Foreign holding companies, the dividend tax exemption and the EU abuse test: the Supreme Court judgments of 25 April and 18 July 2025

The judgments

The question

A Dutch company that pays a dividend normally withholds 15% dividend tax. Two regimes take a foreign corporate shareholder out of that charge, or out of Dutch corporate income tax on the same income. The withholding exemption in Article 4(2) of the Dividend Tax Act 1965 relieves an EU, EEA or treaty-state company that would have enjoyed the participation exemption had it been Dutch. The foreign substantial-interest rule in Article 17(3)(b) of the Corporate Income Tax Act 1969 (CITA) works the other way round: it taxes a foreign company on dividends and gains from a substantial interest (in short, 5% or more) in a Dutch company, but only where that interest is held to avoid Dutch tax on someone else and the arrangement is artificial. Both rules carry the same two-part anti-abuse test. Both must be read in line with the anti-abuse clause of the Parent-Subsidiary Directive 2011/96/EU, as amended by Directive (EU) 2015/121.

The question for foreign family holding companies, investment vehicles and the people advising them is practical. If a foreign holding company sits between individual shareholders and a Dutch company, who must prove what before the Netherlands can deny relief? Does it matter that the holding company existed long before the rules changed, that it never distributes, or that it runs a real business with other assets? In 2025 the Supreme Court answered these questions in three judgments. The judgment of 25 April 2025 on Article 17(3)(b) CITA sets the framework. The two judgments of 18 July 2025 apply it to the dividend tax exemption and add two refinements: a structure can become artificial over time, and a single part of a structure can be artificial while the rest is not.

The legal framework

Article 17(3)(b) CITA: the foreign substantial-interest rule

The judgment of 25 April 2025 applies Article 17(3)(b) CITA in its text for 2016. As quoted by the Supreme Court (para. 4.2), it included in a foreign company’s Dutch income the taxable income from a substantial interest within the meaning of Chapter 4 of the Income Tax Act 2001 in a company established in the Netherlands, “if the taxpayer holds the substantial interest with the main purpose or one of the main purposes of avoiding the levy of income tax or dividend tax on another person and there is an artificial arrangement or series of arrangements”, an arrangement being regarded as artificial “to the extent that it has not been put into place for valid commercial reasons which reflect economic reality” (our translation). The courts call the first limb the subjective condition and the second the objective condition.

According to the Supreme Court (para. 4.3.2), the objective condition was added from 1 January 2016 to align the rule with the 2015 amendment of the Parent-Subsidiary Directive and its tightened anti-abuse provisions in Article 1(2) and (3). The legislature chose a worldwide approach, so that comparable structures are treated alike whether the foreign holding company is inside or outside the EU. For non-EU situations, the parliamentary explanation said that application had to comply with the free movement of capital, including the anti-abuse case law of the Court of Justice.

Our current text of Article 17(3)(b) differs from the 2016 wording quoted by the Supreme Court in two visible respects. It refers only to avoiding “income tax” on another person, not “income tax or dividend tax”. And it covers an “arrangement or transaction or series of arrangements or set of transactions”. Our current text also contains, in Article 17(5), a burden-of-proof rule: if conditions laid down by ministerial regulation are met, the taxpayer is presumed not to have an avoidance purpose unless the inspector makes the contrary plausible; if they are not met, the taxpayer must make plausible either that there is no avoidance purpose or that there are valid commercial reasons. The judgment of 25 April 2025 does not mention that paragraph, and the extract of the 2016 text it quotes does not show whether it then existed.

Article 4(2) and (3)(c) of the Dividend Tax Act

The judgments of 18 July 2025 apply Article 4 of the Dividend Tax Act 1965 in its text for 2018. The Supreme Court quoted it at para. 5.1 of both judgments. Under paragraph 2, withholding is not applied to dividends paid to an entity established in another EU Member State if, at the time the dividend is made available, it has an interest in the paying company to which the participation exemption of Article 13 CITA would have applied had it been established in the Netherlands. Under paragraph 3(c), paragraph 2 does not apply if the recipient holds the interest “with the main purpose or one of the main purposes of avoiding the levy of tax on another person” and there is an artificial arrangement or transaction, defined in the same terms as in Article 17(3)(b) CITA.

According to the Advocate General’s common annex (ECLI:NL:PHR:2023:572, para. 2.3), the extended exemption and the anti-abuse rule in paragraph 3 entered into force on 1 January 2018. The anti-abuse wording in our current paragraph 3(c) is the same as the 2018 text quoted by the Supreme Court. Other parts of Article 4 have changed. Our current text extends paragraphs 1 and 2 to capital provisions within the meaning of Article 10(1)(c) CITA. And paragraph 12 now has the same presumption-and-burden mechanism as Article 17(5) CITA. Our current text also contains a beneficial ownership requirement in paragraph 4; the extracts quoted in the judgments do not show whether it was in the 2018 text, and none of the judgments relies on it. The 2018 text of paragraph 12, as the annex reproduces it, only delegated to ministerial regulation the definition of valid commercial reasons. Under that delegation, Article 1bis of the Dividend Tax Implementing Decree set substance criteria for holding companies that link the activities of group entities. From 1 April 2018 these included €100,000 in wage costs (adjusted by a country factor) and an office available for at least 24 months. Neither judgment of 18 July 2025 discusses paragraph 12 or Article 1bis.

