Category: Beneficial Owner

A person or company who enjoys the real benefits of ownership, even though the title to the property is in another name (conduit). Often important in tax treaties, as a resident of a tax treaty partner may be denied the benefits of certain reduced withholding tax rates if the beneficial owner of the dividends, royalties etc is resident of a third country.

Denmark vs Takeda A/S and NTC Parent S.a.r.l., November 2021, High Court, Cases B-2942-12 and B-171-13

Denmark vs Takeda A/S and NTC Parent S.a.r.l., November 2021, High Court, Cases B-2942-12 and B-171-13

The issue in these two cases is whether withholding tax was payable on interest paid to foreign group companies considered “beneficial owners” via conduit companies covered by the EU Interest/Royalties Directive and DTA’s exempting the payments from withholding taxes. The first case concerned interest accruals totalling approximately DKK 1,476 million made by a Danish company in the period 2007-2009 in favour of its parent company in Sweden in connection with an intra-group loan. The Danish Tax Authorities (SKAT) subsequently ruled that the recipients of the interest were subject to the tax liability in Section 2(1)(d) of the Corporation Tax Act and that the Danish company was therefore obliged to withhold and pay withholding tax on a total of approximately DKK 369 million. The Danish company brought the case before the courts, claiming principally that it was not obliged to withhold the amount collected by SKAT, ... Continue to full case
Denmark vs NETAPP ApS and TDC A/S, May 2021, High Court, Cases B-1980-12 and B-2173-12

Denmark vs NETAPP ApS and TDC A/S, May 2021, High Court, Cases B-1980-12 and B-2173-12

On 3 May 2021, the Danish High Court ruled in two “beneficial owner” cases concerning the question of whether withholding tax must be paid on dividends distributed by Danish subsidiaries to foreign parent companies. The first case – NETAPP Denmark ApS – concerned two dividend distributions of approx. 566 million DKK and approx. 92 million made in 2005 and 2006 by a Danish company to its parent company in Cyprus. The National Tax Court had upheld the Danish company in that the dividends were exempt from withholding tax pursuant to the Corporation Tax Act, section 2, subsection. 1, letter c, so that the company was not obliged to pay withholding tax. The Ministry of Taxation brought the case before the courts, claiming that the Danish company should include – and thus pay – withholding tax of a total of approx. 184 million kr. The second ... Continue to full case
Poland vs "BO zoo", April 2021, Supreme Administrative Court, Cases No II FSK 240/21

Poland vs “BO zoo”, April 2021, Supreme Administrative Court, Cases No II FSK 240/21

The shareholder of “BO zoo” is a German company. The German parent held 100% of the shares of “BO zoo” continuously for more than 2 years. The German parent’s ownership of the shares was based on title. “BO zoo” asked the Tax Chamber whether, in order to apply the exemption provided for in Article 22(4) of the CIT Act, it is obliged to verify whether the German parent meets the definition of a beneficial owner of dividends within the meaning of Article 4a(29a) of the CIT Act. “BO zoo” took the position that no provision of the CIT Act makes the application of the exemption from CIT under Article 22(4) of the CIT Act conditional on the company receiving the dividend being the beneficial owner of the dividend. The Tax Chamber disagreed, arguing that the verification of the beneficial owner is part of the due ... Continue to full case
Netherlands vs "Share Owner/Lender", February 2021, Supreme Court (Preliminary ruling by the Advocate General), Case No 20/01884

Netherlands vs “Share Owner/Lender”, February 2021, Supreme Court (Preliminary ruling by the Advocate General), Case No 20/01884

