The Court of Justice of the European Union (CJEU) on 26 October 2017 issued a judgment concerning the compatibility of Belgian rules under EU Parent-Subsidiary-Directive (90/435/EEC). Specifically, the case concerns the compatibility with the EU Parent-Subsidiary-Directive with Belgian rules under which the deduction of interest payments was disallowed to the extent that in the same tax year, the taxpayer had received exempt dividends from shares held for less than one year, without regard to whether the interest payments were relating to the holding.
The case is: Argenta Spaarbank NV v Belgische Staat, C-39/16 (26 October 2017)
The Belgian tax authority disallowed a deduction of interest paid by a Belgian-based credit institution on the grounds that in the same tax years, it had also received dividends from holdings that it had not held for a full year at the time of distribution. The credit institution disputed the tax assessment arguing that the rules only were to apply in situations when there is a causal relationship between the interest payments and the partially exempt dividends.
The question referred to the CJEU was whether the Belgian rules are compatible with a provision under the Directive that allows the EU Member State of a parent company to refuse the deductions of costs relating to holdings in a subsidiary established in another EU Member State and a provision under which EU Member States may refuse to grant the benefits of the Directive for reason of preventing tax evasion and abuse.
The CJEU concluded that the disputed Belgian rule did fall within the scope of the Directive, and that the Belgian rules were precluded by the Directive.
Read an October 2017 report [PDF 146 KB] prepared by KPMG’s EU Tax Centre
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.