Non-Residents Denied Tax Break By ECJ

by Ulrika Lomas, Tax-News.com, Brussels

15 November 2006

A Belgian couple's claim for exemption on dividend taxes paid in France has been rejected by the European Court of Justice in a ruling delivered yesterday.

The judgment reinforces a series of recent ECJ verdicts requiring the taxing authorities of member states to treat companies and individuals the same regardless of their country of residence within the EU.

Usually, this principle has been applied against member states who have denied non-resident investors the same tax breaks that are open to resident investors. However, in the latest case, the ECJ found in favour of the Belgian tax authorities.

The case centred on Belgian residents Mark and Bernadette Kerckhaert-Morres, who in 1995 and 1996 received dividends from Eurofers SARL, a company established in France which were made subject to a levy of 15%. In their tax return Mr and Mrs Kerckhaert-Morres applied to take advantage of a tax benefit corresponding to the French tax at source. That application was rejected and the couple brought an action in the Court of First Instance in Ghent, Belgium, which then referred the case to the ECJ.

In yesterday's judgment, the Luxembourg Court took the view that Belgian tax legislation does not make any distinction between dividends from companies established in Belgium and dividends from companies established in another Member State.

"Both are taxed at an identical rate of 25% by way of income tax and therefore the law does not discriminate against companies and individuals in other member states," the judges concluded.

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