The interested party bought AEX-listed shares, sold three-month futures based on those shares through its shareholder/broker [D], and lent the shares to [D] (stock lending). It received cash collateral ($ deposits as collateral) and a stock lending fee for its lending. According to the interested party, the shares always briefly reverted to its ownership around their dividend dates through registration in the interested party’s securities account with the French custodian bank on the basis of legal transactions between its shareholder [D] and it, represented by [D]. In dispute is the question whether the interested party is entitled to a set-off of € 39,249,246 in Dutch dividend tax withheld from the dividends on the shares lent by her. Did she receive the dividends (was she the beneficial owner?) and if so, was she also the ultimate beneficiary of the dividend? Also in dispute is whether the ... Continue to full case
Netherlands vs "Share Owner/Lender", February 2021, Supreme Court (Preliminary ruling by the Advocate General), Case No 20/01884

Netherlands vs “Share Owner/Lender”, February 2021, Supreme Court (Preliminary ruling by the Advocate General), Case No 20/01884

The interested party bought AEX-listed shares, sold three-month futures based on those shares through its shareholder/broker [D], and lent the shares to [D] (stock lending). It received cash collateral ($ deposits as collateral) and a stock lending fee for its lending. According to the interested party, the shares always briefly reverted to its ownership around their dividend dates through registration in the interested party’s securities account with the French custodian bank on the basis of legal transactions between its shareholder [D] and it, represented by [D]. In dispute is the question whether the interested party is entitled to a set-off of € 39,249,246 in Dutch dividend tax withheld from the dividends on the shares lent by her. Did she receive the dividends (was she the beneficial owner?) and if so, was she also the ultimate beneficiary of the dividend? Also in dispute is whether the ... Continue to full case
Austria vs S GmbH, November 2020, Verwaltungsgerichtshof, Case No Ra 2019/15/0162-3

Austria vs S GmbH, November 2020, Verwaltungsgerichtshof, Case No Ra 2019/15/0162-3

S GmbH was an Austrian trading company of a group. In the course of business restructuring, the real estate division of the Austrian-based company was initially separated from the “trading operations/brands” division on the demerger date of 31 March 2007. The trademark rights remained with the previous trading company, which was the parent company of the group, now M GmbH. On 25 September 2007, M GmbH transferred all trademark rights to a permanent establishment in Malta, which was set up in the same year, to which it also moved its place of management on 15 January 2008. Licence agreements were concluded between S GmbH and M GmbH, which entitle S GmbH to use the trademarks of M GmbH for advertising and marketing measures in connection with its business operations in return for a (turnover-dependent) licence fee. The tax authorities (re)assessed the corporate income tax for ... Continue to full case
Bulgaria vs CBS, October 2020, Supreme Administrative Court, Case No 12349

Bulgaria vs CBS, October 2020, Supreme Administrative Court, Case No 12349

By judgment of 22 May 2020, the Administrative Court set aside a tax assessment in which CBS International Netherlands B.V. had been denied reimbursement of withholding tax related to royalties and license payments. An appeal was filed by the tax authorities with the Supreme Administrative Court. In the appeal the tax authorities held that the beneficial owner of the licence and royalty payments was not CBS International Netherlands B.V. but instead CBS CORPORATION, a company incorporated and domiciled in New York, USA. According to the tax authorities the main function of CBS International Netherlands B.V. was that of an intermediary between the end customers and the beneficial owner. This was further supported by the transfer pricing documentation, according to which the US company that bears the risk of the development activity, the market risk is borne equally by the two companies, and the only risks ... Continue to full case
Spain vs COLGATE PALMOLIVE ESPAÑA, S.A., September 2020, Supreme Court, Case No 1996/2019 ECLI:ES:TS:2020:3062

Spain vs COLGATE PALMOLIVE ESPAÑA, S.A., September 2020, Supreme Court, Case No 1996/2019 ECLI:ES:TS:2020:3062

