No C 184/8 Official  Journal  of the European  Communities 2. 8. 78 
Proposal  for a Council  Directive  on the application  to collective  investment  institutions 
of the  Council  Directive  concerning  the harmonization  of sytems  of company  taxation 
and of withholding  taxes  on dividends 
(Submitted,  by the Commission  to the Council  on 24 July  1978) 
THE  COUNCIL  OF THE  EUROPEAN  COMMUNITIES, 
Having  regard  to  the  Treaty  establishing  the 
European  Economic  Community,  and  in particular 
Article  100  thereof, 
Having  regard  to the proposal  from  the Commission, 
Having  regard  to the  opinion  of the  Economic  and 
Social  Committee, 
Having  regard  to the  opinion  of the  European 
Parliament, 
Whereas  the provisions  of Council  Directive  ... of ... 
do not  concern  dividends  that  the  final  beneficiary 
receives  through  the  intermediary  of  collective 
investment  institutions; 
Whereas  investment  in securities  representing  the 
capital  of  companies,  carried  out  through  the 
intermediary  of collective  investment  institutions, 
should  not  be penalized,  but  on the  contrary  should 
be encouraged;  whereas,  in order  to ensure  fair 
taxation  and  develop  the  share  market,  it is 
important  to  settle  the  problem  of  dividends 
distributed  to these  institutions  and  redistributed  by 
them  to their  participants; 
Whereas,  in order  as far  as possible  to achieve 
equality  of  tax  treatment  between  dividends 
distributed  by companies  to their  shareholders  and 
those  distributed  to collective  investment  institutions 
and redistributed  by them  to their  participants,  it is 
important  to make  arrangements,  for the  benefit  of 
participants  in collective  investment  institutions,  for 
the transfer  of tax  credits  attaching  to dividends 
distributed  by companies  and  for  the transfer  of the 
right  to set off and  obtain  repayment  of withholding 
taxes  charged  on dividends  which  such  participants 
receive; 
Whereas,  because.of  substantial  differences  existing 
at present  between  the Member  States  as regards  the 
legal  form  of  these  institutions  and  the  tax 
arrangements  to which  they  are  subject,  provision 
should  be  made  for  more  than  one  method  of 
transferring  the right  to obtain  the  tax credit  and  to 
set off  witholding  tax,  with  the  choice  of method 
being  left  to the individual  Member  State; Whereas  special  rules  should  be established  for cases 
where  dividends  are  distributed  to  a collective 
investment  institution  or are  redistributed  by  it 
exempt  from  withholding  tax; 
Whereas  the  budgetary  cost  of the  tax  credit  and  of 
setting  off the  withholding  tax  should  be borne  by 
the Member  State  that  has  levied  corporation  tax on 
the profits  from  which  the dividends  are derived  and 
has charged  withholding  tax  on their  distribution; 
whereas,  for  this  purpose,  financial  compensation 
between  Member  States  must  be  provided  for; 
whereas  an exception  to this  rule  must,  however,  be 
made  where  a collective  investment  institution 
redistributes  dividends  to  another  collective 
investment  institution  which  holds  at least  10 % of 
its participations  and  which  does  not  redistribute 
these  dividends;  whereas,  nevertheless,  there  need  be 
no objection  to Member  States  agreeing  bilaterally  to 
share  this  budgetary  cost; 
Whereas,  in order  to ensure  tax  neutrality,  it is 
essential  that  income  distributed  to a collective 
investment  institution  and  redistributed  by it to its 
participants  should  not  be treated  less  favourably  if it 
derives  from  another  Member  State  than  if it is of 
national  origin; 
Whereas  the  provisions  relating  to  dividends 
distributed  to collective  investment  institutions  and 
redistributed  by them  to their  participants  must  be 
applied  by the Member  States  at the same  time  as the 
provisions  of Council  Directive  .. . of..  ., 
HAS  ADOPTED  THIS  DIRECTIVE: 
CHAPTER  I 
General  provisions  and  definitions 
Article  1 
1. The  Member  States  shall  apply  the  provisions 
of the  following  Articles  to income  redistributed  by 
collective  investment  institutions. 
2. 8. 78 Official  Journal  of the  European  Communities No C 184/9 
2. Save  as otherwise  provided  in this  Directive, 
the provisions  of the  Company  Taxation'  Directive 
shall  apply  to dividends  distributed  to collective 
investment  institutions. 
