BDO Corporate Tax News

The Netherlands Supreme Court issued two decisions on 18 July 2025 that offer useful guidance on the application of the anti-abuse rule in the domestic dividend withholding tax exemption. The court upheld the decision of the Amsterdam Court of Appeals, which concluded that abuse was present in both cases and denied the exemption. Although the cases involve family-owned groups, the decisions can have a broader impact and affect multinational groups with subsidiaries in the Netherlands.

Summary of the Cases 

The two cases before the Supreme Court involve Belgian family-owned companies (companies A and B) claiming an exemption from the Dutch dividend withholding tax. Both Belgian entities invested in a Dutch private equity fund through a Dutch resident feeder company. The Belgian companies were not actively involved in the management of the feeder company or the investments of the fund, nor did they have personnel or office space of their own. Family members were on the boards of the Belgian entities. Company A owned shares in other subsidiaries in addition to the feeder company and it conducted an active business enterprise managing these other subsidiaries. Company B merely held shares in the feeder company and two classic cars; it also originally owned shares in a Belgian subsidiary that was engaged in an active business. The Dutch tax authorities disallowed the dividend withholding tax exemption on the grounds that the structures were artificial, lacked substance and were set up with the main (or one of the main) purposes of circumventing dividend withholding tax. 

Decision of the Supreme Court

The Supreme Court concluded that abuse was present in both cases and denied the exemption from dividend withholding tax based on the following: 

• The mere fact that the taxpayer carries on an active business does not prevent a finding of abuse; the shareholding must be attributable to the active business. This applied to company A.
• A structure that was originally established for valid business reasons can change over time, i.e., a change in circumstances such that the structure no longer reflects economic reality can lead to a finding of abuse. This was relevant to company B, which initially owned an active Belgian subsidiary. 
• All parts and steps of a structure must be taken into account in determining whether abuse is present. The dividend withholding tax exemption can be denied even if only one part or step is artificial.
• Neither Belgian company was involved in the activities of the Dutch feeder company or the fund investments. 
• The dividend withholding tax exemption would not apply if the family members held the investments directly.
• Although the burden is on the Dutch tax authorities to demonstrate abuse, the taxpayer can provide evidence to the contrary, which the taxpayers in this case failed to do. 
• The families had full control over the dividend income in the Belgian companies and the decision whether to reinvest or pay dividends. 

BDO Insight

Involvement in an active business and any change in the nature of a structure are crucial facts to consider when assessing whether a structure is abusive. Especially important to the Dutch Supreme Court in the instant cases is the control by the family members / ultimate shareholders over the dividend income received by the Belgian entities. The court seems to take the position that the family members are the beneficial owners of the dividends. The question of control over dividend income is also a relevant consideration when addressing the management of companies owning shares in Dutch subsidiaries.

Lisanne Rijff
BDO in Netherlands