CELEX: 51978PC0340
Language: en
Date: 1978-07-18
Title: PROPOSAL FOR A COUNCIL DIRECTIVE ON THE APPLICATION TO COLLECTIVE INVESTMENT INSTITUTIONS OF THE COUNCIL DIRECTIVE CONCERNING THE HARMONIZATION OF SYSTEMS OF COMPANY TAXATION AND OF WITHHOLDING TAXES ON DIVIDENDS

N o 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,                       Whereas special rules should be established for cases
                                                               where dividends are distributed to a collective
Having regard to the Treaty establishing the                   investment institution or are redistributed by it
European Economic Community, and in particular                 exempt from withholding tax;
Article 100 thereof,
                                                               Whereas the budgetary cost of the tax credit and of
Having regard to the proposal from the Commission,             setting off the withholding tax should be borne by
                                                               the Member State that has levied corporation tax on
Having regard to the opinion of the Economic and               the profits from which the dividends are derived and
Social Committee,                                              has charged withholding tax on their distribution;
                                                               whereas, for this purpose, financial compensation
                                                               between Member States must be provided for;
Having regard to the opinion of the European                   whereas an exception to this rule must, however, be
Parliament,                                                    made where a collective investment institution
                                                                redistributes    dividends     to  another       collective
Whereas the provisions of Council Directive . . . of . . .      investment institution which holds at least 10 % of
do not concern dividends that the final beneficiary            its participations and which does not redistribute
receives through the intermediary of collective                these dividends; whereas, nevertheless, there need be
investment institutions;                                        no objection to Member States agreeing bilaterally to
                                                                share this budgetary cost;
Whereas investment in securities representing the
capital of companies, carried out through the
                                                               Whereas, in order to ensure tax neutrality, it is
intermediary of collective investment institutions,            essential that income distributed to a collective
should not be penalized, but on the contrary should            investment institution and redistributed by it to its
be encouraged; whereas, in order to ensure fair
                                                               participants should not be treated less favourably if it
taxation and develop the share market, it is
                                                               derives from another Member State than if it is of
important to settle the problem of dividends
                                                                national origin;
distributed to these institutions and redistributed by
them to their participants;
                                                               Whereas the provisions relating to dividends
Whereas, in order as far as possible to achieve                distributed to collective investment institutions and
equality of tax treatment between dividends                    redistributed by them to their participants must be
distributed by companies to their shareholders and              applied by the Member States at the same time as the
those distributed to collective investment institutions         provisions of Council Directive . . . o f . . .,
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              HAS ADOPTED THIS DIRECTIVE:
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                                    CHAPTER I
receive;
                                                                          General provisions and definitions
Whereas, because.of substantial differences existing
at present between the Member States as regards the
legal form of these institutions and the tax                                            Article 1
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          1.    The Member States shall apply the provisions
set off witholding tax, with the choice of method              of the following Articles to income redistributed by
being left to the individual Member State;                     collective investment institutions.
 ---pagebreak--- 2. 8. 78                                    Official Journal of the European Communities                           No C 184/9
2.     Save as otherwise provided in this Directive,                                          Article  3
the provisions of the Company Taxation' Directive
shall apply to dividends distributed to collective                    Notwithstanding Article 2 (1), the Member States
investment institutions.                                               may agree among themselves that the provisions of
                                                                       this Directive shall apply to CIIs whose capital is not
                               Article    2                            raised by means of offers to the public, and shall
                                                                       inform the Commission accordingly.