Article  2 
1. For  the  purposes  of  this  Directive,  the 
expression  or the term: 
— 'collective  investment  institutions',  hereinafter 
called  CIIs,  means  the  institutions  referred  to in 
the Annex  hereto,  which  forms  an integral  part  of 
this Directive,  provided  that  their  purpose  is the 
collective  investment  of capital  raised  by means  of 
offers  to the public  and  that  their  operations  are 
based  on the principle  of spreading  the investment 
risk; 
— 'CII  of a Member  State'  means  a CII  which  is 
deemed  to be  resident  in that  State  for  tax 
purposes; 
— the  'Company  Taxation  Directive'  means  Council 
Directive  ... of...; 
— 'dividends'  means  dividends  within  the  meaning 
of Article  2 (1)  or Article  7 of the  Company 
Taxation  Directive  in the  case  of dividends 
received  by a CII and  the same  sums  less  the costs 
incurred  by  the  CII  in the  case  of dividends 
redistributed  by it, provided  that  they  have  not 
been  placed  to reserve  for a period  of more  than 
five years  from  the end  of the  accounting  period 
during  which  they  were  received; 
— 'dividends  which  have  not  suffered  withholding 
tax' means  dividends  from  which,  in accordance 
with  the  provisions  of the  Company  Taxation 
Directive  and  the  provisions  of this  Directive,  no 
withholding  tax  has  been  deducted  either  at 
distributing  company  level  or at CII  level,  or in 
the case  of which,  in accordance  with  Article  7, 
such  withholding  tax  as had  been  deducted  has 
been  repaid  to  the  CII  redistributing  the 
dividends; 
— 'dividends  which  have  suffered  withholding  tax' 
means  any  other  dividends; 
— 'distributing  company'  means  any  company  of a 
Member  State,  other  than  a CII,  which  distributes 
dividends. 
2. Dividends  received  by a CII  which,  pursuant  to 
the laws  of the State  of the CII,  are attributed  for tax 
purposes  to the  participants  of the  CII  during  the 
same  year  or in the following  year  shall  be deemed  to 
be dividends  redistributed  by the CII,  whether  or not 
an actual  redistribution  has  been  made. 
3. The  Council,  acting  by a qualified  majority  on a 
proposal  from  the  Commission,  may  amend  the 
Annex. Article  3 
Notwithstanding  Article  2 (1),  the  Member  States 
may agree  among  themselves  that  the  provisions  of 
this Directive  shall  apply  to CIIs  whose  capital  is not 
raised  by means  of offers  to the  public,  and  shall 
inform  the Commission  accordingly. 
CHAPTER  II 
Provisions  relating  to tax credit 
Article  4 
1. Any  dividend  which  a CII  redistributes  to its 
participants  other  than  a CII  shall  confer  on such 
participants,  in accordance  with  Articles  4 and  5 of 
the Company  Taxation  Directive,  entitlement  to a tax 
credit  at the  rate  determined,  in accordance  with 
Article  8 of that  Directive,  by the  State  of the 
distributing  company. 
2. Notwithstanding  paragraph  1, the  Member 
State  of the  CII  shall  be free  to stipulate  that  the 
rate of the  tax  credit  attached  to the  dividends 
redistributed  by the  CII  shall,  in all cases,  be that 
which  it has  itself  fixed  in accordance  with  Article  8 
of the Company  Taxation  Directive. 
If use  is made  of this  option,  the  State  of the  CII 
shall,  when  the dividends  are redistributed  by the CII, 
levy a compensatory  tax  or an advance  payment 
equal  to the tax credit  granted  to the participants  and 
shall  grant  authorization  for  the  tax  credit  attached 
to the  dividends  received  by the  CII  to be set off 
against  this  compensatory  tax  or advance  payment, 
but any  excess  shall  not  be repayable. 
3. In  all  cases,  the  amount  of the  tax  credit 
attached  to the dividends  redistributed  by a CII  shall 
be calculated  by reference  to the  amount  of such 
dividends. 
The same  shall  apply  to the amount  of the tax credit 
set off  against  the  compensatory  tax  or advance 
payment. 
