No claim for refund of dividend tax withheld

Case no. 59/2019
Judgment delivered on 24 June 2021

Fidelity Investment Funds
Fidelity Institutional Funds
and
Fidelity Funds
vs.
The Danish Ministry of Taxation

The cases concerned whether Fidelity Investment Funds, Fidelity Institutional Funds and Fidelity Funds (the foreign investment undertakings), which are resident in Great Britain and Luxembourg, had a claim for a refund of the tax withheld by Danish companies on dividend paid to the foreign investment undertakings in 2000-2009.

In the 2000-2009 period, investment funds could be exempted from withholding tax on dividend received from Danish companies, if the investment fund was resident in Denmark, and if it had elected to be treated as a distributing fund under Section 16c of the Danish Tax Assessment Act and to calculate a minimum distribution according to that provision.

In response to the request for a preliminary ruling from the High Court, the CJEU rejected the requirement for an investment undertaking to be resident in Denmark, as this condition for being exempt from withholding tax on dividend was considered to be in contravention of Article 63 TFEU on the free movement of capital.

The Supreme Court held that the fact that the residency requirement was in contravention of EU law did not in itself imply that foreign investment undertakings were entitled to a refund of the dividend tax withheld.

The foreign investment undertakings had claimed that Section 16c of the Tax Assessment Act was also contrary to EU law, and that they were therefore also not required to meet the requirement for an annual minimum distribution covering, among other things, dividend from Danish companies.

The Supreme Court held that the requirement in Section 16c of the Withholding Tax Act on the calculation of an annual minimum distribution covering, among other things, dividend from Danish companies had to be regarded as being justified by the need to ensure correct taxation and the internal cohesion of the Danish tax system for investment undertakings, and that the requirement did not amount to a disproportionate restriction of the free movement of capital under Article 63 TFEU.

The foreign investment undertakings had not elected to be qualified as distributing investment funds and to calculate an annual minimum distribution in the 2000-2009 period, which meant that they did not fulfil this condition for exemption from withholding tax. Accordingly, the Supreme Court ruled that the foreign investment undertakings were not entitled to a refund of the dividend tax withheld.

The Supreme Court held that there was no reasonable doubt as to the interpretation of EU law in relation to refund in the cases at hand that justified referring questions to the CJEU on this matter.

The High Court had reached the same conclusion.