The EU layer

The Supreme Court treats both Dutch rules as implementations of the general anti-abuse rule in Article 1(2) and (3) of the Parent-Subsidiary Directive (HR 2025:1162 and 2025:1163, para. 5.2.1). They must therefore be interpreted in the light of the Court of Justice case law on abuse of rights, and the burden-of-proof rules come from that case law too. The cases relied on, as cited in the judgments, are Eqiom and Enka (C-6/16, 7 September 2017), Deister Holding and Juhler Holding (C-504/16 and C-613/16, 20 December 2017) and above all T Danmark and Y Denmark (C-116/16 and C-117/16, 26 February 2019). The footnotes also cite Nordcurrent group (C-228/24, 3 April 2025).

The earlier benchmark: HR 10 January 2020

All the lower courts took as their guide the Supreme Court’s judgment of 10 January 2020, ECLI:NL:HR:2020:21, on the 2012 text of Article 17(3)(b) CITA. As quoted by the District Court of The Hague, that judgment held that, according to the legislature, the subjective condition is in principle met if the shareholders behind the company would owe more Dutch income tax or dividend tax without its intervention (para. 2.6.2). This is the wegdenkgedachte, which we translate as the “thinking-away” test. In EU law, meeting that condition only creates a presumption of abuse, which the taxpayer must be allowed to rebut by showing that holding the interest is not a wholly artificial arrangement unconnected with economic reality (para. 2.6.7). The 2025 judgments rework this model.

The Curaçao personal holding company: HR 25 April 2025

Facts

The taxpayer, X1 B.V., was incorporated under Dutch law on 28 December 2007 as the personal holding company of its sole shareholder and director (the DGA, directeur-grootaandeelhouder, director and major shareholder). From 2007 it held, together with the personal holding companies of several of his relatives, an interest in a Dutch operating company. On 27 January 2011 an intermediate holding company was set up to facilitate the sale of 85% of the operating company to a private equity firm. Its shares were held by a stichting administratiekantoor (a trust office foundation issuing depositary receipts). The taxpayer’s depositary receipts gave it an economic interest of 11.11% in the foundation’s assets (paras 2.1–2.2).

On 31 December 2011 the DGA emigrated to Curaçao. He remained the taxpayer’s sole shareholder and director, so its effective management moved to Curaçao. According to the Court of Appeal, he received a protective income tax assessment on emigration, and he moved for non-tax reasons: after retiring he wanted to live near his son, who had lived on Curaçao for many years. At the end of 2015 the intermediate holding (15%) and the private equity firm (85%) sold the operating company to a third party. In January 2016 the sale proceeds were paid out as a dividend through the foundation to the depositary receipt holders. The taxpayer received €13,819,076 and did not distribute it to the DGA. At that time it had no staff and no office; a trust company carried out its administrative work (paras 2.3–2.5).

From 1 January 2016, the Tax Arrangement for the Kingdom (BRK), under which such dividends bore 15% Dutch dividend tax, was replaced by the Tax Arrangement Netherlands–Curaçao (BRNC). Under Article 10(8) BRNC, such dividends are in principle exempt from Dutch tax. The taxpayer filed a nil return for 2016. The inspector taxed the dividend under Article 17(3)(b) CITA (2016 text). His letter of 20 December 2019, quoted by the Court of Appeal, calculated a 15% dividend-tax-replacing charge of €2,072,861 and grossed it up at the 20% and 25% corporate rates to a correction of €8,331,446. Losses of €899,481 were set off, and interest of €388,078 was charged.

The lower courts

The District Court of The Hague (22 November 2021) allowed the appeal and reduced the assessment and the interest decision to nil. It accepted that, applying the thinking-away test, a presumption of abuse arose. However, it held that the taxpayer had rebutted the presumption. The structure was an ordinary domestic holding structure when set up in 2007, the move in 2011 had non-tax motives, and the dividends had borne 15% Dutch dividend tax under the BRK until 2016. It saw no reason why the replacement of the BRK by the BRNC should give the taxpayer an avoidance motive, “whether or not retroactively”.

On the inspector’s appeal, The Hague Court of Appeal (19 October 2022) upheld that result on different reasoning. It placed the burden of proof for both conditions on the inspector (para. 5.2). It held that the inspector had made the subjective condition plausible by the thinking-away test. A direct dividend to the DGA would have been a regular benefit from a substantial interest taxable at 15% under Article 10(2) BRNC, through Article 2.1(1)(b) of the Income Tax Act 2001 with Article 7.5(1) and Article 4.12(a), and would also have borne 15% dividend tax (para. 5.6). The objective condition was also met prima facie. The taxpayer had no substantive enterprise to which the interest functionally belonged, was not a top holding with an essential management, policy or financing function for the group, had no linking function, and had very little substance (para. 5.11).

