2022-10-25-KPMG_s_EU_Tax_Centre-Euro_Tax_Flash_from_KPMG_s_EU_Tax_Centre_3页_315kb

CJEU Decision on Parent-Subsidiary Directive and Dividend Received Deduction (DRD) in Mergers

Background

The Court of Justice of the European Union (CJEU) issued a ruling in case C 295/21, addressing whether the Belgian partial exemption regime for dividends received deduction (DRD) is compatible with Article 4(1) of the Parent-Subsidiary Directive (PSD) during a merger by absorption. A Belgian insurance company absorbed entities with surplus DRD carried forward from prior years.

Key Findings

• The CJEU determined that EU law does not prohibit Member States from limiting the carry-over of DRD surpluses in mergers.
• The system avoids direct taxation of dividends in the recipient parent company, maintaining tax neutrality by ensuring that dividends are not taxed indirectly.
• Among other points, the ruling aligns with EU law principles, as the limitation on DRD carry-over does not violate Article 4(1) of the PSD, and the transfer of surpluses does not result in a disproportionately higher tax burden.

EU Tax Centre Comment

This decision reinforces that the PSD does not govern the transfer of excess DRDs in mergers, similar to previous CJEU rulings. KPMG notes that this clarification provides guidance for handling such cases, emphasizing the compatibility of national rules under EU law.