CHAPTER  III 
Provisions  relating  to withholding  tax 
Article  5 
Any dividend  which  has suffered  withholding  tax and 
which  a CII  redistributes  to its participants,  other 
than  a CII,  shall  confer  on such  participants,  in 
No C 184/10 Official  Journal  of the European  Communities 2. 8. 78 
accordance  with  Article  16 of the Company  Taxation 
Directive,  the right  to set off withholding  tax equal  to 
25 % of the amount  of the dividend;  any  excess  shall 
be repaid  to them  by the Member  State  charging  the 
tax against  which  this  withholding  tax  is to be set 
off. 
Article  6 
1. Each  Member  State  shall  be free  to charge  a 
withholding  tax  on dividends  redistributed  by the 
CIIs of that  State.  The  rate  of such  withholding  tax 
shall  not exceed  25 %. 
If use  is made  of this  option,  withholding  tax  of 
25 % shall  be set off against  the  withholding  tax 
charged  at CII  level,  but  any  excess  shall  not  be 
repayable. 
2. The  set-off  provided  for  in paragraph  1 shall 
not be carried  out  where  the  dividends  have  not 
already  suffered  withholding  tax. 
Article  7 
Where  a CII of a Member  State,  without  itself  being 
required  to deduct  a withholding  tax,  redistributes  to 
participants  resident  in that  State  dividends  which 
have  already  suffered  withholding  tax,  the  Member 
State  of the  CII  shall  be  free  to repay  such 
withholding  tax,  calculated  at the rate  of 25 % to the 
CII, where  one  of the  following  two  conditions  is 
fulfilled: 
— the  name  and  address  of the participant  of the CII 
and the amount  of the dividends  received  by him 
are automatically  communicated  to the  taxation 
administration; 
— the  securities  representing  interests  in the CII are 
registered  in the names  of the holders. 
Article  S 
Notwithstanding  Article  6 (1),  the Member  State  of 
the CII must  charge  a withholding  tax of 25 % where 
the CII  redistributes  dividends  which  have  not 
suffered  withholding  tax.  However,  a Member  State 
shall  be free  not  to charge  withholding  tax  where 
such dividends  are redistributed  to residents  of that 
Member  State  and  where  one  of the  following  two 
conditions  is fulfilled: 
— the  name  and  address  of the participant  of the CII 
and the amount  of the dividends  received  by him 
are automatically  communicated  to the  taxation 
administration; 
— securities  representing  interests  in the  CII  are 
registered  in the names  of the holders. Article  9 
The amount  of  withholding  tax  which  the 
participants  in a CII are entitled  to set off or to have 
repaid  shall  be calculated  by reference  to the amount 
of the dividends  redistributed  by the CII. 
The same  shall  apply  to: 
— the  amount  of withholding  tax  suffered  on 
dividends  distributed  to the  CII  which  is set off 
against  the  amount  of the  withholding  tax 
payable  by the CII; 
— the  repayment  of the withholding  tax referred  to 
in Article  7; 
— the  amount  of the withholding  tax referred  to in 
Article  8. 
CHAPTER  IV 
Provisions  common  to tax credit 
and to withholding  tax 
Article  10 
1. The  Member  State  of a CII  may  replace  the 
set-off  arrangements  applicable  to that  CII  under 
Articles  4 (2) and  6 (1) by an arrangement  whereby 
the compensatory  tax,  advance  payment  or 
withholding  tax is levied  in full  and the tax credits  or 
withholding  tax  attaching  to dividends  received  by 
the CII  are repaid  to the  latter,  up to the  amounts 
that could  have  been  set off under  those  Articles. 
2. Any  repayment  made  to a CII  pursuant  to 
paragraph  1 must  be cancelled  where  the dividends 
are not  redistributed  by that  CII  during  the year  in 
which  the  repayment  takes  place  or during  the 
following  year. 
Article  11 
1. For  the purposes  of this  Directive,  distributions 
made  by a CII shall  be deemed  to represent: 
— firstly,  dividends  received  by  that  CII  either 
during  the  year  in which  the  distributions  are 
made  or during  the preceding  year; 
— then,  where  appropriate,  other  dividends; 
2.8.78 Official  Journal  of the  European  Communities No C 184/11 
— finally,  where  appropriate,  income  of any  other 
type,  reduced  by any  losses  incurred. 