 1.    For the purposes                of   this   Directive, the
 expression or the term:
 — 'collective investment institutions', hereinafter                                         CHAPTER II
     called CIIs, means the institutions referred to in
     the Annex hereto, which forms an integral part of                             Provisions relating to tax credit
     this Directive, provided that their purpose is the
     collective investment of capital raised by means of                                       Article 4
     offers to the public and that their operations are
     based on the principle of spreading the investment
     risk;                                                             1.    Any dividend which a CII redistributes to its
                                                                       participants other than a CII shall confer on such
— 'CII of a Member State' means a CII which is                        participants, in accordance with Articles 4 and 5 of
     deemed to be resident in that State for tax                       the Company Taxation Directive, entitlement to a tax
     purposes;                                                         credit at the rate determined, in accordance with
 — the 'Company Taxation Directive' means Council                      Article 8 of that Directive, by the State of the
     Directive . . . o f . . . ;                                       distributing company.
 — 'dividends' means dividends within the meaning                      2.    Notwithstanding paragraph 1, the Member
     of Article 2 (1) or Article 7 of the Company                      State of the CII shall be free to stipulate that the
     Taxation Directive in the case of dividends
                                                                       rate of the tax credit attached to the dividends
     received by a CII and the same sums less the costs                redistributed by the CII shall, in all cases, be that
     incurred by the CII in the case of dividends
                                                                       which it has itself fixed in accordance with Article 8
     redistributed by it, provided that they have not                  of the Company Taxation Directive.
     been placed to reserve for a period of more than
     five years from the end of the accounting period
     during which they were received;                                  If use is made of this option, the State of the CII
                                                                       shall, when the dividends are redistributed by the CII,
 — 'dividends which have not suffered withholding                      levy a compensatory tax or an advance payment
     tax' means dividends from which, in accordance                   equal to the tax credit granted to the participants and
     with the provisions of the Company Taxation                      shall grant authorization for the tax credit attached
     Directive and the provisions of this Directive, no                to the dividends received by the CII to be set off
      withholding tax has been deducted either at                     against this compensatory tax or advance payment,
     distributing company level or at CII level, or in                 but any excess shall not be repayable.
     the case of which, in accordance with Article 7,
     such withholding tax as had been deducted has                     3.    In all cases, the amount of the tax credit
     been repaid to the CII redistributing the                         attached to the dividends redistributed by a CII shall
     dividends;                                                        be calculated by reference to the amount of such
 — 'dividends which have suffered withholding tax'                     dividends.
     means any other dividends;                                       The same shall apply to the amount of the tax credit
 — 'distributing company' means any company of a                      set off against the compensatory tax or advance
     Member State, other than a CII, which distributes                payment.
     dividends.
 2.    Dividends received by a CII which, pursuant to                                        CHAPTER III
 the laws of the State of the CII, are attributed for tax
purposes to the participants of the CII during the                             Provisions relating to withholding tax
 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.                                                       Article 5
 3.    The Council, acting by a qualified majority on a               Any dividend which has suffered withholding tax and
 proposal from the Commission, may amend the                          which a CII redistributes to its participants, other
 Annex.                                                               than a CII, shall confer on such participants, in
 ---pagebreak--- No C 184/10                         Official Journal of the European Communities                                2. 8. 78
accordance with Article 16 of the Company Taxation                                      Article 9
Directive, the right to set off withholding tax equal to
25 % of the amount of the dividend; any excess shall           The amount of withholding tax which the
be repaid to them by the Member State charging the             participants in a CII are entitled to set off or to have
tax against which this withholding tax is to be set            repaid shall be calculated by reference to the amount
off.                                                           of the dividends redistributed by the CII.
                          Article 6                            The same shall apply to:
1.     Each Member State shall be free to charge a             — the amount of withholding tax suffered on
withholding tax on dividends redistributed by the                   dividends distributed to the CII which is set off
CIIs of that State. The rate of such withholding tax                against the amount of the withholding tax
shall not exceed 25 %.                                              payable by the CII;
If use is made of this option, withholding tax of              — the repayment of the withholding tax referred to
25 % shall be set off against the withholding tax                   in Article 7;
charged at CII level, but any excess shall not be
repayable.
                                                               — the amount of the withholding tax referred to in
                                                                    Article 8.
2.     The set-off provided for in paragraph 1 shall
not be carried out where the dividends have not
already suffered withholding tax.