The Court of Appeal then held that the 2016 objective condition, like the subjective one, must be applied so as not to infringe EU law, so that rebuttal evidence also had to be possible against it (para. 5.13). The taxpayer succeeded. The structure arose within the family business. It was a normal domestic holding structure in 2007, when no move was planned. The 2011 relocation followed a non-tax emigration and was not without real meaning (para. 5.15.2). The taxpayer was undisputedly the beneficial owner, free to dispose of the proceeds, and had not passed them on, so it was not a conduit company in the sense of T Danmark (para. 5.15.3). Nor was it interposed to avoid Dutch tax, since the dividends were still taxable at 15% under the BRK when it moved. Any better position from 2016 resulted from the change of tax arrangement, not from an artificial structure (para. 5.15.4). The inspector was ordered to pay costs of €759, and a court fee of €541 was levied on him.

The Advocate General

In a single conclusion for this case and its companion, AG Wattel (28 July 2023) advised dismissing the State Secretary’s appeal. He reasoned that, under Article 66(2) of the OCT Decision 2013/755/EU, the Netherlands may restrict capital movements with Curaçao only so far as this pursues the fight against tax avoidance effectively and proportionately. In his view, the legislature had in any event chosen to follow the Court of Justice abuse case law in relation to non-EU states (paras 1.8–1.10). He considered the thinking-away test on its own “a (much) too vague and general presumption of abuse” to justify reversing the burden of proof (para. 1.12). Excluding rebuttal of the presumed main purpose would, in his view, also conflict with the EU principle of effectiveness (para. 1.13). The Court of Appeal had, in his view, done what the case law requires (para. 1.14).

The grounds of appeal

The State Secretary argued that the inspector need only make the subjective condition plausible, after which the taxpayer can rebut only the objective condition. On that view the Court of Appeal had wrongly placed an initial burden on the inspector for the objective condition, contrary to the legislative history of Article 17(3)(b) CITA and of Article 4(3)(c) of the Dividend Tax Act and to the 2020 judgment (para. 4.1.1). He also argued that the relevant EU framework for Curaçao, an overseas country and territory (OCT), was the OCT Decision rather than the Directive and the freedoms (para. 4.1.2). He further argued that the Court of Appeal should have assessed the position at the moment of the dividend, not the motives of 2007 and 2011 (para. 4.1.3), and that its finding that the objective condition was not met was wrong or insufficiently reasoned (para. 4.1.4). The taxpayer lodged a conditional cross-appeal.

The Supreme Court’s reasoning

The EU components of abuse. Drawing on T Danmark, the Supreme Court restated the two elements of abuse of EU law (para. 4.4.1). The first is a set of objective circumstances showing that, despite formal compliance, the purpose of the EU rule was not achieved (the purpose requirement). The second is a subjective element: the intention to obtain an EU advantage by artificially creating the conditions for it. The whole structure must be examined in each case (para. 4.4.2). A group of companies with common shareholders can be an artificial arrangement if it (i) was not set up for reasons reflecting economic reality, (ii) has a purely formal structure, and (iii) has as its main purpose, or one of its main purposes, a tax advantage that defeats the object or purpose of the applicable tax law. This occurs in particular where a conduit company is inserted between the payer and the beneficial owner of the dividends (para. 4.4.3).

Indications. Abuse can be established by a set of indications, provided they are objective and consistent (para. 4.4.4). A conduit company is one that only receives dividends and passes them on, but a company with other activities can also be artificial if it passes the dividends on, wholly or almost wholly, very soon after receipt (para. 4.4.5). Further indications are the absence of genuine economic activity, judged by management, balance sheet, cost structure and costs actually incurred, staff, premises and equipment, and the lack of power to dispose freely of the dividends in economic terms (para. 4.4.6).

Translation into the Dutch rule. The Court’s central step is that both Dutch conditions, the subjective (main purpose) and the objective (artificiality), are part of the subjective element of EU abuse. They must therefore be given content together, so that they are met only if that EU subjective element is present (para. 4.5.1). The EU purpose requirement is then, as a rule, also met, because Article 17(3)(b) CITA has the same aim as Article 1(2) and (3) of the Directive (para. 4.5.2).

Burden of proof. The inspector must put forward, and if contested make plausible, the facts showing the elements of abuse. The taxpayer must be able to rebut both aspects of the subjective element: the intention and the artificial character (para. 4.6.1). The Court put it this way:

Effect must therefore be given to the burden of proof regarding the subjective and the objective condition of Article 17(3)(b) of the Act – as components of the subjective element of abuse of EU law – in that the inspector must put forward facts and circumstances, and make them plausible if contested, from which there follows a set of objective and consistent indications as referred to in 4.4.4 that point to abuse of rights. The finding that such a set of indications exists means, subject to rebuttal evidence furnished by the taxpayer as referred to in 4.6.1, that there is abuse of rights.

The Court then listed two indications drawn from Dutch law. The first indication arises if none of the situations that the legislative history treats as valid commercial reasons is present (para. 4.6.3). That is, the foreign company that directly holds the substantial interest (i) carries on no substantive enterprise to whose assets the interest functionally belongs, (ii) performs no essential function for the group’s business, and (iii) has no linking function with sufficient substance. Such facts may point to a conduit company, which “can – but need not” be a relevant objective indication of abuse. The second indication is the thinking-away test: the shareholders behind the company would owe more Dutch income tax or dividend tax if the Dutch company paid them directly (para. 4.6.4). If both indications are present, the interposed foreign company can be presumed, subject to rebuttal, to be a conduit company used for abuse (para. 4.6.5).

Rebuttal. The taxpayer may rebut by making plausible either (i) that there are valid commercial reasons reflecting economic reality for interposing the foreign company, or (ii) that, even without such reasons, the interposition did not have as its main purpose or one of its main purposes a tax advantage that defeats the object or purpose of the applicable rule (para. 4.6.6). The Court expressly said that ground (ii) supplements what it had held about rebuttal in para. 2.6.7 of the 2020 judgment.

Application. The Court of Appeal’s unchallenged findings on the absence of an enterprise, a linking function and substance, together with the thinking-away comparison, supported its prima facie conclusion. The Court of Appeal had therefore rightly placed the initial burden for both conditions on the inspector and rightly allowed rebuttal against both (paras 4.7.1–4.7.3). The OCT complaint failed because of the legislature’s worldwide approach (para. 4.7.4). On timing, the Supreme Court held:

That assessment must indeed take place according to the situation at the moment at which the benefit from the substantial interest in the company established in the Netherlands arises, but, contrary to what the ground argues, this does not preclude account also being taken of facts and circumstances from before or after that moment.

The Court gave two reasons. The structure must be examined as a whole. And the statutory wording asks whether the arrangement “has been put into place” for valid commercial reasons (para. 4.7.5). The Court of Appeal could also weigh that the taxpayer had not been interposed to avoid Dutch tax on the dividend. Any better position from 2016 resulted from the BRNC, under which such profit distributions were no longer allocated to the Netherlands as well but only to Curaçao. That showed the better position had not been sought in advance (para. 4.7.6). The rest of the Court of Appeal’s judgment was factual and not incomprehensible.

Outcome

The appeal was dismissed. The cross-appeal, which sought nothing more favourable than the Court of Appeal’s judgment, lapsed under Article 8:112(2) of the General Administrative Law Act (para. 5). The State Secretary was ordered to pay half of €5,442, that is €2,721, in costs, because case 22/04508 was related (paras 6–7). That related case, decided the same day as ECLI:NL:HR:2025:669, concerned X2 B.V., the personal holding company of the DGA’s son, who had lived on Curaçao since before the company was incorporated; the father was its director. The reasoning is identical.

The Belgian family BVBA: HR 18 July 2025 (ECLI:NL:HR:2025:1162)

Facts

X B.V.B.A. was incorporated under Belgian law in 2004 as the holding company of a Belgian NV that produced electricity from renewable sources and traded green certificates. It was also that NV’s director. In 2011 it sold that interest (para. 2.1). In 2018 its shares were held by three Belgian-resident members of one family, one of whom was its director. It had no office and no employees (para. 2.2).

Since at least 2016 it had held 38.71% of a Dutch BV acting as a feeder company for a fund of a Dutch private equity house. The BV’s only asset was a 17.11% interest in a BV that was a limited partner in a commanditaire vennootschap holding minority stakes in portfolio companies. Employees of the private equity house managed the whole chain. The taxpayer’s indirect interest in each portfolio company ranged from 0.65% to 1.2%. Apart from the BV shares, it owned two vintage cars (para. 2.3). On 31 July 2018 the BV paid it a dividend, from which 5% dividend tax was withheld (para. 2.4). According to the Court of Appeal and the AG, the withheld tax was €50,793 on a dividend of €1,015,862. The 5% rate applied under Article 10(2)(a) of the Netherlands–Belgium tax treaty of 5 June 2001.

The lower courts

The District Court of Noord-Holland dismissed the appeal on 26 June 2020. It applied the thinking-away test, because 15% would have been withheld on a direct dividend to Belgian-resident individuals. It found that the taxpayer had shown no economic or commercial justification for its existence and its holding. In its view, the claimed pooling function did not change this, since the taxpayer fulfilled only a formal legal and tax function (as quoted in the Court of Appeal’s judgment, para. 4).

Amsterdam Court of Appeal (2 June 2022) upheld that decision. It placed the burden for both conditions on the inspector, taking the 2020 judgment as its guide because, according to the legislative history, Article 4(3)(c) was not meant to change the substance of Article 17(3)(b) CITA (paras 5.3.2–5.3.3). The subjective condition was met by the thinking-away test, which it held compatible with EU law, citing para. 102 of T Danmark (para. 5.3.4). The objective condition was met prima facie for five reasons. The interest was not functionally attributable to any enterprise; there was no enterprise at all; the taxpayer had no involvement with the BV and had simply placed a sum of money with the private equity house; there was no relevant substance or activity, the vintage cars included; and the family decided on the use of the taxpayer’s results, so it could not freely dispose of the dividends. A similarity with the T Danmark conduit companies “forces itself upon one”, and immediate distribution was not required (para. 5.3.6).