The tax authorities had issued an assessment according to which royalty payments from Colgate Palmolive España S.A (CP España) to Switzerland were not considered exempt from withholding taxes under the Spanish-Swiss DTA since the company in Switzerland was not the Beneficial Owner of the royalty-income. The assessment was set aside by the National Court in a decision issued in November 2018. The Supreme court were to clarify the conformity with the law of the judgement of the Audiencia Nacional, following in the wake of the order of admission which, in a similar manner to that proposed in appeal no. 5448/2018, ruled in favour of the taxpayer on 3 February last, asks the following questions. a) to clarify the objective and temporal limits of the so-called dynamic interpretation of the DTAs signed by the Kingdom of Spain on the basis of the OECD Model Convention – ... Continue to full case
Panama vs X S.A., September 2020, Administrative Tax Court, Case No TAT-RF-065

Panama vs X S.A., September 2020, Administrative Tax Court, Case No TAT-RF-065

An assessment was issued where the tax administration denied the application treaty benefits, understanding that the dividends distributed by X S.A. a company with tax residence in Panama, to its shareholder NL Corp in the Netherlands did not qualify for the reduced rate provided for in the DTA because the latter was not the “beneficial owner” of the dividends. Judgement of the Tax Court The court upheld the assessment. “By virtue of the above, we consider that the possibility that the tax administration of the State in which the benefits of the Convention are requested, in this case Panama, also depends on the analysis of the body of evidence, and it is not apparent that the taxpayer has provided, in a timely manner, documentation related to the elements described above, therefore, we do not consider the request to be admissible, as it has not been ... Continue to full case
Peru vs. "TELE SA", July 2020, Tax Court, Case No 03306-9-2020

Peru vs. “TELE SA”, July 2020, Tax Court, Case No 03306-9-2020

“TELE SA” had applied a 15% withholding tax rate to lease payments for telecommunications equipment purportedly provided by a Chilean company that had been established by the Mexican parent of the “TELE” group. TELE SA claimed the payments qualified as royalties under Article 12 of the Peru-Chile double tax treaty. The Peruvian Tax Authority found the reduced 15 % rate did not apply to the lease payments because the Chilean entity was not the beneficial owner of the royalty payments. Hence an assessment was issued where withholding taxes had been calculated using a 30% rate under Peruvian domestic tax legislation. An appeal was filed with the Tax Court. Judgement of the Tax Court The Tax Court upheld the decision of the tax authorities and dismissed the appeal of “TELE SA”. The 15% withholding tax rate for royalty provided for in Article 12 of the double ... Continue to full case
France vs Société Planet, July 2020, CAA, Case No 18MA04302

France vs Société Planet, July 2020, CAA, Case No 18MA04302

The Administrative Court of Appeal (CAA) set aside a judgement of the administrative court and upheld the tax authorities claims of withholding taxes on royalties paid by Société Planet to companies in Belgium and Malta irrespective of the beneficial owner of those royalties being a company in New Zealand. Hence, Article 12(2) of the Franco-New Zealand tax treaty was not considered applicable to French source royalties whose beneficial owner resided in New Zealand, where they had been paid to an intermediary company established in a third country. Click here for English translation Click here for other translation France vs Planet July 2020 CAA 18MA04302 ... Continue to full case
Italy vs Stiga s.p.a., formerly Global Garden Products Italy s.p.a., July 2020, Supreme Court, Case No 14756.2020

Italy vs Stiga s.p.a., formerly Global Garden Products Italy s.p.a., July 2020, Supreme Court, Case No 14756.2020

The Italian Tax Authorities held that the withholding tax exemption under the European Interest and Royalty Directive did not apply to interest paid by Stiga s.p.a. to it’s parent company in Luxembourg. The interest was paid on a loan established in connection with a merger leverage buy out transaction. According to the Tax Authorities the parent company in Luxembourg was a mere conduit and could not be considered as the beneficial owner of the Italian income since the interest payments was passed on to another group entity. The Court rejected the arguments of the Italian Tax Authorities and recognized the parent company in Luxembourg as the beneficial owner of the interest income. In the decision, reference was made to the Danish Beneficial Owner Cases from the EU Court of Justice to clarify the conditions for application of the withholding tax exemption under the EU Interest and ... Continue to full case
France vs Atlantique Négoce (Enka), June 2020, Conseil d'Etat, Case No. 423809

