Netherlands Supreme Court holds that dividend withholding tax on distributions to Luxembourg minority shareholder incompatible with free movement of capital

On 30 November 2007, the Dutch Supreme Court decided a case (No. 42679) on the compatibility of the imposition of withholding tax on dividend distributions by a Netherlands limited liability company (BV) to a Luxembourg minority shareholder (SARL).

(a) Facts. The taxpayer is a Luxembourg company (SARL), which owned a 2.25% shareholding in a Netherlands company (BV) that in turn headed a group of holding companies, which was being dissolved. In 2001 and 2003, the SARL received divid…