On 18 July 2025, the Dutch Supreme Court delivered two significant rulings concerning dividend wit holding tax ("DWT") exemptions for Belgian corporate shareholders. The Court denied DWT exemptions to two Belgian entities receiving dividends from Dutch BVs, establishing that shareholdings must be functionally attributable to material business activities and that legitimate business structures can contain artificial elements.
Background
Both cases concerned Belgian family-owned companies investing via
Dutch feeder entities of private equity funds in 2018. Under Dutch
law, the DWT exemption is denied when anti-abuse rules apply.
The first case involved a Belgian BVBA holding 38.71% of shares in a Dutch BV, serving as a holding company for a Belgian family. After selling its original Belgian investments, the BVBA invested passively in the Dutch BV without active management involvement, conducting no other activities and maintaining neither office space nor employees. The second case concerned a Belgian NV holding 24.39% of shares in the same Dutch BV feeder entity. The NV managed investments for a Belgian family and actively managed various Dutch and Belgian entities conducting material business, with board members receiving remuneration and working from a home workspace.
Lower Court Decisions
Both the District Court and Court of Appeals consistently ruled
against the BVBA, finding it lacked economic activities, office
space, and staff. For the NV, the District Court however granted
the DWT exemption, concluding the arrangement was not artificial.
The Amsterdam Court of Appeals reversed this decision, ruling that
the NV's shareholding could not be functionally attributed to
its business and finding insufficient substance.
Supreme Court Ruling
The Supreme Court upheld both Court of Appeals judgments, applying
the framework from its Curaçao ruling of April this year.
The Court recognised that structures initially established for
legitimate purposes may become artificial due to changed
circumstances. Crucially, the Court ruled that shares in
dividend-distributing entities must be functionally attributable to
the shareholder's material business assets. The Supreme Court
also found that Belgian family members retained full control over
dividend distribution decisions, effectively disregarding the
corporate shareholders for DWT purposes.
Key take-aways
These rulings establish that foreign shareholders must demonstrate
functional attribution of shareholdings to material business
activities. The Supreme Court confirmed that structures must be
continuously evaluated, as those originally established for valid
business reasons may become artificial under changed circumstances.
Having dedicated office space and qualified staff are key substance
indicators. The extensive application of anti-abuse rules to
foreign holding companies raises questions about disparities
compared to domestic family structures and highlights the
importance of maintaining genuine business substance in
international tax planning.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
