Brussels, 22/01/2007 (Agence Europe) - Belgium, Spain, Italy, the Netherlands and Portugal have been referred to the European Court of Justice for their rules under which there is discrimination against outbound dividends. Latvia, which has similar practices, will receive a reasoned opinion from the Commission, calling on it to put an end to these practices. The Commission is happy to note that Luxemburg has decided to end discrimination, so the infringement procedure against it will be closed as soon as it has made the necessary changes to its tax rules.
The tax rules of the five Member States incriminated permit higher taxation of dividends paid to companies in another Member State (outbound dividends) that those paid to firms established in the country. In these countries, taxation of outbound dividends ranges from 5% to 25%, although it is virtually nil or very low for domestic dividends.
The Commission considers that these measures are in breach of the Treaty in that they restrict the free movement of capital and the freedom of establishment. It refers notably to the Court of Justice's “Denkavit” ruling (case C-170/05) of December 2006 which stated that outbound dividends could not be subject to higher taxation in the source State that domestic dividends. (mb)