Supreme Court clarifies anti-abuse rule of the Dutch dividend withholding tax exemption

On 18 July 2025 the Dutch Supreme Court issued two decisions clarifying the anti-abuse rule of the Dutch dividend withholding tax (‘DDWHT’) exemption. Although the decisions dealt with family-owned groups, they can have a much broader impact and affect other multinational groups as well. 

Main facts of the cases 

The two cases concern Belgian, family-owned companies claiming exemption from DDWHT. Each of these two Belgian entities invested in a Dutch private equity fund through a Dutch resident ‘feeder company’. The Belgian companies were not actively involved in the management of the feeder company nor the investments of the fund. They had no personnel or office space of their own. Family members were on the board of the Belgian entities. One Belgian entity (A) owned shares in other subsidiaries besides the feeder company and conducted an active business enterprise managing these other subsidiaries. The other Belgian entity (B) merely held the shares in the feeder company and two classic cars. Initially entity B also owned shares in a Belgian subsidiary with an active business. 

Supreme Court judgement  

The question was whether the structures were artificial, not connected to economic reality, and set up with the purpose (or one of the purposes) to avoid DDWHT contrary to the purpose of the EU Parent Subsidiary Directive. 

In both cases abuse was present and the DDWHT exemption was denied based on the following main considerations: 

• The mere fact that the taxpayer carries on an active business does not prevent abuse. The shareholding must be attributable to that active business. This applied to Belgian entity A; 
• A structure initially set up for valid business reasons can change in character over time. This was relevant to Belgian entity B that initially owned an active Belgian subsidiary; 
• All parts and steps of a structure need to be considered when assessing the question of abuse. It is already sufficient if one or more parts or steps are artificial; 
• Neither Belgian entity was involved in the activities of the Dutch feeder company or the fund investments; 
• If the family members held the investments directly, the DDWHT exemption would not apply; 
• It is initially the DTA that must prove the abuse and the taxpayer can provide proof to the contrary. The taxpayers failed to do so; 
• The families had in fact full control over the dividend income in the Belgian entities and the question to reinvest or pay out as a dividend. 

Key aspects 

The considerations about functional allocation to the active business and the change in character are crucial elements to keep in mind when assessing abuse. 

The consideration of the Supreme Court related to the control of the family members / ultimate shareholders over the dividend income received by the Belgian entities is an especially crucial element. The Supreme Court seems to state that the family members are the beneficial owners of the dividends. This question of control over the dividend income is also relevant in multinational groups.  

Next steps? 

Interested in how these key aspects of the Supreme Court decisions might impact your business? Contact us via our form or directly through your BDO contact person. 

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