The taxpayer relied on limited liability, easier sale, pooling, deferral of Belgian tax with reinvestment, no obligation to distribute, 30% Belgian withholding on its own distributions, and EU residence of all concerned. None of these amounted to rebuttal (paras 5.3.7–5.3.8). For example, the reinvestment option could be a legitimate business reason, but the taxpayer had no obligation to reinvest and the family could distribute, reinvest or sell at will (para. 5.3.7(iv)). On EU law, the Court of Appeal held that Article 4(3)(c) implements the Directive’s exhaustive anti-abuse rule and fits it “seamlessly”, so it could not be tested independently against the free movement of capital. It added that, under para. 123 of T Danmark, the Treaty freedoms cannot be invoked once abuse within the meaning of the Directive is established (paras 5.3.12–5.3.15). Eqiom concerned the pre-2015 wording of the Directive (para. 5.3.16). A Dutch holding company with Dutch-resident shareholders was not comparable, because there the Netherlands taxes the investment result at least once at the level of the individual shareholders (para. 5.3.18). The Court of Appeal did not refer questions to the Court of Justice, holding that no question of interpretation arose (para. 5.3.14).

The Advocate General

AG Wattel (26 May 2023) advised dismissal. He called the statutory labels “subjective” and “objective” test “extremely confusing” because the EU concept of abuse also has an objective and a subjective element, but with different content. Both Dutch tests, including the objective one, fall under the EU subjective element, which must be proved (para. 1.8). The Court of Appeal had not treated the thinking-away test alone as sufficient: it had placed the burden on artificiality on the inspector as well, so the appeal rested on a misreading (paras 1.9–1.14). The AG saw the Court of Appeal’s findings as factual. They described a passive investment pot that three family members could empty or sell (para. 1.16). The Charter argument was raised for the first time in cassation. In any case, once abuse of the Directive is established, it also excludes reliance on the freedoms and the Charter (paras 5.16–5.18).

The grounds of appeal

The taxpayer argued that the Court of Appeal had based the subjective condition solely on the thinking-away test and had placed too much of the burden on the taxpayer. It also argued that the interpretation breached Articles 20(2), 49 and 63(1) TFEU and Articles 20 and 21 of the Charter of Fundamental Rights by treating domestic and cross-border structures differently (paras 4.1.1–4.1.3). The taxpayer had existed long before the investment, reinvested its profits, and received the 2018 dividend only as a consequence of its 2011 investment decision (para. 4.1.4). A passive holding company is not artificial for that reason alone, and none of the T Danmark indicators were present (paras 4.2.2–4.2.3). The free-disposal point was a wrong test, since under para. 105 of T Danmark it requires contractual or equivalent pass-through arrangements (para. 4.2.4).

The Supreme Court’s reasoning

The Supreme Court first held that the framework in paras 4.5.1 to 4.6.6 of the April judgment applies correspondingly to Article 4(3)(c) of the Dividend Tax Act (paras 5.2.1–5.2.2). It then added a point of its own:

It cannot be ruled out, in the context of Article 1(2) and (3) of the Parent-Subsidiary Directive, that an arrangement which was initially put into place for commercial reasons reflecting economic reality must be regarded as artificial from a certain moment, because that arrangement has been maintained despite a change in circumstances. Therefore, in assessing whether the arrangement is artificial, facts and circumstances occurring or having occurred after the arrangement was created may also be taken into account.

The test therefore becomes whether an arrangement was put into place or maintained with the main purpose of obtaining an EU advantage by artificially creating or keeping the conditions for it (para. 5.3.1). The Court described this case as one where foreign shareholders hold a Dutch company through a foreign company, the structure was initially set up for valid commercial reasons, and the structure was maintained after a change in circumstances. Here that change was the sale of the Belgian NV (para. 5.3.2). Artificiality can be recognised in particular where the structure can no longer be justified by economic and commercial advantages connected with it. The inspector must show this through a set of objective and consistent indications. If he succeeds and the indications in paras 4.6.3 and 4.6.4 of the April judgment are also present, the maintained structure is presumed artificial and abusive, subject to rebuttal (para. 5.3.3). The taxpayer may then rebut by making plausible either (i) that maintaining the structure is justified by valid commercial reasons found in advantages other than the dividend tax advantage of Article 4(2), or (ii) that, despite the lack of such reasons, the structure was not maintained with the main purpose of a tax advantage defeating the object of Article 4(2) (para. 5.3.4).

On that basis the Court of Appeal’s findings disclosed no error of law (paras 5.4.1–5.4.2). The complaint that a passive holding company can never be artificial on account of its activities alone also failed. The Court of Appeal was entitled to weigh the free-disposal point:

In this connection, the Court of Appeal was entitled to hold and take into account that the family which is the shareholder of the taxpayer can decide entirely at its own discretion whether or not to have the profits distributed by the BV to the taxpayer paid out to itself or applied for reinvestment, and that in that sense the taxpayer cannot freely dispose of the dividends it receives from the BV.

