Brussels, 26/07/2006 (Agence Europe) - The European Commission has sent Belgium, Spain, Italy, Luxembourg, the Netherlands and Portugal a formal request to amend their tax legislation concerning outbound dividend payments to companies. These six Member States tax dividend payments to foreign companies more heavily than dividend payments to domestic ones. The Commission considers that these rules are contrary to the EC Treaty and the EEA Agreement as they restrict both the free movement of capital and the freedom of establishment.
Outbound dividends are, in this case, dividends paid by domestic companies to companies in other States. Domestic dividends are dividends paid by domestic companies to other domestic companies. The above-mentioned countries have national rules which provide for no or only very low taxation of domestic dividends, while outbound dividends are subject to withholding taxes ranging from 5 to 25%.