Domestic withholding tax imposed by EU Member States on dividend payments made to non-resident investment vehicles has been an ongoing issue for some time now, due to the argument that such taxes may restrict the free movement of capital within the EU. The European Court of Justice (“ECJ”) recently handed down a major decision regarding this matter, finding that the French withholding tax (“WHT”) levied on dividend payments by French-resident companies to non-resident investment vehicles is not compatible with EU law.
This decision not only relates to the right to refunds of WHT from French company dividends, but also provides a basis for seeking refunds of WHT from other EU-based companies, where the WHT has been imposed on a basis similar to that employed by France...
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