accordingly, the ECJ held that, in the situation presented, there was an impermissible restriction on the free movement of capital if the final tax burden falling on Belgian taxpayers in the Netherlands in connection with those dividends is heavier than that on Dutch taxpayers.

Consequently, it is possible for Belgian taxpayers holding Dutch shares to apply for a refund of the Dutch withholding tax on the grounds of prejudice. We explain below the concrete steps to be taken to this end.

3. Concrete steps for a refund of Dutch withholding tax

As a Belgian taxpayer, one will have to collect the following information to claim a refund of the Dutch withholding tax: 

• A statement of all Netherlands-based companies invested in;
• The dividend statement to which the refund application relates;
• An itemised calculation of the fair market value of all Dutch shares held on 1 January of the year in which the dividend(s) were received;
• The percentage shareholding you (or your partner or together) own in the Dutch company(ies);
• If one owns immovable property in the Netherlands: a statement of the value of that property and the value of the debts in connection with that immovable property located in the Netherlands.

Based on this information, the Belgian taxpayer will then have to prove on an annual basis that he is taxed more heavily than a Dutch taxpayer with regard to all the shares in the Dutch companies during the calendar year. 

Would you like to be assisted by the Seeds of Law specialists or receive more information on this matter? Please do not hesitate to contact us at +32 (0)2 747 40 07 or at info@seeds.law.