27/1/2009
By Sophie Baker
UK pension funds are set to enjoy a €100million rebate from the Dutch tax authorities following a tax ruling, says the UK branch of KPMG.
The professional services provider's test claimant, Strathclyde Pension Fund, has brought a successful legal challenge against the Dutch tax authority for a levied 'withholding tax' (WHT) on dividend payments to tax exempt bodies located within the European Union (EU) but outside the Netherlands.
The Dutch tax authorities issued the ruling on 27 January, and KPMG said the ruling also has implications for similar tax exempt bodies in other EU member states who have suffered Dutch WHT in recent years. It has estimated the total cost to the Dutch Revenue in the reimbursements to hit up to €500million.
"This is ground breaking and progressive ruling from the Dutch Tax Authorities in that it recognises the need to remove barriers to cross border investment in Europe and supports the principle of the free movement of capital within the European Union," commented Chris Morgan, head of KPMG's International Corporate Tax Practice in the UK. "Pension funds who have not filed claims to date should look to do so
in the near future before claims potentially become time-barred."
Morgan added that he is optimistic that this ruling could pave the way for other EU Member States to repay other reclaims for WHT. "Such claims have been brought against at least twelve Member States
of the EU."
Claims made for years prior to 2007 have been granted payments on an ex-officio basis, and the Dutch WHT rules are yet to be applied, since those rules prior to 2007 were in contravention of EU law.
KPMG said it currently has over 70 UK pension fund clients whose claims in the Netherlands should follow the ruling in this case. The company also said the reclaims will be equivalent to 15 per cent of the gross dividends received on Dutch equities in the relevant periods, and claims can go back a number of years.
Andrew Bradshaw, partner at pensions law firm Sackers, said: "At last, some positive news for UK pension schemes and hopefully a sign of things to come from other tax authorities. The clock is ticking on lodging claims so pension schemes with Dutch securities should consider doing so sooner rather than later."
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