The Court of Justice of the European Union has ruled that a Member State cannot deny a tax exemption on dividends paid by nationally established companies to an investment fund established in a non-Member State if a mutual administrative assistance agreement is in place between the two states.

Case C-190/12 involved the Polish tax authorities and an American investment fund. Polish Corporation Tax rules provide that investment funds are exempt from the tax provided the fund has its registered office in Poland. Emerging Markets Series of DFA Investment Trust Company, an American investment fund which held investments in Polish companies, made a refund claim for Corporation Tax for the years 2005 and 2006 that had been levied, at a rate of 15%, on dividends paid to the fund by the companies established in Poland. When the Polish tax authorities refused the refund claim, the fund brought an action before the administrative court of Poland. That court in turn sought a ruling from the Court of Justice on the question of whether it is against EU law to exclude a tax exemption for dividends paid by companies established in a Member State to an investment fund established in a non-Member State.

The Court of Justice in its judgment found that an EU Member State cannot exclude from the tax exemption those dividends paid by nationally established companies to a non-Member State investment fund when an agreement for mutual administrative assistance is in place., The Court of Justice stated however that it is up to the national courts to determine whether the agreement for the exchange of information enables the tax authorities to verify the information provided by the investment fund.

For further details see Curia’s press release and the full judgement available on their website.