Currently, under French tax rules, dividends paid to certain funds which are not resident in France are taxed at twenty-five percent; whilst a similar fund based in France is exempt from the levy on its investments within the country.
The tax rule was declared by the European Court of Justice (ECJ) to be discriminatory; and this decision has now paved the way for a possible tax rebate to UK investment funds.
Following the decision of the ECJ, one economist said: “Investment funds that may have paid this withholding tax any time over the past five years should investigate now as to whether they are able to claim rebates. Europe-wide these claims could amount to as much as €20bn, so it is in funds' interests to act now.
“The ultimate beneficiaries of this ruling against discrimination will be UK companies and employees saving for their retirement who will see improved returns on investments in Europe.
“UK pension and investment funds will no longer have to pay more tax on their dividends from investments in French companies than their French equivalents and in a difficult economic climate, funds will welcome any measure which allows them to maximise returns.”
It is believed that along with paving the way for a potential windfall to UK investors, the decision by the ECJ could open up similar judgements against other European countries, such as the Netherlands and Germany, where similar taxes are in place.
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