The Court of Appeal could also give weight to the absence of any obligation to reinvest (para. 5.4.3). The arguments based on the Treaty freedoms and the Charter failed on the grounds in paras 5.16 to 5.18 of the AG’s conclusion (para. 5.4.4).

Outcome

The appeal was dismissed. No costs order was made (paras 6–7). The 5% treaty-rate withholding therefore stands.

The Belgian family investment NV: HR 18 July 2025 (ECLI:NL:HR:2025:1163)

Facts

X N.V. was incorporated in Belgium in 1991. Its shares are held by two Belgian BVBAs that are owned, directly or indirectly, by members of one Belgian-resident family, including a brother and a sister. Its board consisted of one of the BVBAs and a Belgian NV owned by the brother. The sister became a director at the end of 2017 (paras 2.1.1–2.1.3). In 2018 it held minority and majority interests in seventeen companies, mainly Belgian and Dutch. One of them was a 24.39% stake in a Dutch feeder BV of the same kind as in the previous case. That BV’s only asset was a 13.57% stake in the limited partner of a private equity partnership. The taxpayer’s indirect interest in each portfolio company ranged from 0.33% to 0.61% (para. 2.2).

The brother and his wife performed management, legal and administrative work for the taxpayer, through the NV and the BVBA, from a dedicated workspace in their home. The two companies charged annual management fees linked to the capital invested. According to the District Court’s findings, these fees were about €525,000 and about €150,000 for 2017. The taxpayer itself had no employees. The brother also sat on the boards of four Belgian participations that carried on substantive businesses and investigated possible acquisitions (para. 2.3). On 31 July 2018 the feeder BV paid a dividend, from which 5% was withheld (para. 2.4): €25,396 on €507,920, according to the Court of Appeal and the AG.

The lower courts

The District Court of Noord-Holland, in its judgment of 26 June 2020, found for the taxpayer and ordered a refund. It reasoned that the taxpayer had an office in the family home, significant activities and annual costs of over €650,000, invested in Dutch and Belgian businesses, and had a steering influence in several Belgian ones. It therefore carried on a substantive enterprise and held the BV interest in that context. It had real meaning, and there was an economic and commercial justification for its existence (as quoted in the Court of Appeal’s judgment, para. 4).

On the inspector’s appeal, Amsterdam Court of Appeal (2 June 2022) reversed this decision and dismissed the taxpayer’s conditional cross-appeal. The subjective condition was met by the thinking-away test, and the result would be the same if the test were applied to the two intermediate BVBAs (as summarised by the Supreme Court, para. 3.2.2). On the objective condition, the Court of Appeal found decisive that the BV interest could not be functionally attributed to the taxpayer’s enterprise, even though it did have one in relation to other participations. There was no involvement with the BV. There was no relevant substance, because the administration was bought in from the BVBA and the home office served the companies providing management rather than the taxpayer. The family controlled the use of the results (para. 5.3.6). It added:

There is no absence of abuse merely because the taxpayer carries on a substantive enterprise. Were that otherwise, the anti-abuse provision could easily be circumvented by placing the interest in the distributing entity with a company that has other activities, without the latter performing any (management) activities in relation to the distributing entity.

On rebuttal, the pooling argument was unsubstantiated: there were only two shareholders, and the feeder BV was itself already a pooling vehicle. The court was not persuaded that any part of the roughly €500,000 management fee related to the BV interest. Belgian withholding on onward distributions was neither relevant nor obviously plausible, because the direct shareholders were themselves companies that could probably rely on the Belgian participation exemption (para. 5.3.7). The EU-law reasoning was the same as in the BVBA case. No costs were awarded (para. 6).

The Advocate General

AG Wattel (26 May 2023) gave the same analysis of the tests and the burden of proof. On the facts, he noted that the Court of Appeal had not treated the taxpayer’s long existence, its genuine substance and significant costs for other, actively held participations, or the fact that it was perhaps not a typical conduit, as relevant. What mattered to that court was that, as regards the BV interest, the taxpayer was a passive investment pot that the family could empty or sell. Given the finding that the BV interest was “a sum of money” separate from the enterprise and in no way managed by the taxpayer, he considered that conclusion correct in law, also in the light of para. 105 of T Danmark (para. 1.18).

The grounds of appeal

The grounds largely mirrored those in the BVBA case. The taxpayer added that it had been a family investment company for some thirty years and was not interposed with a view to the BV investment or any Dutch investment. The funds invested were its own retained earnings. Holding the investment privately would first have required a distribution subject to Belgian withholding on the whole amount (para. 4.1.4). It was not a cash box but had real meaning, because it carried on a substantive enterprise (para. 4.2.3). The Court of Appeal’s view that every company whose shareholders decide on the use of its results is a conduit went far beyond T Danmark (para. 4.2.4).

