ECJ issues favorable judgment for taxpayers in withholding tax cases C-338/11 to C-347/11.

The decision in the joint cases concerning French withholding taxes and foreign investment funds was delivered in by the ECJ in Luxembourg (Cases C-338/11 to C-347/11) on May 11, 2012. The Atoz Taxand team was there to hear the decision.

The decision was favorable for the taxpayers, confirming that foreign funds that had received dividend payments from French companies and that had been subject to withholding taxes are entitled to the same exemption as French funds under Article 63 TFEU. The following key arguments of the French authorities were both rejected:

 a) The comparison should be made at the level of investors, not the funds themselves, and

 b) The effect of a positive judgement should be time limited.

Although the details of each case need to be examined closely, the likelihood of recovery of withholding taxes by foreign funds in France and other EU member states has increased significantly.

It is particularly interesting to note that the case included two US mutual funds, so the application to non-EU funds has taken a significant step forward. The possible distinction between EU and non EU funds was not formally raised before the Court. However, in its conclusions and judgment, the Court strongly suggests that there is no basis to distinguish per se between EU and non EU funds.

The decision will be implemented shortly at the national level by the Administrative Court of Montreuil.

In addition, the decision has opened an extension of the statute of limitation by which investors can potentially claim for fiscal year 2009.

Since the preliminary ruling is binding for all Member States, we recommend investors to review their strategy and tactics and file any relevant claims in France and across Europe.