Where a tax exempt shareholder is denied a cash credit in breach of EU law on the distribution by a resident company of non-resident sourced income, in circumstances where resident-sourced income would carry a credit, what is the nature of the remedy? Is it a repayment remedy, recoverable as of right or is it a damages remedy which can only re recovered if certain conditions are met including the difficult requirement of a sufficiently serious breach?
In his opinion of 21 December in The Trustees of the BT Pension Scheme C-628/15, AG Wathelet concludes that it is neither. It is not the repayment of tax unduly levied as the exempt taxpayer paid no tax. However, he concludes, the principle of the primacy of EU law obliges the Member States to adopt such measures as are necessary to enable any person that has suffered discrimination prohibited by Art 63 TFEU to obtain the payment of any sums to which it would have been entitled in the absence of such discrimination. In the current instance the exempt shareholders had suffered a “direct loss” and were entitled to the dis-application of the restriction which excluded non-resident income from the grant of a cash credit.
Full opinion can be found here.
This article appears in the JHA January 2017 Tax Newsletter, which also features:
