European Court Decision May Pave Way for U.S. and Canadian Investment Funds to Reclaim Withheld Tax From European Union Governments, Says KPMG

NEW YORK, April 11, 2014 (GLOBE NEWSWIRE) -- The European Court of Justice, with a ruling on April 10, has opened the way for investment funds based outside the European Union (EU) to potentially reclaim withholding tax levied by EU governments.

The decision follows a number of cases where the European Court ruled that funds from one EU member state can claim back withholding tax levied in another member state. While the Court has previously implied this principle may hold where the fund claiming is from a non-EU member state, this is the first time the Court has been asked to give a decisive ruling on the matter.

Deanna Flores, KPMG's National Tax Industry Leader for Registered Funds and Investment Advisors, estimates that claims have already been submitted for approximately €3 billion and this decision is likely to trigger further claims from investment funds outside the EU, primarily based in the U.S. and Canada.

"This is a significant decision which opens the gates for withholding tax dollars levied by European Union member state governments to potentially be returned to investment funds based outside the EU," said Flores.

The issue at the heart of the decision is whether EU law precludes tax legislation under which dividends paid by companies established in one member state to an investment fund established in a non-member state cannot qualify for a tax exemption that applies in a domestic situation (Poland in this specific case). Details of the case are available in the European Court's press release here

According to David Richardson, a managing director in KPMG's International Tax Practice, although the decision relates to a case in Poland, it is applicable across the EU.

"The Court stated a member state may not exclude from a tax exemption dividends paid by nationally established companies to an investment fund established in a non-member state if there exists between the two states an obligation of mutual administrative assistance," Richardson said.

"Investment funds that have withholding taxes levied on them by EU fiscal authorities may well find that the decision means that they can claim a refund. Investment funds should consider seeking professional advice to submit a claim, since the process is complicated," Richardson added.

"The Court, however, also held that restrictions on the movement of capital in relation to third countries in the absence of arrangements for mutual assistance may be justified by the need to maintain the effectiveness of fiscal supervision," Richardson noted.


KPMG LLP, the audit, tax and advisory firm (, is the U.S. member firm of KPMG International Cooperative ("KPMG International"). KPMG International's member firms have 155,000 professionals, including more than 8,600 partners, in 155 countries.

CONTACT: Pete Settles KPMG LLP Office: (201) 505-6065 Mobile: (732) 546-4212 psettles@kpmg.comSource:KPMG LLP