EU dividend withholding tax reclaimsDefining your strategy in a moving landscape

1

New opportunities and key drivers

The free movement of capital provisions in the Treaty on the Functioning of the European Union (the Treaty) extends to third (i.e., non-EU) countries:

• This principle has been reaffirmed by the Court of Justice of the European Union (CJEU) in its April 10, 2014 decision in relation to a US Regulated Investment Company (US RIC) investing in Polish shares.

• It has also been enforced in decisions issued by local courts favorable to US RICs.

• Refunds are currently granted to US RICs by Finland and Poland; we expect this trend to continue and expand.

• Across the asset management industry as a whole, there are billions of euros of dividend withholding tax relating to open tax periods for which reclaims are yet to be filed.

European investment funds have been filing claims for refunds of dividend WHT in reference to the “free movement of capital” principle established by the Treaty (EU WHT reclaims) for a number of years.

The European courts have indeed consistently established that it is discriminatory and contrary to the free movement of capital principle for EU member states to impose a higher level of taxation on dividends from portfolio investments paid to nonresidents compared with similar payments paid to resident investors.

The free movement of capital provisions in the Treaty extend to third countries, notably provided the investor does not have a direct (controlling) interest, which is generally not the case for investment funds.

This position was reinforced in the CJEU decisions in FIM Santander and Emerging Markets Series of DFA Investment Trust Company, which both involved US RICs.

We can assist you throughout the process with:• Initial feasibility study and

cost-benefit analysis • Filing reclaims in relevant

jurisdictions• Post-filing steps up to refund• Technical watch

| EU dividend withholding tax reclaims | Defining your strategy in a moving landscape

Global and coordinated approach

We have a global network of experienced professionals dedicated to the asset management industry. Our ability to work across global locations in a coordinated and consistent way from the US has significantly contributed to our delivery of well-controlled and timely service to clients.

Detailed knowledge

We provide a thorough understanding of the potential for reclaims in EU countries, coupled with a detailed case-by-case approach, taking into account the different and specific fact patterns at hand.

Proven track record with clients

We have successfully assisted large global asset managers and small single fund managers for Australian, Canadian, Cayman Islands, US and other non-EU domiciled investment vehicles, as well as, of course, many EU-domiciled vehicles.

How EY can help

The EY advantage

We will adjust our approach to your organization’s specific needs and constraints and make sure you develop and document a robust filing strategy and protect your reclaim position from filing to refund

Austria Refunds granted to EU funds (corporation forms). Litigation in progress by non-EU funds.

Belgium Refunds granted to Undertakings for Collective Investment in Transferable Securities Directive (UCITS) funds, discussions in progress regarding Alternative Investment Funds (AIFs). Proposed Industry reclaims format for US RICs. Ongoing litigation regarding statutes of limitation.

Denmark Expected European Court of Justice case law (EU fund). Statute of limitation reduced to 3 years as of September 2016.

Finland Favorable case law on US RICs (close-end and open-end funds). US RICs’ reclaims favorably processed (refunds granted) and procedure available to benefit from a zero at source withholding tax. Statute of limitation reduced to three years for years starting as of January 1, 2017.

France Refunds granted to UCITS funds and AIFs. Discussions ongoing around US RICs’ comparability with domestic funds (slowed due to 2017 Presidential election agenda); however, French courts may end up ruling on pilot cases.

Germany Germany will start taxing German collective investment vehicles (CIVs) in 2018. Selection of pilot cases currently considered for review by German tax authorities and courts.

Italy Italian tax authorities committed to assess US RICs’ reclaims by year-end 2015 but cases have not been reviewed yet. Refunds granted to UK life insurance companies and recent favorable court decisions in relation to US pension funds.

Netherlands Unfavorable Supreme Court decision against Lux SICAV’s impact on US RICs could be overruled by the European Court of Justice preliminary ruling requested by the Dutch Supreme Court in March 2017.

Poland Favorable court decisions (regarding the required level of comparability). Refunds obtained from various tax offices including the Dolnoslaskie and the Mazowieckie Polish tax offices.

Portugal Reclaim opportunity since July 1, 2015 following new favorable tax regime for domestic funds.