France vs Atlantique Négoce (Enka), June 2020, Conseil d’Etat, Case No. 423809

For FY 2007 Atlantique Négoce declared having paid dividends to its Luxembourg parent company, Enka, but the tax authorities found that it had not been proven that the Luxembourg parent company was the actual beneficial owner of the dividends. On that basis a claim for withholding tax on the dividends was issued. Judgement of the Conseil d’Etat. The court upheld the decision of the tax authorities and dismissed the appeal of Atlantique Négoce. It follows from the grounds of the judgment of the Court of Justice of the European Union (CJEU) of 26 February 2019, Skatteministeriet v T Danmark and Y Denmark Aps (aff. C-116/16 and C 117/16, paragraph 113) that the status of beneficial owner of the dividends must be regarded as a condition for benefiting from the exemption from withholding tax provided for in Article 5 of Directive 90/435/EEC of 23 July 1990 ... Continue to full case
Switzerland vs Coffee Machine Group, April 2020, Federal Supreme Court, Case No 2C_354/2018

Switzerland vs Coffee Machine Group, April 2020, Federal Supreme Court, Case No 2C_354/2018

Coffee Machine Ltd. was founded in Ireland and responsible for the trademark and patent administration as well as the management of the research and development activities of the A group, the world’s largest manufacturer of coffee machines. A Swiss subsidiary of the A group reported payments of dividend to the the Irish company and the group claimed that the payments were exempt from withholding tax under the DTA and issued a claim for a refund. Tax authorities found that the Irish company was not the beneficial owner of the dividend and on that basis denied the companies claim for refund. The lower Swiss court upheld the decision of the tax authorities. Judgement of the Supreme Court The Supreme Court upheld the decision of the lower court and supplemented its findings with the argument, that the arrangement was also abusive because of the connection between the ... Continue to full case
Korea vs "Lux corp", 16 January 2020, Supreme Court Case no. 2016두35854

Korea vs “Lux corp”, 16 January 2020, Supreme Court Case no. 2016두35854

In this case the Korean Supreme Court held that Luxembourg SICAV and SICAF are entitled to reduced withholding tax rate on interest and dividend income under the Korea–Luxembourg Tax Treaty. Meaning of “residents of Luxembourg,” which is subject to the “Convention between the Government of the Republic of Korea and the Government of the Grand Duchy of Luxembourg for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital” (held: any person who, under the laws of Luxembourg, is liable to pay tax therein), and in a case where tax is not imposed in accordance with the benefit of tax exemption, etc. for which legal requirements has been fulfilled, whether it may be considered that the tax liability does not exist (negative). Standard for determining whether one qualifies as the “beneficial owner” as prescribed in ... Continue to full case
Spain vs "Lux Hold S.A.", October 2019, TEAC, Case No 00/02188/2017/00/00

Spain vs “Lux Hold S.A.”, October 2019, TEAC, Case No 00/02188/2017/00/00

There is an obligation to withhold tax on dividends paid to a holding company resident in an EU Member State, if the beneficial owner is resident abroad. Although the Parent-Subsidiary Directive 90/435 does not contain a beneficial owner clause, the exemption clause contained in Article 14.1.h) of the TRLIRNR is perfectly in line with EU law. It cannot be rejected as an incorrect transposition nor can it be considered to infringe the Community principles of freedom of movement or establishment. All this in accordance with the CJEU Judgment of 26 February 2019. The judgment of the CJEU in Cases C-116/16 and C-117/16 is analysed. In contrast to the judgment cited by the claimant: CJEU Judgment of 7 September 2017 Case C-6/16. SP vs Palmolive SAN_1128_2018 ENG NW”>Click here for English Translation Click here for other translation Spain BO - Resolución nº 00-2188-2017 081019 ... Continue to full case
Denmark vs T and Y Denmark, February 2019, European Court of Justice, Cases C-116/16 and C-117/16

