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Germany: Dividend withholding, Canadian pension plan (CJEU Advocate General opinion)

Germany: Dividend withholding, Canadian pension plan

The Advocate General of the Court of Justice of the European Union (CJEU) on 5 June 2019 issued an opinion in a case concerning the compatibility with EU law of the German withholding tax on dividends paid to a Canadian pension program or scheme.


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The CJEU Advocate General concluded that the German law constitutes an unjustified restriction to the free movement of capital and noted that the derogation from the prohibition on restrictions to the free movement of capital with non-EU countries (also referred to as the “Standstill Clause”) is not applicable in the present case.

The case is: College Pension Plan of British Columbia (C-641/17)


The Canadian pension fund received dividends from German stock corporations, and these payments were subject to a 15% withholding tax pursuant to the Germany-Canada income tax treaty.

The Canadian fund applied for a refund of the withholding tax, asserting that such treatment was discriminatory. Under German law, a German pension fund would be allowed to deduct technical reserves, taking account of its future pension liabilities. This meant that only the net income would be subject to corporate income tax at the rate of 15%. In addition, the German withholding tax that would apply to a German pension fund during a fiscal year would be credited against its final corporate income tax, and any excess amount would be reimbursed. As a result, German pension funds are exempt or practically exempt from tax, thereby placing non-resident funds at a disadvantage.

The German tax authorities denied the refund. The Canadian pension fund appealed the decision to a court in Munich. In October 2017, the Munich court requested a preliminary ruling from the CJEU as to whether the German dividend withholding tax was compatible with the free movement of capital.

The CJEU Advocate General’s opinion concludes that the German law constitutes an unjustified restriction to the free movement of capital that does not fall within the scope of the Standstill Clause. The Advocate General’s opinion is not binding on the court. Rather, it is the role of the Advocate General to propose a legal solution to the case. The CJEU judges now will begin their deliberations in this case, with judgment to be given at a later date.

Read a June 2019 report prepared by KPMG’s EU Tax Centre

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