The Supreme Court’s reasoning

The Court repeated its framework (paras 5.2.1–5.2.2) and added a second refinement. Under the second subparagraph of Article 1(2) of the Directive, an arrangement may consist of several steps or parts. According to recital 8 of the Directive, only some of those steps or parts may be artificial and caught by the anti-abuse rule. An arrangement set up for valid commercial reasons can therefore contain steps or parts that must be regarded as artificial. An arrangement can also become artificial because it is maintained despite a change in circumstances, or because artificial steps or parts are added to it (para. 5.2.3). The test is whether an arrangement was put into place, or changed by adding steps or parts, with the main purpose of obtaining the EU advantage by artificially creating the conditions for it (para. 5.3.1).

The Court described the typical case as follows (para. 5.3.2). Foreign shareholders hold several foreign and Dutch participations through a foreign intermediate holding company. Some of those participations carry on substantive businesses, which the holding company actively manages. Others, including a Dutch company, only make portfolio investments, and the holding company does nothing for them beyond holding them passively. A specific step or part is artificial in particular if it cannot be justified by economic and commercial advantages connected with it. The inspector bears the burden of showing this through a set of indications (para. 5.3.3). Rebuttal must likewise concern that step or part: either valid commercial reasons connected with it, other than the dividend tax advantage, or the absence of a main purpose to obtain an advantage defeating the object of Article 4(2) (para. 5.3.4).

Applying this, the Court approved the Court of Appeal’s approach:

This applies in particular also insofar as the Court of Appeal proceeded on the basis that the mere circumstance that the taxpayer carries on a substantive enterprise does not in itself mean that there can be no abuse, but that what is decisive is whether the taxpayer’s participation in the BV can be functionally attributed to that substantive enterprise, which according to the Court of Appeal is not the case.

The Court of Appeal could thus examine whether the structure was artificial as regards holding that participation (para. 5.4.1). It was entitled to conclude, subject to rebuttal, that interposing the taxpayer as a foreign company to hold the BV participation was an artificial arrangement aimed at avoiding Dutch dividend tax on the shareholders. This established the EU subjective element. It could also assume, as its findings implied, that the EU purpose requirement was met (para. 5.4.2). The rebuttal findings, including the family’s freedom to have profits distributed or reinvested and the lack of an obligation to reinvest, disclosed no error and were factual (para. 5.4.3). The arguments based on the Treaty freedoms and the Charter failed for the reasons given by the AG in paras 5.16 to 5.18 (para. 5.4.4).

Outcome

The appeal was dismissed, without a costs order (paras 6–7). The Court of Appeal’s judgment stands: the District Court’s refund order is set aside and the withholding of €25,396 is upheld.

How the judgments fit together

One test, two statutes. The Supreme Court treats Article 17(3)(b) CITA and Article 4(3)(c) of the Dividend Tax Act as one anti-abuse rule implementing the Directive. Its paras 4.5.1 to 4.6.6 of 25 April 2025 are declared to apply correspondingly to the dividend tax (HR 2025:1162 and 2025:1163, para. 5.2.2). In the April case the framework helped the taxpayer. In July it helped the inspector. The difference lies in the facts, not in the law.

The burden of proof is now explicit. The State Secretary’s reading, under which the thinking-away test proves the main purpose and the taxpayer must then disprove artificiality, was rejected (para. 4.7.3). The inspector must establish a set of objective and consistent indications covering both statutory conditions. The thinking-away test is one such indication (para. 4.6.4), and the absence of an enterprise, a group function or a linking function with substance is another (para. 4.6.3). Together they create a presumption that the taxpayer may rebut on either ground in para. 4.6.6. The Court’s ground (ii) is new: even without valid commercial reasons, the taxpayer may show that the interposition did not have the abusive main purpose. The April case shows how this can work. The taxpayer had almost no substance, yet the Court of Appeal could find that its interposition and relocation were not tax-driven and that the advantage arose from a change in the tax arrangement (paras 4.7.5–4.7.6).

Time cuts both ways. In April the Court allowed facts from before and after the moment of the dividend to be weighed, which let the 2007 and 2011 history count in the taxpayer’s favour (para. 4.7.5). In July it held that a structure set up for good reasons can become artificial once it is maintained after a change in circumstances (HR 2025:1162, para. 5.2.3). The two are consistent. The structure is judged as a whole and over time, so neither a clean origin nor a recent distribution is decisive on its own. In the Belgian BVBA case, the sale of the operating NV in 2011 was the change in circumstances. The Amsterdam Court of Appeal had already held that an anti-abuse rule could easily be avoided if it did not apply to existing companies (HR 2025:1162, para. 3.3.3). The Supreme Court gave that view a Directive-based foundation.

Artificiality can be partial. HR 2025:1163 confirms that a holding company with a real business can still be refused the exemption for a participation that does not functionally belong to that business. The analysis is done participation by participation, as the Amsterdam Court of Appeal already reasoned: proof “has to relate to the specific relationship between the taxpayer and [the BV]” (ECLI:NL:GHAMS:2022:1732, para. 5.3.5, our translation).

