Refunds Of WHT ' European Court Decision On Discrimination Of Luxembourg Specialised Investment Fund

• Published date: 08 August 2023
• Law Firm: ATOZ
• Author: Mr Antoine Dupuis and Desislava Dimitrova

OUR INSIGHTS AT A GLANCE

• On 27 April 2023, an important decision was issued by the CJEU striking down a German law according to which a Specialised Investment Fund existing under the laws of Luxembourg is considered partially liable for corporate income tax on German real estate income.
• According to the Court, Article 63 TFEU must be interpreted as precluding legislation of a Member State under which income received from non-resident specialised property funds is subject to corporate income tax, whereas resident comparable vehicles are exempt from such tax.
• Hereafter, we provide you with an analysis of this decision and assess its practical implications.

A few weeks ago, an important decision was issued by the Court of Justice of the European Union (the "Court") striking down a German law according to which a Specialised Investment Fund ("SIF") existing under the laws of Luxembourg is considered partially liable for corporate income tax on German real estate income (Case C-537/20 from 27 April 2023).

Background

The request for preliminary ruling was filed by the German Bundesfinanzhof ("Federal Finance Court"). The claimant in the main dispute was a Luxembourg domiciled closed-end investment fund - a Luxembourg SIF set up as an FCP in the case at hand ("the Fund") with only two institutional investors. In the course of 2008 to 2010, the Fund received rental income and realised capital gains from the properties it held in Germany. In July 2013, the Fund filed corporate income tax returns in Germany for these years in respect of its limited (non-resident) liability to corporate income tax, but stated that, in its view, it should not be liable for corporate income tax in the same way as comparable domestic resident vehicles.

The responsible tax office considered that the exemption available to resident funds can not be applied to foreign...