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Brussels, 25 July 2006

Direct Taxation: Commission requests Belgium, Spain, Italy, Luxembourg, the Netherlands and Portugal to end discriminatory taxation of outbound dividends

The European Commission has sent Belgium, Spain, Italy, Luxembourg, the Netherlands and Portugal a formal request to amend their tax legislation concerning outbound dividend payments to companies. These six Member States tax dividend payments to foreign companies more heavily than dividend payments to domestic ones. The Commission considers that these rules are contrary to the EC Treaty and the EEA Agreement as they restrict both the free movement of capital and the freedom of establishment. The request is in the form of a ‘reasoned opinion’ under Article 226 of the EC Treaty. If the Member States do not reply satisfactorily to the reasoned opinion within two months the Commission may refer the matter to the European Court of Justice.

"It is a basic rule of the Internal Market that the Member States cannot tax companies of other Member States more heavily than their own companies" said EU Taxation and Customs Commissioner László Kovács. "While most Member States respect this rule, the Commission will actively ensure that the others do so too."

Outbound dividends are, in this case, dividends paid by domestic companies to companies in other States. Domestic dividends are dividends paid by domestic companies to other domestic companies.

Belgium, Spain, Italy, Luxembourg, the Netherlands and Portugal tax outbound dividends more heavily than domestic dividends. They have national rules which provide for no or only very low taxation of domestic dividends, while outbound dividends are subject to withholding taxes ranging from 5 to 25%.

As regards Belgium, Spain, Italy, the Netherlands and Portugal the discrimination concerns outbound dividends paid to Member States and to the three EFTA countries which are parties to the EEA. In the case of Luxembourg the discrimination only concerns these last three countries.

The Commission's legal analysis in these cases follows the one put forward in the Commission's Communication of 19 December 2003 (IP/04/25) on the taxation of dividends received by individuals.

The Commission's cases reference numbers are Belgium (2004/4347), Spain (2004/4354), Italy (2004/4350), Luxembourg (2004/4351), The Netherlands (2004/4352), Portugal (2004/4353).

For the press releases issued on infringement procedures in the taxation or customs area see:

For the latest general information on infringement measures against Member States see:

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