2. For  the  purposes  of paragraph  1, the amount  of 
dividends  originating  in each  Member  State  shall  be 
determined  on a proportional  basis.  In the  case  of 
dividends  referred  to in the  second  indent  above,  the 
proportional  basis  shall  apply  to the  dividends  for all 
years,  taken  together. 
Article  12 
1. Expenses  and  costs  that  are  incurred  by a CII 
for the  purpose  of acquiring  dividends  and  other 
receipts,  including  receipts  from  the  disposal  of fixed 
assets,  and  that  can  be directly  attributed  to a given 
category  of receipts,  shall  be deducted  from  receipts 
in that  category. 
2. Expenses  other  than  those  referred  to  in 
paragraph  1 shall  be allocated  in proportion  to total 
gross  receipts  from  each  category. 
Article  13 
1. Every  CII  of a Member  State  must  notify  that 
State  and  its  participants  of the  amount  of the 
dividends  redistributed  and  of the  amounts  of tax 
credit  and  withholding  tax  that  the  participants  are 
entitled  to set off against  personal  tax. 
2. Member  States  may  enter  into  agreements  on 
special  additional  provisions  regarding  the 
information  that  CIIs  are  required  to  furnish 
pursuant  to paragraph  1 above. 
Article  14 
Where  a participant  in a CII,  other  than  another  CII, 
is resident  in a Member  State  other  than  the  State  of 
the CII,  the former  Member  State  shall  be entitled  to 
receive  financial  compensation  from  the  State  of the 
CII equal  to the  amount  of the  tax  credit  and 
withholding  tax  which,  pursuant  to the  provisions  of 
this Directive,  it has  authorized  to be set off or has 
repaid. 
Article  IS 
1. Where  a CII  of a Member  State  redistributes  to 
its participants  dividends  received  from  a company  or 
from  a CII  of another  Member  State,  the State  of the 
CII redistributing  such  dividends  shall  be entitled  to 
receive  from  that  other  Member  State  financial compensation  equal  to the  amount  of the  tax  credit 
attached  to the  dividends  received  by that  CII  and  to 
the amount  of withholding  tax.  Such  compensation 
shall  be calculated  by  reference  to the  amount  of 
dividends  redistributed  by.that  CII. 
The Member  State  required  to pay  compensation 
may  reduce  the amount  payable  by up to 10 %. 
2. Notwithstanding  paragraph  1,  where  the 
participant  in the  CII  redistributing  the  dividends  is 
another  CII  holding  not  less  than  10  % of  the 
participations  in  the  former  CII,  the  financial 
compensation  referred  to in the  above  paragraph 
shall  be paid  only  in so far  as the  dividends  are 
redistributed  by the other  CII. 
3. In  the  case  provided  for  in Article  4 (2),  the 
financial  compensation  referred  to in paragraphs  1 
and 2 may  not  exceed  the  amount  of compensatory 
tax or advance  payment  levied  at CII  level. 
4. Member  States  may  enter  into  bilateral 
agreements  which  depart  from  the  requirements  of 
paragraphs  1, 2 and  3, provided  that  the  rights  of 
participants  in CIIs,  arising  out  of this  Directive,  are 
not affected. 
CHAPTER  V 
Provisions  regarding  non-discrimination 
Article  16 
1. Save  as otherwise  provided  in this  Directive,  a 
Member  State  may  not  accord  less  favourable  tax 
treatment  to income  of any  kind  derived  by a CII  of 
that State  from  another  Member  State  than  it accords 
to income  derived  from  a domestic  source. 
The same  provision  shall  apply  where  such  income  is 
redistributed  by the  CII  to residents  of the  State  of 
the CII. 
2. Save  as otherwise  provided  in this  Directive, 
the Member  State  in which  a participant  in a CII  of 
another  Member  State  is resident  may  not  accord  less 
favourable  tax  treatment  to income  of any  kind 
derived  from  that  CII  than  it accords  to income 
derived  from  its own  CIIs. 
Article  17 
1. Subject  to provisions  in respect  of withholding 
tax rates  in double  taxation  agreements  concluded 
between  Member  States  and  non-member  countries, 
No C 184/12 Official  Journal  of the European  Communities 2. 8. 78 
a Member  State  may  not  accord  more  favourable 
tax treatment  to participants  in the CIIs  of that  State 
who are  resident  in a non-member  country  than  it 
accords  to those  who  are  resident  in a Member 
State. 