                                                                                      CHAPTER IV
                          Article 7
Where a CII of a Member State, without itself being                        Provisions common to tax credit
 required to deduct a withholding tax, redistributes to                          and to withholding tax
participants resident in that State dividends which
have already suffered withholding tax, the Member
State of the CII shall be free to repay such                                           Article 10
withholding tax, calculated at the rate of 25 % to the
 CII, where one of the following two conditions is
                                                               1.     The Member State of a CII may replace the
 fulfilled:                                                    set-off arrangements applicable to that CII under
 — the name and address of the participant of the CII          Articles 4 (2) and 6 (1) by an arrangement whereby
     and the amount of the dividends received by him           the compensatory tax, advance payment or
     are automatically communicated to the taxation            withholding tax is levied in full and the tax credits or
     administration;                                           withholding tax attaching to dividends received by
                                                               the CII are repaid to the latter, up to the amounts
 — the securities representing interests in the CII are         that could have been set off under those Articles.
     registered in the names of the holders.
                                                               2.     Any repayment made to a CII pursuant to
                          Article S                            paragraph 1 must be cancelled where the dividends
                                                               are not redistributed by that CII during the year in
 Notwithstanding Article 6 (1), the Member State of            which the repayment takes place or during the
 the CII must charge a withholding tax of 25 % where            following year.
 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                                  Article 11
 Member State and where one of the following two
 conditions is fulfilled:                                       1.    For the purposes of this Directive, distributions
                                                                made by a CII shall be deemed to represent:
 — the name and address of the participant of the CII
     and the amount of the dividends received by him
                                                               — firstly, dividends received by that CII either
     are automatically communicated to the taxation
                                                                    during the year in which the distributions are
     administration;
                                                                     made or during the preceding year;
 — securities representing interests in the CII are
     registered in the names of the holders.                    — then, where appropriate, other dividends;
 ---pagebreak--- 2.8.78                                       Official J o u r n a l of the E u r o p e a n Communities                            N o C 184/11
— finally, where appropriate, income of any other                                compensation equal to the a m o u n t of the t a x credit
       type, reduced by any losses incurred.                                     attached to the dividends received by t h a t CII a n d to
                                                                                the a m o u n t of withholding tax. Such compensation
2.        For the purposes of p a r a g r a p h 1, the a m o u n t of            shall be calculated by reference to the a m o u n t of
dividends originating in each M e m b e r State shall be                         dividends redistributed b y . t h a t CII.
determined on a p r o p o r t i o n a l basis. In the case of
                                                                                 T h e M e m b e r State required to pay compensation
dividends referred to in the second indent above, the
                                                                                 may reduce the a m o u n t payable by u p t o 10 % .
p r o p o r t i o n a l basis shall apply to the dividends for all
years, taken together.
                                                                                 2.       Notwithstanding paragraph           1, where the
                                                                                 participant in the CII redistributing the dividends is
                                                                                 another CII holding not less t h a n 10 % of the
                                 Article  12
                                                                                 participations in the f o r m e r CII, the financial
                                                                                 compensation referred to in the above p a r a g r a p h
1.        Expenses and costs that are incurred by a CII
                                                                                 shall be paid only in so f a r as the dividends are
for the purpose of acquiring dividends and other
                                                                                 redistributed by the other CII.
receipts, including receipts f r o m the disposal of fixed
assets, and t h a t can be directly attributed to a given
category of receipts, shall be deducted from receipts                            3.        In the case provided for in Article 4 (2), the
in that category.                                                                financial compensation referred to in p a r a g r a p h s 1
                                                                                 and 2 may not exceed the a m o u n t of compensatory
                                                                                 tax or advance p a y m e n t levied at CII level.
