Greece Asked To End Discriminatory Taxation Of Foreign Dividends

by Ulrika Lomas, for LawAndTax-News.com, Brussels

18 October 2006

The European Commission on Tuesday formally requested that the Greek authorities abolish discriminatory taxation of dividends paid by companies from other Member States.

Greece exempts dividends paid by Greek companies to individuals, but taxes dividends paid by companies of other Member States. The Commission considers this different treatment contrary to the EC Treaty.

The request is in the form of a reasoned opinion under Article 226 of the EC Treaty. If Greece does not reply satisfactorily to the reasoned opinion within two months the Commission may refer the matter to the European Court of Justice.

"The rules of the Internal Market forbid discrimination of dividends paid by companies of other Member States" explained EU Taxation and Customs Commissioner László Kovács. "Dividends paid from other Member States should be taxed in the same way as dividends paid by domestic companies".

The stated aim of the exemption from income tax of dividends paid by Greek companies is to avoid double taxation of the company profits. Such double taxation would arise when the profits were taxed first at the level of the company and then again in the hands of the individual shareholders when distributed as dividends.

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