Supreme Court denies WHT exemption to Belgian holdings

On Friday, 18 July 2025, the Dutch Supreme Court (Hoge Raad) issued two rulings concerning the withholding exemption for dividend tax. These are the first cases in which the amended 2018 anti-abuse provision in the dividend tax is assessed against the EU law concept of abuse. In both cases, the Supreme Court ruled that the withholding exemption does not apply, meaning that dividend tax is due.

Background

The related proceedings concern two Belgian companies—X BVBA and X NV—whose (in)direct shareholders are families residing in Belgium. Both companies hold an indirect interest in a Dutch limited partnership (CV) through a Dutch intermediate holding company. In 2018, the Dutch intermediate holding company distributed dividends to the Belgian companies. Had the shareholder company been established in the Netherlands, the withholding exemption would have applied to this dividend distribution.

The dispute

The key issue before the Dutch Supreme Court  was whether the Belgian companies could invoke the withholding exemption under Article 4(2) of the 1965 Dividend Withholding Tax Act (Wet op de dividendbelasting 1965), or whether this was precluded by the anti-abuse provision in Article 4(3)(c) of the same Act. This anti-abuse provision excludes the application of the withholding exemption if:

• The main purpose or one of the main purposes of holding the interest in the dividend-paying entity is to avoid Dutch dividend withholding tax for another party (the subjective test); and

• The arrangement constitutes an artificial construction, transaction, or series of transactions (the objective test).

This provision was introduced in 2018. Prior to that, there was no explicit statutory basis in Dutch dividend tax law for assessing abuse under EU law. Assessments were primarily based on case law and general principles of EU law. The introduction of Article 4(3)(c) implemented the 2015 amendment to the EU Parent-Subsidiary Directive, which added a general anti-abuse rule. These are the first rulings in which the application of this provision is tested against EU law. The Supreme Court held that the Dutch legislation is consistent with EU law.

Earlier Case: Corporate Income Tax and Substantial Interest – 25 April 2025

In an earlier decision on 25 April 2025, the Supreme Court assessed a national anti-abuse measure under EU anti-abuse standards. That case involved the technical substantial interest rule under Article 17(3)(b) of the 1969 Corporate Income Tax Act (Wet Vpb 1969). The Court aligned its reasoning with recent case law from the Court of Justice of the EU, including the Nordcurrent judgment of 3 April 2025 (C-228/24), which emphasized that abuse of EU law must always be assessed based on all the facts and circumstances of the case.

For more information on that case, please refer to the EUDTG news alert on Nordcurrent here. 

Judgment

Based on the assessment framework, the Dutch Supreme Court reached the following conclusions:

• When a structure involving an intermediary foreign company is maintained after a relevant change in circumstances—such as the disposal of shares—this constitutes, in the Court’s view, an indication of abuse under EU law. Even a structure originally set up for valid commercial reasons that reflect economic reality may, in light of such a change, be considered artificial from a certain point onward.

• The mere fact that the taxpayer operates a substantive business does not, according to the Court, automatically exclude abuse under EU law. What matters is whether the shareholding can be functionally attributed to that substantive business.

• Regarding the burden of proof, the Court held that it is initially up to the tax inspector to demonstrate, based on facts and circumstances, that abuse is likely. The taxpayer must then provide counter-evidence showing that the structure was motivated by valid commercial reasons or that obtaining a tax advantage was not the main purpose.

It is worth noting that the Supreme Court considers the degree of shareholder control over profit allocation to be significant. This becomes relevant when the shareholder—in one of these cases, the Belgian shareholder family—has full discretion to decide whether the profits distributed by the company to the taxpayer are further distributed to the shareholders or reinvested. In such a situation, the taxpayer—the Belgian intermediary holding company—does not have true control over the dividends it receives. It is also relevant that the taxpayer is under no obligation to reinvest the profits received from the BV, either in whole or in part—an aspect the Court of Appeal considered significant. With this approach, the Supreme Court appears to take into account, in assessing whether the structure constitutes abuse, that in this case it is the Belgian shareholder family who is, in substance, entitled to the dividend. It also seems relevant that the shareholders in this case also acted as directors. In situations involving an independent or third-party board, this could potentially lead to a different assessment.