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Dutch DTA With Japan Questioned By EU Commission

by Lorys Charalambous, Tax-News.com, Cyprus
23 November 2015

The European Commission has requested that the Netherlands amend the limitation on benefits clause in its double tax treaty with Japan.

The Commission said that, on the basis of previous cases such as Gottardo (C-55/00) and Open Skies (C-466/98), a member state concluding a treaty with a third country cannot agree better treatment for companies held by shareholders resident in its own territory, than for comparable companies held by shareholders who are resident elsewhere in the European Union or European Economic Area (EU/EEA).

Similarly, the Commission said a member state "cannot agree better conditions for companies traded on its own stock exchange than for companies traded on stock exchanges elsewhere in the EU/EEA. However, under the current terms of the LOB clause, some entities are excluded from the benefits of the tax treaty. This means that they suffer higher withholding taxes on dividends, interest, and royalties received from Japan than similar companies with Dutch shareholders or whose shares are listed and traded on 'recognized stock exchanges,' which include certain EU and even third-country stock exchanges."

The Commission has requested that the Netherlands respond to its concerns within two months. Otherwise the case may be referred to the European Court of Justice.

 



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