EU Members Enforce Unfair Taxation on Offshore Companies

Six European Union member states have been singled out and called to account by the EU Taxation and Customs Commissioner Laszlo Kovacs for enforcing unfair taxation on offshore companies.

Basically these member states have been taxing those companies who make outbound dividend payments more heavily than companies making domestic dividend payments and this action goes completely against the fundamentals of the European Union’s internal market structure and compliance model.

The six member nations currently under scrutiny are The Netherlands, Spain, Belgium, Portugal, Italy and Luxembourg and it has been formally requested by the European Commission that all six countries make immediate amendments to their taxation laws to halt the unfair taxation of those companies making offshore dividend payments.

Both the European Community Treaty and the European Economic Area Agreement have clear rules stating that such discriminatory taxation treatment as applied by The Netherlands, Spain, Belgium, Portugal, Italy and Luxembourg currently is prohibited - and these rules are enforced in all other EU member states.  According to the EU Taxation and Customs Commissioner Laszlo Kovacs the rules will now also be enforced in the non-compliant nations and to that end the six nations currently ignoring the rules have eight weeks within which to submit a satisfactory response to the EU Taxation and Customs Commissioner or they will likely be brought before the European Court of Justice.

The difference in the taxation treatment of dividends by these six EU members applies to outbound dividends; domestic dividends are unaffected.  Outbound dividends are those dividend payments made by local, domestic companies to offshore companies (i.e., companies in other member states). 

Not only are all other EU member states affected by the dividend taxation treatment applied by The Netherlands, Spain, Belgium, Portugal and Italy but offshore companies receiving outbound dividends which are located in Iceland, Norway and Lichtenstein which are European Free Trade Association nations are affected too.  (Luxembourg enforces unfair taxation on offshore companies in only Iceland, Norway and Lichtenstein.)

It seems likely that the non-compliant nations will have sufficient pressure put upon them to make the necessary changes to their taxation laws and that this unfair taxation of dividend payment to offshore companies will cease shortly.