CJEU judgment on comparability of Dutch and foreign investment funds

CJEU judgment on comparability of Dutch and foreign investment funds

On 30 January 2020, the European Court of Justice (“CJEU”) rendered its judgment in the “Deka” case (C-156/17).

The Dutch Supreme Court referred three procedural questions to the CJEU regarding a refund of Dutch dividend withholding tax to foreign investment funds. These questions concern the compatibility of the Dutch Fiscal Investment Institution (FII) regime with EU law, and, more specifically, the shareholder and distribution requirements under that regime. 


Deka is an investment fund established under German law in the form of a Publikums-Sondervermögen. Deka is exempt from German corporate income tax and qualifies as an Undertaking for Collective Investment in Transferable Securities (UCITS). Deka received dividends from Dutch shares which were subject to a Dutch dividend withholding tax of 15%. Deka applied for a refund considering itself comparable to a Dutch FII.

A Dutch FII is effectively entitled to a refund of the dividend withholding tax withheld from it. The Dutch tax authorities rejected the application for a refund made by Deka on the grounds that Deka did not comply with all the requirements to qualify as FII, being the distribution requirement (i.e. the FII regime requires distribution of the fund’s taxable profit within 8 months following the end of the year) and the shareholder requirements (participation thresholds which are not to be exceeded by holders of shares or certificates of participation in a fund in order to qualify for the FII regime).

Meeting the FII requirements 

In the CJEU’s view, EU Member States are free to define material and formal requirements which must be met to benefit from such a specific tax regime applicable to collective invest-ment undertakings and to the dividends received by those undertakings. However, these requirements should apply indiscriminately and the burden of proof should not make it im-possible or excessively difficult for a non-resident taxpayer to obtain the tax advantage at hand. 

Shareholder requirements 

Deka argued that it was difficult to prove that it met the shareholder requirements because its shares were publicly traded via an electronic trading system. Deka, therefore, had no information on the identity of its shareholders.

Based on the CJEU judgment, it is for the referring court to verify that the shareholder re-quirements under the FII regime do not de facto disadvantage non-resident investment funds. Provided that the tax authorities require proof of compliance with those requirements for resident investment funds and non-resident investment funds alike, these requirements apply indiscriminately. However, if the tax authorities impose a more stringent burden of proof on non-resident investment funds, this constitutes a breach of the freedom of capital movement.

Distribution requirement 

Deka argued that the legal framework to which it is subject in Germany effectively also re-quired a minimum distribution to its shareholders which may be topped-up with an additional deemed distribution for tax purposes, as a result of which non-distributed profits were effectively subject to taxation at the level of the end investors. As such, Deka argued that this method of distribution and taxation had a similar object and purpose as the distribution requirement under the FII regime. 

The CJEU held that it is for the referring court to verify whether the object and purpose of the FII regime lie principally in the taxation of profits of the shareholder in an investment fund (i.e. achieving fiscal neutrality for investors in the investment fund). If so, a resident investment fund which makes an actual distribution of its profits, and a non-resident investment fund whose profits are not distributed but are deemed to have been distributed and are taxed as such at the shareholder in that fund, must be regarded as being in objectively comparable situations. In both cases, the level of taxation is shifted from the investment fund to the shareholder. 


The CJEU judgment brings positive news for foreign investment funds which filed claims in the Netherlands. The fact that they did not actually distribute their profits to their investors does not make them automatically incomparable with a Dutch FII. The Dutch Supreme Court will now have to issue its final judgment taking into account the CJEU’s judgment. Globe refund strongly advise foreign investment funds to continue protecting their rights for refund for claims already filed and by filing new claims timely. Statute of limitation in the Netherlands is 3 years following the end of the dividend year.

To read the full judgement click here.