The European Court of Justice ruled in favour of the UK Inland Revenue last Thursday (September 25) in its dispute with Dutch copier firm Oce NV concerning withholding tax levied on its UK subsidiary.
The Dutch firm claimed that the 5% withholding tax it was required to pay on the earnings of its UK subsidiary was unlawful because it did not extend to British companies and was therefore discriminatory under European law which stipulates such dividend income cannot be taxed twice.
However, the ECJ ruled that as the Dutch government allowed Oce to deduct its tax payments made to the Inland Revenue, the withholding tax did not constitute double taxation and as a result was not discriminatory against other firms within the EU.
The judgement was something of a landmark in the fact that the overwhelming majority of recent ECJ rulings have been in favour of the taxpayer.
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