Spain Industry action to support comparability and verification of comparability of US RICs with domestic funds.

Sweden In June 2016, following a decision of the Swedish Supreme Administrative Court on a separate matter, the Swedish tax authorities have decided to suspend the refund of claims filed by US RICs. They have very recently started to reject certain claims. The situation of US RICs is currently being reassessed in court.

2Ernst & Young LLP |

EU reclaim is a very rapidly evolving landscape

Here are some recent developments

EU reclaim – Country overview

EU reclaim – US overviewNotice 2016-10, released by the IRS on January 15, 2016, provides guidance for US RICs on how to account for refunds of foreign withholding taxes under section 853 and section 905(c).

In order to support the position of US RICs with foreign tax authorities, the SEC has issued a statement in March 2017 on the issuance of SEC certificates in the context of EU reclaims.

Key phases of a successful EU reclaims project

In summary, the FIM Santander and Emerging Markets Series of DFA Investment Trust Company rulings and the increasing number of refund decisions have made it clear that there is a significant opportunity for non-EU-resident funds to successfully file EU WHT reclaims.

Team Approach

Tools and technology

Gather

Ana

lyze

Delive

r

Evaluate

Monitor

Ass

ess

Plan

Communicate

Why act now?There are statutes of limitations to restrict the periods for which claims can be made. These are typically, but not always, on a calendar-year basis, and they need to be monitored so that opportunities to file claims are not missed.

Robert MeinerPartner, Tax, Global Compliance and Reporting (GCR) Ernst & Young LLPNew York+1 212 773 5786robert.meiner@ey.com

Stephen FisherPrincipal, Tax, Global Compliance and Reporting (GCR) Ernst & Young LLPBoston+1 617 375 8397stephen.fisher@ey.com

Dmitri V. SemenovPartner, Tax, International Tax Services (ITS) Ernst & Young LLPNew York+1 212 773 2552dmitri.semenov@ey.com

Sarah Belin-ZerbibExecutive Director, Tax, International Tax Services (ITS) Ernst & Young LLPNew York+1 212 773 9835sarah.belinzerbib@ey.com

Danielle C. Clark Principal, Tax, International Tax Services (ITS) Ernst & Young LLPStamford+1 203 674 3693 sarah.belinzerbib@ey.com

Contacts

EY | Assurance | Tax | Transactions | Advisory

About EYEY is a global leader in assurance, tax, transaction and advisoryservices. The insights and quality services we deliver help build trust andconfidence in the capital markets and in economies the world over. Wedevelop outstanding leaders who team to deliver on our promises to allof our stakeholders. In so doing, we play a critical role in building a betterworking world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, ofthe member firms of Ernst & Young Global Limited, each of which is aseparate legal entity. Ernst & Young Global Limited, a UK company limitedby guarantee, does not provide services to clients. For more informationabout our organization, please visit ey.com.

EY is a leader in serving the global financial services marketplaceNearly 51,000 EY financial services professionals around the world provide integrated assurance, tax, transaction and advisory services to our asset management, banking, capital markets and insurance clients. In the Americas, EY is the only public accounting organization with a separate business unit dedicated to the financial services marketplace. Created in 2000, the Americas Financial Services Organization today includes more than 11,000 professionals at member firms in over 50 locations throughout the US, the Caribbean and Latin America.

EY professionals in our financial services practices worldwide align with key global industry groups, including EY’s Global Wealth & Asset Management Center, Global Banking & Capital Markets Center, Global Insurance Center and Global Private Equity Center, which act as hubs for sharing industry-focused knowledge on current and emerging trends and regulations in order to help our clients address key issues. Our practitioners span many disciplines and provide a well-rounded understanding of business issues and challenges, as well as integrated services to our clients.

With a global presence and industry-focused advice, EY’s financial services professionals provide high-quality assurance, tax, transaction and advisory services, including operations, process improvement, risk and technology, to financial services companies worldwide.

© 2017 EYGM Limited. All Rights Reserved.

EYG No: 01995-171Gbl1703-2222537 (BDFSO)ED None

This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.

ey.com