The Danish Supreme Court decides the Fidelity case

06 July 2021

The Fidelity case concerned claims brough by three undertakings for collective investment in transferable securities (UCITS) for the repayment of Danish withholding tax on dividends received from companies resident in Denmark between 2000 and 2009. The Supreme Court rejected the claims on the grounds that the Fidelity UCITS did not fulfil the conditions for the exemption provided by Danish law.


Danish law allowed UCITS resident in Denmark to apply for an exemption from withholding tax on dividends received from Danish companies. The granting of the exemption turned on two conditions being met: (1) the UCIT must be resident in Denmark; and (2) the UCIT must have Article 16 C fund status. The first condition (UCITS is resident in Denmark) had been held to be contrary to the free movement of capital in 2018 (see ECJ decision here). The second condition (Article 16 C fund status) was met if the UCITS undertook to make a minimum distribution and to withheld from that distribution the tax payable by its members or, after June 2005, if the UCITS calculated a minimum distribution which was taxed in the hands of the members by means of a deduction at source.

The Fidelity UCITS were not resident in Denmark and had not applied to the Danish tax authorities for Article 16 C status. They argued that it was impossible, or extremely difficult, to satisfy the Article 16 C fund status condition, and that they had no incentive to do so, because as non-resident UCITS they did not meet the first condition and were thus ineligible for the exemption in any case.  

The judgment of the Danish Supreme Court

The Supreme Court held that the incompatibility of the first condition (UCITS resident in Denmark) with EU law did not mean that the funds were entitled to a repayment of the amounts of dividend taxes withheld. Turning to the second condition (Article 16 C fund status), the Court held that the condition was justified by the need to safeguard the coherence of the tax system and the need to ensure a balanced allocation of taxing rights between Member States, and that it was not a disproportionate restriction on the free movement of capital. The Court added that because the Fidelity UCITS had not applied for an Article 16 C fund status, their claims for a repayment failed because the second condition set out in the legislation for the granting of the exemption had not been complied with.

Return to List of Articles by UK Lawyers on Tax Disputes, Tax Litigation, HMRC Tax Appeal Return to Listings