On 20 March 2025, the Amsterdam Court of Appeal issued judgments in two related cases concerning dividend stripping (ECLI:NL:GHAMS:2025:810 and ECLI:NL:GHAMS:2025:811). In both cases, the parties involved were securities traders residing in the Netherlands, each holding a 50% indirect interest—via a Luxembourg-based company—in an international trading firm. This group also included a company resident in the Netherlands.
Shortly before the dividend record date, the traders—mainly dealing with U.S. investment banks—purchased shares in Dutch listed companies. Simultaneously, a repurchase obligation was agreed upon via futures contracts. These structured transactions ensured that the U.S. banks received compensation equal to the net dividend, plus part of the Dutch dividend withholding tax levied. For the banks, these transactions were profitable overall.
The Dutch company, in turn, claimed a credit for the withheld dividend tax in its corporate income tax return, resulting in a refund. Under Article 25, second paragraph, first sentence, of the Dutch Corporate Income Tax Act 1969, such a credit is possible, provided the withholding tax qualifies as an advance levy. This requires that the company is considered the beneficial owner of the dividend.
Although the Court accepted that the Dutch company could be regarded as the recipient of the dividend, it held that the company could not be considered the beneficial owner. The Court based its ruling on the anti-dividend stripping provision in the Dutch Corporate Income Tax Act (Article 25, second paragraph, third sentence, in conjunction with the third paragraph). According to this provision, beneficial ownership is deemed not to exist if:
• the benefit (in whole or in part) accrues directly or indirectly to another party for whom the Dutch dividend withholding tax constitutes a final levy (in this case: the U.S. bank),
• the Dutch company provides consideration in connection with the dividend, and
• the other party effectively retains its economic position in the shares.
The latter was achieved by selling the shares just prior to the dividend date, in combination with entering into a futures contract under which equivalent shares were redelivered after the dividend date. The agreed price corresponded to the ex-dividend market value of the shares, plus a fee for temporarily transferring the dividend entitlement.
The fact that a foreign group company formally acted as purchaser of the shares did not change the Court’s conclusion. In its view, this constituted a clear case of dividend stripping. Not only did the transaction structure run counter to the object and purpose of the withholding tax credit mechanism, but the taxpayer had also deliberately routed the transactions through a foreign group entity—apparently with the aim of circumventing the statutory anti-abuse provision.
Implications for Practice
These rulings confirm that the Amsterdam Court of Appeal applies strict scrutiny to the economic substance of structured dividend transactions. Legal title alone does not determine beneficial ownership; rather, it is the underlying financial flows and interests that count. Consequently, the entitlement to credit Dutch withholding tax under the corporate income tax regime is denied if the taxpayer is not the beneficial owner.
We expect the taxpayer to appeal the rulings to the Dutch Supreme Court.
Do you have questions about dividend stripping, the consequences of these rulings, or would you like a second opinion on your structure? Feel free to contact us.