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The Court of Justice of the European Union (CJEU) on March 13, 2025, held () that Belgium's restrictions on using the dividend received deduction (DRD) for intra-group transfers violate EU law. The decision addresses the compatibility of Belgium's DRD regime and tax consolidation system with the EU parent-subsidiary directive (PSD).

Background

The case involved a Belgian company that received dividends from its subsidiaries in 2019 and was part of a Belgian tax-consolidated group. The taxpayer received an intra-group transfer, which was added to its tax base. Belgian rules initially included eligible dividends in the tax base, followed by a 100% deduction under the DRD regime. However, Belgian law prohibited applying the DRD to intra-group transfers, leading the taxpayer to argue this was incompatible with EU law. The Court of First Instance of Liège referred the case to the CJEU for clarification.

CJEU decision

The CJEU emphasized that the PSD aims to ensure tax neutrality for profit distributions within the EU by eliminating economic double taxation. The CJEU found that Belgium's rules indirectly taxed dividends, violating the PSD's objectives. The CJEU rejected Belgium's argument that the rules were justified under Article 1(4) of the PSD to prevent tax abuse, noting the measures did not specifically target artificial arrangements. Therefore, the CJEU concluded that the Belgian legislation was in breach of EU law.

ÀÖÓ㣨Leyu£©ÌåÓý¹ÙÍø observation

This judgment follows previous CJEU decisions on the Belgian DRD regime, reinforcing that indirect taxation of dividends breaches the PSD's objectives. The new Belgian federal government plans to reform the DRD regime into a participation exemption, with changes expected in the minimum acquisition value and conditions for participation.

Read a March 2025 report prepared by ÀÖÓ㣨Leyu£©ÌåÓý¹ÙÍø’s EU Tax Centre