Member Article

UK investment funds in line for tax rebate

The European Court of Justice has ruled that foreign investment funds that invest in French companies should not be liable to pay a discriminatory withholding tax on dividends. Previously under French corporate tax law, France levied a withholding tax of 15%, or in some cases 25%, on foreign investment funds. Following the decision, UK pension funds and other investment funds that invest in French firms will no longer be discriminated against compared to French investment funds. The European Commission has already forced some countries such as Sweden and Spain to change their rules so that they do not levy discriminatory withholding taxes against foreign investors, and France will now be expected to do the same. PwC has estimated the case will result in tax refunds to UK investment funds of up to ?5bn. As a precedent, it is expected other countries that levy a withholding a tax on foreign investment funds, such as Germany, Netherlands and Belgium, are unlikely to continue. Teresa Owusu-Adjei, tax partner at PwC, said: “The ultimate beneficiaries of this ruling against discrimination will be UK companies and employees saving for their retirement who will see improved returns on investments in Europe. “UK pension and investment funds will no longer have to pay more tax on their dividends from investments in French companies than their French equivalents and in a difficult economic climate, funds will welcome any measure which allows them to maximise returns. “Investment funds that may have paid this withholding tax any time over the last five years should investigate now as to whether they are able to claim rebates. Europe-wide these claims could amount to as much as ?20bn so it is in funds’ interests to act now.? John Dance, owner of Vertem Asset Management, said: “Going forward it will allow UK based pension funds and investment funds to be on a level playing field versus their French counterparts and improve returns which have been somewhat dragged back previously due to the additional tax charges. “There is a possibility that UK funds may be able to claim back around 5bn euros in over payments, if this is so then it remains to be seen how this will repaid to present and past investors of the funds.?

This was posted in Bdaily's Members' News section by Tom Keighley .

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