The Treaty freedoms add nothing once abuse is established. By adopting paras 5.16 to 5.18 of the AG’s conclusions, the Court accepted that, once abuse of the Directive is established, the freedoms and the Charter cannot be invoked against the withholding. The domestic comparison was rejected by the Court of Appeal, and by the AG in his additional remarks. A Dutch holding company would itself be subject to Dutch tax and obliged to withhold, so the cases are not comparable. For non-EU situations, the April judgment rests on the legislature’s worldwide approach rather than on a separate test under the OCT Decision (para. 4.7.4).

Open points. Several matters remain open in the sources. - The 2025 framework was developed for the 2016 and 2018 texts. Our current Article 4(12) of the Dividend Tax Act and Article 17(5) CITA place the burden on the taxpayer when the conditions of the ministerial regulation are not met. The judgments do not say how this fits with the EU-law burden on the inspector in para. 4.6.2. - The free-disposal indicator is applied broadly. In both Belgian cases, the shareholders’ ordinary power to decide on distributions supported the conclusion that the holding company could not freely dispose of the dividends. The Supreme Court did not rule on whether this applies generally. It held only that the Court of Appeal was entitled to weigh it in these cases. - The Supreme Court made no reference to the Court of Justice. The AG in the Curaçao case saw a possible question on the OCT Decision but considered it answered by the legislature’s choice (PHR 2023:701, para. 1.9).

For the parallel discussion of how Dutch courts test a targeted anti-abuse rule against EU law in the interest-deduction context, see our review of Article 10a CITA and the fiscal unity.

What it means in practice

These judgments concern a foreign company that holds 5% or more of a Dutch company and has individual or non-qualifying shareholders behind it. In that situation, the starting point is the thinking-away comparison: what Dutch tax would the people behind the company pay if they held the Dutch shares directly? If the answer is more, the inspector has one indication. He will look for a second in the holding company’s profile. The judgments point to the following questions.

• Functional link. Is the Dutch interest part of a substantive enterprise of the holding company, or is it a passive investment? In HR 2025:1163, a real business with seventeen participations, home-office management and fees of over €650,000 did not help, because the private equity stake was “a sum of money” placed with the fund manager.
• Involvement. Does the holding company actually do anything in relation to the Dutch company? In both Belgian cases, the absence of any involvement with the feeder BV weighed heavily.
• Substance indicators. Management, balance sheet, cost structure, costs actually incurred, staff, premises and equipment (para. 4.4.6). Staff and offices provided by related companies did not count as the taxpayer’s own in HR 2025:1163.
• Disposal of dividends. Look at what happens to the dividends and who decides. Rapid onward payment is a classic indicator. In the Belgian cases, the family’s complete discretion over the holding company’s results was also weighed.
• History and changes. Look at why and when the structure was set up and what has changed since: the sale of the operating business, emigration of the shareholder, a new treaty or tax arrangement. A clean history helped in HR 2025:668. A change in circumstances followed by inaction counted against the taxpayer in HR 2025:1162.
• Business reasons specific to the Dutch interest. Limited liability, ease of sale, pooling and tax deferral were all rejected on the facts. In each case the court asked whether the reason actually explained why this particular Dutch interest was held through this particular company.

Records worth keeping include: - contemporaneous documents showing why the holding company was set up and why it holds the Dutch interest; - evidence of any changes since, and of the reasons for keeping the structure afterwards; - board minutes and correspondence showing involvement with the Dutch investee; - cost and time allocations linking management fees to particular participations; - evidence of where effective management sits and why it moved; - records of what happened to each dividend received.

The Curaçao judgment shows that such evidence can decide the case even where substance is minimal.

Two limits should be noted. First, in the Belgian cases the 5% treaty rate still applied. The inspector had not argued treaty abuse, and the anti-abuse finding denied only the domestic withholding exemption (ECLI:NL:GHAMS:2022:1731, para. 5.3.19). Second, the judgments apply the 2016 and 2018 statutory texts. Under the current texts, the ministerial-regulation conditions in Article 4(12) of the Dividend Tax Act and Article 17(5) CITA must be checked first.

Status

All three Supreme Court judgments are final, and none involved a referral back. In HR 2025:668 the assessment remains reduced to nil, as the District Court and Court of Appeal had decided. The same applies to the companion case HR 2025:669. In HR 2025:1162 and 2025:1163 the 5% withholding stands. No question was referred to the Court of Justice.

On legislation, our current texts show the differences described above. The current Article 17(3)(b) CITA refers to avoiding income tax only and covers transactions as well as arrangements. The current Article 4 of the Dividend Tax Act includes capital provisions and a reworded paragraph 12, under which the taxpayer or withholding agent bears the burden of proof where the conditions of the ministerial regulation are not met. The judgments apply the 2016 and 2018 texts and do not consider these changes.

Provisions discussed

• Dividend Tax Act 1965: Art. 4
• Corporate Income Tax Act: Art. 17

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How to cite

Case law review by BCA EU, for information. Quotations from the judgments are our translations; only the original texts published by the courts are authoritative. Judgments checked on the official sources on 30 October 2026. This page is not legal or tax advice.