On 2 April 2020, the Court of Justice of the European Union (“CJEU”) rendered a decision (“Decision”) in case C-458/18, (“GVC Services”) in response to a request for a preliminary ruling submitted by the Administrative Court of Sofia (Bulgaria) regarding the applicability of the Parent Subsidiary Directive 2011/96/EU (PSD) 1 in order to exempt from withholding tax (“WHT”) dividends paid by a company resident in the European Union (the “UE” - Bulgaria in the case hand) to a company resident in Gibraltar. This Decision could be seen as a “flip flap” of the CJEU to the well-established market practice set by the European Commission and the European Parliament (respectively the “Commission”, and the “Parliament”) of the EU.
In the case at hand, the CJEU ruled that a company incorporated and subject to corporation tax in Gibraltar should not be assimilated to “a company incorporated under the law of the United Kingdom and subject to corporation tax in the United Kingdom”, as listed in the annex I, part A and part B of the PSD. Therefore, the WHT exemption on dividends paid by a company resident in the EU to a company resident in Gibraltar could not be based on the provisions of the PSD.
The importance of that Decision for Luxembourg relies on the fact that, Luxembourg being a well-known and reputable investment holding jurisdiction, Luxembourg vehicles may be used to structure inbound and outbound shareholding investments through Gibraltar.
This ATOZ Reports aims at (i) describing the facts and conclusions of the CJEU and (ii) analysing why this decision goes against a current market practice set by the Commission and the Parliament and what could be the concrete impacts for Luxembourg corporate taxpayers performing holding activities.