Denmark vs T and Y Denmark, February 2019, European Court of Justice, Cases C-116/16 and C-117/16

The cases of T Danmark (C-116/16) and Y Denmark Aps (C-117/16) adresses questions related to interpretation of the EU-Parent-Subsidary-Directive The issue is withholding taxes levied by the Danish tax authorities in situations where dividend payments are made to conduit companies located in treaty countries but were the beneficial owners of these payments are located in non-treaty countries. During the proceedings in the Danish court system the European Court of Justice was asked a number of questions related to the conditions under which exemption from withholding tax can be denied on dividend payments to related parties. The European Court of Justice has now answered these questions in favor of the Danish Tax Ministry; Benefits granted under the Parent-Subsidiary Directive can be denied where fraudulent or abusive tax avoidance is involved. Quotations from cases C-116/16 and C-117/16: “The general principle of EU law that EU law cannot ... Continue to full case
Denmark vs N, X, C, and Z Denmark, February 2019, European Court of Justice, Cases C-115/16, C-118/16, C-119/16 and C-299/16

Denmark vs N, X, C, and Z Denmark, February 2019, European Court of Justice, Cases C-115/16, C-118/16, C-119/16 and C-299/16

The cases of N Luxembourg 1 (C-115/16), X Denmark A/S (C-118/16), C Danmark I (C-119/16) and Z Denmark ApS (C-299/16), adresses questions related to the interpretation of the EU Interest and Royalty Directive. The issue in these cases is withholding taxes levied by the Danish tax authorities in situations where interest payments are made to conduit companies located in treaty countries but were the beneficial owners of these payments are located in non-treaty countries. During the proceedings in the Danish court system the European Court of Justice was asked a number of questions related to the conditions under which exemption from withholding tax can be denied on interest payments to related parties. The European Court of Justice has now answered these questions in favor of the Danish Tax Ministry; Benefits granted under the Interest and Royalty Directive can be denied where fraudulent or abusive tax ... Continue to full case
Italy vs Dolce & Gabbana, December 2018, Supreme Court, Case no 33234/2018

Italy vs Dolce & Gabbana, December 2018, Supreme Court, Case no 33234/2018

Italien fashion group, Dolce & Gabbana, had moved ownership of valuable intangibles to a subsidiary established for that purpose in Luxembourg. The Italian Revenue Agency found the arrangement to be wholly artificial and set up only to avoid Italien taxes and to benefit from the privileged tax treatment in Luxembourg. The Revenue Agency argued that all decision related to the intangibles was in fact taken at the Italian headquarters of Dolce & Gabbana in Milan, and not in Luxembourg, where there were no administrative structure and only one employee with mere secretarial duties. Dolce & Gabbana disagreed with these findings and brought the case to court. In the first and second instance the courts ruled in favor of the Italian Revenue Agency, but the Italian Supreme Court ruled in favor of Dolce & Gabbana. According to the Supreme Court, the fact that a company is ... Continue to full case
Spain vs COLGATE PALMOLIVE ESPAÑA, S.A., November 2018, Audiencia National, Case No 643/2015 - ECLI:EN:AN:2018:5203

Spain vs COLGATE PALMOLIVE ESPAÑA, S.A., November 2018, Audiencia National, Case No 643/2015 – ECLI:EN:AN:2018:5203

The tax authorities had issued an assessment according to which royalty payments from Colgate Palmolive España S.A. (CP España) to Switzerland were not considered exempt from withholding taxes under the Spanish-Swiss DTA since the company in Switzerland was not the Beneficial Owner of the royalty-income. Judgement of the National Court The court held in favour of Colgate and set aside the decision of the tax authorities. SP vs Palmolive SAN_1128_2018 ENG NW”>Click here for English Translation Click here for other translation SAN_5203_2018 ... Continue to full case