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Smaller funds advised to claim tax refund

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NETHERLANDS - Dutch pension funds are being advised to safeguard their rights to the refund of dividend withholding tax in European countries, as recent cases in both the Netherlands and France suggest taxes claimed in contravention of EU rules may also have been taken by governments elsewhere.

Niels van der Wal, tax adviser at KPMG Meijburg & Co, said “in 2006 many pension funds submitted requests for full restitution of withholding tax with many EU-tax authorities”, but is advising pension funds to review their status as he believes “a lot of the smaller funds still did not file their claims”.

Dutch pension funds are probably entitled to a full refund of French dividend withholding tax, following a decision of the French Conseil d’Etat earlier this month.

According to the French court the withholding tax levied is a restriction of the free movement of capital and therefore in conflict with European Law.

More importantly, while two such decisions have been made in the Netherlands and France it is widely expected among tax experts that other EU Member States will follow suit and repay withholding tax on the same grounds.

The French case was brought by larger pension investor PFZW, the Dutch care and welfare sector pension fund, and for many of the smaller funds the benefit of the potential rebates did not weigh against the costs of a legal challenge. (See earlier IPE story: French supreme court acts on pensions rebate)

But since the ruling of the French court, they can arguably apply for the rebate all the same, emphasised Van der Wal.

To qualify for the refund, a pension fund has to demonstrate that it is sufficiently comparable to a local, or in this case, a French pension fund.

Furthermore, pension funds must be able to demonstrate that they actually suffered the dividend tax in the past, added Van der Wal.

The KPMG tax adviser has recommended pension funds safeguard their rights before the reclaim period for withholding tax expires and said pension funds should not only investigate their entitlement to a recovery of dividend tax paid in France, but also in other EU-countries where similar procedures have begun.

“In most EU-countries you can get restitution over several years back in time. In some European countries tax reclaims can be filed each quarter, implying each quarter part of the potential entitlement lapses”, said Van der Wal.

Prior to the French ruling, Dutch tax authorities had issued a ruling which will lead to substantial refunds of Dutch withholding tax to pension funds based outside the Netherlands. Claims going back to 2003, if submitted in a timely manner, are eligible for repayment by the Dutch tax office. (See earlier IPE story: Pension funds set to receive €500m in Dutch tax rebates)

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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