2. The  Member  States  and  the  Commission  shall 
cooperate  with  each  another  with  a view  to adopting 
a common  position  on this  matter. 
CHAPTER  VI 
Transitional  and  final  provisions 
Article  18 
1. This  Directive  shall  apply  to dividends  that  have 
been  distributed  by a distributing  company  after  the 
date stipulated  in Article  22  of the  Company 
Taxation  Directive.  It shall  apply  to any  other 
income  received  or redistributed  by a CII  after  that 
date. 
2. By  way  of derogation  from  paragraph  1, 
Member  States  shall  be free  to apply  that  paragraph 
either  in whole  or in part  where  dividends  or other 
income  have  been  distributed  or received  before  the 
date referred  to therein. 
Where  use is made  of this  option,  Articles  14 and  15 
shall  apply  only  where  bilateral  agreements  have been  concluded  between  the  Member  States 
concerned. 
Article  19 
The provisions  of this  Directive  shall  not preclude  the 
application  of national  provisions  the  purpose  of 
which  is to prevent  the recipient  of a dividend  from 
obtaining  an unjustified  advantage  and  which  make  it 
possible  to refuse  the set-off  or repayment  of the tax 
credit  or withholding  tax. 
Article  20 
1. Member  States  shall  bring  into  force  the laws, 
regulations  and  administrative  provisions  necessary 
to comply  with  the  provisions  of this  Directive  not 
later  than  the  date  stipulated  in Article  22 of the 
Company  Taxation  Directive. 
2. Member  States  shall  ensure  that  the texts  of any 
further  main  provisions  of national  law  which  they 
adopt  in the  field  governed  by this  Directive  are 
communicated  to the Commission. 
Article  21 
This  Directive  is addressed  to the Member  States. 
ANNEX 
List of the collective  investment  institutions  referred  to in Article  2 (1) 
BELGIUM:  Les  fonds  communs  de placement, 
De gemeenschappelijke  beleggingsfondsen 
within  the meaning  of the 
Loi sur les fonds  communs  de placement  du 27. 3. 1957, 
Wet van  27.  3. 1957  betreffende  de gemeenschappelijke  beleggings-
fondsen. 
DENMARK:  Investeringsforeninger  within  the  meaning  of Lovbekendtgorelse 
nr. 130  af 6. 4. 1967  om  beskatning  af medlemmer  af investerings-
foreninger; 
Certifikat-udstedende  investeringsforeninger. 
GERMANY: Kapitalanlagegesellschaften  within  the  meaning  of the  Gesetz  iiber 
Kapitalanlagegesellschaften  as last  amended. 
2. 8. 78 Official  Journal  of the  European  Communities No C 184/13 
FRANCE: Societe  nationale  d'investissement  (SNI),  referred  to in Article  208-1° 
of the Code  general  des impots; 
Societes  d'investissement  ordinaires  (SIOs)  referred  to in Articles 
208-1°  bis and  208-2°  of the Code  general  des impots; 
Societes  d'investissement  a capital  variable  (SICAVs)  referred  to in 
Article  208-1°  bis A of the Code  general  des impots; 
Ponds  communs  de placement  governed  by Decret  No  571842  du 
28. 12. 1957,  published  in the  Journal  officiel  de la Republique 
fran^aise  du 29. 12. 1957. 
IRELAND: Units  trusts  within  the meaning  of the Unit  Trusts  Act  1972; 
Investment  trust  companies. 
ITALY: Le societa  ed enti  finanziari. 
LUXEMBOURG:  Fonds  communs  de placement  and  societes  d'investissement  featuring 
on the  official  list of investment  funds  drawn  up by the  Commis-
saire  au controle  des  banques  under  Article  IV (1) of the  Arrete 
Grand-Ducal  du 22. 12. 1972  ayant  pour  objet  le controle  des  fonds 
d'investissement. 
NETHERLANDS:  Beleggingsinstellingen  within  the  meaning  of Article  28 of the  Wet 
op de Vennootsschapsbelasting  1969. 
UNITED  KINGDOM-  Authorized  units  trusts  within  the  meaning  of Section  358  of the 
Income  and  Corporation  Taxes  Act  1970; 
Approved  investment  trusts  within  the  meaning  of Section  359  of 
the Income  and  Corporation  Taxes  Act  1970.