2.        Expenses other t h a n those referred to in
p a r a g r a p h 1 shall be allocated in p r o p o r t i o n to total
gross receipts f r o m each category.                                            4.       M e m b e r States may enter into bilateral
                                                                                 agreements which depart f r o m the requirements of
                                                                                 p a r a g r a p h s 1, 2 and 3, provided t h a t the rights of
                                                                                 participants in CIIs, arising out of this Directive, are
                                 Article  13                                     not affected.
1.        Every CII of a M e m b e r State must notify that
State and its participants of the a m o u n t of the
dividends redistributed and of the a m o u n t s of tax                                                      CHAPTER V
credit and withholding tax that the participants are
entitled to set off against personal tax.                                                     Provisions regarding non-discrimination
2.        M e m b e r States m a y enter into agreements on
special            additional       provisions   regarding           the                                      Article 16
i n f o r m a t i o n that CIIs are required to furnish
pursuant to p a r a g r a p h 1 above.
                                                                                 1.        Save as otherwise provided in this Directive, a
                                                                                 M e m b e r State may not accord less favourable t a x
                                                                                 treatment to income of any kind derived by a CII of
                                 Article  14                                     that State f r o m another M e m b e r State t h a n it accords
                                                                                 to income derived f r o m a domestic source.
W h e r e a participant in a CII, other than another CII,
                                                                                 T h e same provision shall apply where such income is
is resident in a M e m b e r State other than the State of
                                                                                 redistributed by the CII to residents of the State of
the CII, the former M e m b e r State shall be entitled to
                                                                                 the CII.
receive financial compensation f r o m the State of the
CII equal to the a m o u n t of the tax credit and
withholding tax which, p u r s u a n t to the provisions of                      2.        Save as otherwise provided in this Directive,
this Directive, it has authorized to be set off or has                           the M e m b e r State in which a participant in a CII of
repaid.                                                                          another M e m b e r State is resident may n o t accord less
                                                                                 favourable tax treatment to income of any kind
                                                                                 derived f r o m that CII than it accords to income
                                                                                 derived f r o m its own CIIs.
                                 Article  IS
1.        W h e r e a CII of a M e m b e r State redistributes to                                             Article 17
its participants dividends received f r o m a c o m p a n y or
f r o m a CII of another M e m b e r State, the State of the                     1.        Subject to provisions in respect of withholding
CII redistributing such dividends shall be entitled to                           tax rates in double taxation agreements concluded
receive f r o m that other M e m b e r State financial                           between M e m b e r States and n o n - m e m b e r countries,
 ---pagebreak--- No C 184/12                           Official Journal of the European Communities                                    2. 8. 78
a Member State may not accord more favourable                         been concluded        between        the Member   States
tax treatment to participants in the CIIs of that State              concerned.
who are resident in a non-member country than it
accords to those who are resident in a Member
State.                                                                                         Article   19
2.    The Member States and the Commission shall                     The provisions of this Directive shall not preclude the
cooperate with each another with a view to adopting                   application of national provisions the purpose of
a common position on this matter.                                     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
                      CHAPTER VI                                      credit or withholding tax.
            Transitional and final provisions
                                                                                               Article   20
                        Article   18
                                                                      1.    Member States shall bring into force the laws,
1.     This Directive shall apply to dividends that have              regulations and administrative provisions necessary
been distributed by a distributing company after the                  to comply with the provisions of this Directive not
date stipulated in Article 22 of the Company                          later than the date stipulated in Article 22 of the
Taxation Directive. It shall apply to any other                       Company Taxation Directive.
income received or redistributed by a CII after that
date.
                                                                      2.    Member States shall ensure that the texts of any
2.     By way of derogation from paragraph 1,                         further main provisions of national law which they
 Member States shall be free to apply that paragraph                  adopt in the field governed by this Directive are
either in whole or in part where dividends or other                   communicated to the Commission.
income have been distributed or received before the
 date referred to therein.
                                                                                               Article   21
Where use is made of this option, Articles 14 and 15
shall apply only where bilateral agreements have                      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.
 ---pagebreak--- 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.