ECJ - Recent Developments in Direct Taxation 2012

S. 187Poland: C-190/12 Emerging Markets Series of DFA Investment Trust Company

S. 1891. Introduction

This paper focuses on an analysis of the pending case C-190/12 Emerging Markets Series of DFA Investment Trust Company (hereinafter: Emerging Markets). The proceedings before the ECJ were initiated with a preliminary question raised by the Regional Administrative Court in Bydgoszcz and concerns a restriction to free movement of capital with regard to third countries by excluding from the scope of a general income tax exemption investment funds established in third countries.

2. Facts and applicable law

Emerging Markets Series of DFA Investment Trust Company, an investment vehicle established in the USA, carried on investment equity activity in Poland, acquiring shares in Polish companies. From those investments the fund derived dividend income which under Art. 22 Sec. 1 of the Polish Corporate Income Tax Act was subject to withholding tax in Poland at a 19% tax rate, reduced to 15% under Art. 11 Sec. 2b of the tax treaty between Poland and the USA. At the same time dividends paid out to Polish investment funds were tax exempt.

The fund applied for a tax refund to the Polish tax authorities on 20 Dec...