Advocate General’s Conclusions Shed Light on Anti-Abuse Provision Impacting Dividend Withholding Tax Exemption for Holding Companies

June 20, 20230



On June 9, 2023, the Advocate General (A-G) presented two significant conclusions to the Supreme Court, addressing the anti-abuse provision within Section 4 of the Dividend Withholding Tax Act (Wet DB). These conclusions have important implications for holding companies seeking to benefit from the dividend withholding tax exemption. The A-G recommended the dismissal of the taxpayers’ appeals in cassation, prompting a closer examination of the requirements for holding companies to qualify for the exemption.  


Case Background  


The cases under review involved Dutch companies distributing dividends to Belgian holding companies whose shareholders were resident members of the same family. In one case, the holding company lacked substantial business activity. In the other case, although the holding company engaged in substantive business activities related to its shareholdings in other companies, the shares of the dividend-distributing company were not functionally attributable to this business. Both cases were initially deemed abusive by the Court of Appeals Amsterdam, leading to the denial of the dividend withholding tax exemption.  


A-G’s Opinion  


The A-G’s opinion supports the decisions made by the Court of Appeals Amsterdam, asserting that the correct legal standard was applied in determining abuse. The A-G further concluded that the Court’s actual findings were not incomprehensible. Based on this reasoning, the A-G advised the Supreme Court to reject the taxpayers’ appeals in cassation.  


Potential Impact and Recommendations  


While the Court of Appeals Amsterdam’s substantiation, particularly in the case involving a business, may appear surprising, it is highly likely that the Supreme Court will follow the A-G’s opinion. Should this occur, tax authorities may be empowered to challenge similar structures. In light of this possibility, it is crucial for holding companies to ensure they meet specific requirements to substantiate their function effectively.  


Requirements for Substantiating Holding Companies  


  1. Actual Management: Holding companies should demonstrate that the management of the Dutch company is genuinely carried out by the foreign parent company. This requirement emphasizes the need for substantive decision-making authority at the parent level.  
  2. Personnel and Office Space: The availability of personnel, dedicated to managing the Dutch company, within the foreign parent company is essential. Additionally, office space must be allocated for the performance of these management activities.  
  3. Power to Dispose of Dividends: The board of directors of the foreign parent company must possess the actual power to dispose of the dividends received from the Dutch company. This requirement underscores the need for genuine control over the funds distributed as dividends.  




The Advocate General’s conclusions in the Supreme Court case shed light on the anti-abuse provision within the Dividend Withholding Tax Act, particularly concerning holding companies. While the court‘s decisions may have raised eyebrows, it is advisable for holding companies to prepare for potential challenges from tax authorities. By ensuring that the requirements, including actual management, personnel availability, and the power to dispose of dividends, are fulfilled, holding companies can strengthen their position and mitigate the risk of losing the dividend withholding tax exemption. If you have any further related questions, contact us.

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