Landmark Dutch Supreme Court ruling on dividend tax exemption and anti-abuse measures

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.