On March 13, 2012 the High Court of 's-Hertogenbosch decided in a case in which a Finnish resident investment fund had requested a refund of Dutch dividend withholding tax. The Finnish resident investment fund was not subject to Finnish profit tax and held Dutch portfolio investments. The tax inspector refused to refund the Dutch dividend withholding tax on the dividends that were distributed from the portfolio investments to the Finnish shareholder. The tax authorities argued that the Finnish fund was not similar to a Dutch qualifying investment fund (REIT). The Finnish investment fund was not subject to Finnish profit tax and was not obliged to distribute profits to its shareholders.
The Finnish investment fund argued inter alia that the refusal of a refund constituted a restriction on the free movement of capital within the meaning of EU law. The Finnish fund should be compared to a Dutch REIT or an entity that is exempt from Dutch corporate income tax. This would lead to a tax credit or a refund of Dutch withholding tax.
The District Court of Breda (on June 6, 2011) dismissed the comparison with a Dutch qualifying investment fund. However, the High Court of 's-Hertogenbosch decided differently. The High Court did not answer the question whether the Finnish investment fund is comparable to a Dutch qualifying investment fund. Yet the Court ruled that the Dutch underlying tax legislation constitutes a restriction on the free movement of capital. Based on EU Law, a European investment fund cannot be taxed heavier than a Dutch investment fund, as is apparently the case with the Finnish investment fund. The Dutch State should grant a refund of Dutch withholding tax.
The Dutch tax authorities have already received over a thousand claims, with an estimated total value of EUR 1 billion. This amount will probably increase, as it is expected that this decision of the High Court will trigger more claims.
It is no surprise that the Dutch State Secretary decided to bring an appeal to the Dutch Supreme Court.