The European Court issued its judgement in Köln-Aktienfonds (KA Deka, C 156/17) about Dutch dividend withholding tax reclaims by a German Sondervermögen.
KA Deka argued that it is comparable with the Dutch investment institution (FBI). The dispute is whether KA Deka qualifies for the “shareholder requirements” and “distribution requirement” of the FBI regime.
The Court rules that countries are free to introduce investment regimes. However, the conditions should not de facto restrict foreign funds.
KA Deka was not able to prove that the FBI shareholder requirements were met. If the inability to meet the requirements results from the way KA Deka is set up, this is for the account of KA Deka. The European Court refers the assessment whether a de facto restriction exists to the national court.
The FBI regime further requires funds to distribute profits within 8 months. KA Deka did not meet this requirement, but a deemed distribution was taken into account in Germany at investor level. According to the Court, a distribution requirement is contrary to EU law where deemed distributions are taxed, if the objective of the rule is to ensure taxation of distributions. The interpretation of the objective of the distribution requirement is referred to the national court.