WRITTEN QUESTION E-1586/00

by Karl von Wogau (PPE-DE) to the Commission

(19 May 2000)

Subject: Taxation of dividends paid by public limited companies

Is the Commission aware of the bureaucratic hoops which holders of shares in companies established in other Member States have to jump through so that their tax liability may be correctly calculated?

What relief measures can the Commission propose to alleviate this situation?

I refer in particular to the case of the small shareholders and employee shareholders of the Aventis company who went along with the advice of the Board of Directors of Höchst AG and swapped their Höchst AG shares for shares in Aventis, a company which has its registered office in Strasbourg, France. The assessment of tax liability involves the shareholder, the depositary bank, the tax office in the shareholder's place of residence, the dividend-paying office (Strasbourg) and the French tax authorities (Paris). The shareholder collects the quintuplicate application form (RF 1A) from the Federal Finance Office or the depositary bank. He fills it in and sends all five copies to the appropriate tax office in his place of residence. That office confirms that the shareholder is resident in Germany and keeps the top copy. The other four copies are returned to the shareholder. Copies 2-5 are then sent to the dividend-paying office. That office confirms the shareholder's personal details and pays the dividend without deducting withholding tax and sends copy 2 to the French tax authorities on account of the tax credit. Copies 3-5 are returned to the shareholder, who retains copy 3 and sends copies 4 and 5 to the German tax authorities. They keep copy 4. Copy 5 is sent via the Federal Finance Office to the French tax authorities so as to ensure that the tax credit is reimbursed to the German tax authorities (see Annex).

Answer given by Mr Bolkestein on behalf of the Commission

(6 July 2000)

Article 293 (formerly Article 220) of the EC Treaty requires the Member States, so far as is necessary, to enter into negotiations with each other with a view to securing for the benefit of their nationals the abolition of double taxation within the Community. Since no multilateral convention on the dividends of public limited companies has been concluded under this Article, that objective is pursued by the Member States through bilateral agreements. France and Germany concluded such an agreement on 21 July 1959, subsequently amending it by agreements signed on 9 June 1969 and 28 September 1989.

Articles 9 and 20 of the latest version of the agreement not only grant German residents exemption from French withholding tax on dividends paid by companies established in France, but entitle them to the same tax credit as French residents when dividends are distributed.

The Commission cannot but be pleased that France and Germany should have been able, by means, including the introduction of compensation payments between the two Member States, to achieve such a result, so eliminating all forms of double taxation for German residents receiving dividends from France.

The Commission would, however, draw the Honourable Member's attention to the fact that the procedures for the administration of the bilateral agreement are a matter for the two Member States concerned. The Commission understands that small shareholders and employee shareholders of what was Hoechst AG might be bothered by the changes in procedures for the payment of dividends since the company's merger with the new Strasbourg-based Aventis. However, there is nothing in the information provided by the Honourable Member to lead the Commission to conclude that Community law has been violated. That being so, the Commission considers the Member States concerned are the best judges of whether the current system needs to be simplified.