The Elimination of Double Taxation of Dividends in the EU: Cobelfret Means the End of Belgium’s Final Taxation

Abstract

With a view to avoid double taxation of dividends, the Belgian ‘definitively taxed income’ rules allow parent companies to deduct the dividends received from their subsidiaries resident in another Member State but only up to the amount of their taxable profits in the same taxable period, which potentially limits the deductibility of the dividends received. In the Belgium v. Cobelfret NV (hereinafter ‘Cobelfret’) case, the European Court of Justice (ECJ) decided that, by imposing such a limit, Belgium has not correctly transposed the terms and objectives of the Parent-Subsidiary Directive. After a general introduction on the question of double taxation of dividends (1.1), a short summary of the Cobelfret case (1.2), and of the ECJ decision (2), the present contribution offers a commentary, first, on the possible impact of this decision in Belgium (3.1) and, second, on the coherence of existing ECJ case law on cross-border dividends with the objectives of the Parent-Subsidiary Directive (3.2).