Following the CJEU decision in september 2018, the Danish High Court issued a decision on the actual facts of the Fidelity case c-480/16
The Danish High Court asked itself the following question:
Should foreign funds have the same tax benefits as a Danish fund complying with the IMB requirements, irrespective of the fact that they did not meet these requirements and did not try to fulfill the purpose of the Danish rules in any other way?
The IMB conditions include making a Danish active election of IMB status and submitting annual IMB assessments based on Danish tax rules and for Danish funds also applying a tax on distributions.
The Court answered this question in the negative.
The Court stated that the CJEU did not analyze whether the IMB requirements were contrary to EU law and that as the case was presented, the Court did not have to respond to this or to whether a foreign fund should have been allowed the possibility to provide tax information to the Danish tax authorities in a way alternative to the ‘IMB’ requirements.
Globe Refund comments
It should be noted that the claimant asked for five questions to be referred to the CJEU in order to obtain clarification as to whether all (or at least which of) the features of an IMB fund should be fulfilled to consider a foreign fund as being comparable to a Danish fund.
The Danish High Court only accepted to ask one of the questions and reject the other four.
This probably explains why the CJEU has not provided a comprehensive answer to the situation.
It is therefore likely that further questions may be referred to the CJEU in this case, which has been appealed to the Supreme Court, or in similar cases before the issue is resolved.
In our view, the case is not closed for foreign (comparable) funds having suffered Danish WHT on Danish dividends.
While the chance of success overall should not have increased, the case at hand does open up for the possibility that even though a foreign fund has not complied with Danish IMB requirements (which very few foreign funds have), it could be considered to refer the claims to the tax authorities and agree on an alternative reporting that could potentially lead to a (partial) refund or that the CJEU is presented with further questions and it can be concluded that the IMB requirements are in fact contrary to EU law.
The Danish High Court ruling has been appealed before the Danish Supreme Court.
At the Supreme Court level, additional questions could potentially be referred to the CJEU.
Furthermore, other funds that have received rejections could choose to appeal their rejection to court with another procedural approach implying that the case could have another outcome than the Fidelity case. Also, in such a case, new questions could be referred to the CJEU.
For instance, referring to the CJEU decision in the Van der Weegen – Pot case (580/11), it could be invoked that in practice the IMB rules are very difficult to comply with for a foreign fund and, therefore, the Danish rule is contrary to EU law.
Regarding the future, we are still awaiting new legislation taking into account the CJEU conclusion, i.e. amending the current Danish WHT rules, to align tax treatment of Danish and foreign funds, e.g. by allowing foreign funds to benefit from a Danish WHT exemption.