CJEU – Recent Developments in Direct Taxation 2022

1. Introduction

Allianzgi-Fonds Aevn (“AF Aevn”) is a German undertaking for collective investment in transferable securities (UCIT). In 2015 and 2016, it owned shares in several Portuguese resident corporations that distributed dividends. AF Aevn had no permanent establishment in the Portuguese territory. Dividends paid to AF Aevn were subject to withholding tax at 25% under Portuguese corporate income tax (CIT). In one of the years, a partial refund was obtained by applying the Portuguese-German tax treaty and its 15% withholding tax rate. AF Aevn is a tax transparent entity in Germany, which implies that the Portuguese participation exemption on dividends extended to foreign entities is not applicable. This is because, in accordance with Article 14(3) of the Corporate Income Tax Code (CITC), dividend payments to foreign investors taking the legal form of a corporation are, in principle, exempt from corporation tax in the source State (Portugal). An exception to this exists only if the payments are taxed in the EU or European Economic Area (EEA) Member State of residence at a rate less than 60% of the corporation tax rate applicable in Portugal (Article 14 (3) b) CITC).

S. 176In turn, re...