German Federal Tax Court reverses its case law denying refund of dividend withholding tax to interposed Netherlands holding companies

The German Federal Tax Court (Bundesfinanzhof) recently published a decision on the scope of the anti-abuse provision contained in Sec. 50d(1a) (now, Sec. 50d(3)) of the Income Tax Law (Einkommensteuergesetz, or EStG; case I R 74, 88/04, decision of 31 May 2005). Details of the decision are summarized below.

(a) Facts. The plaintiffs, two Netherlands-resident limited liability companies (BVs), were owned by a holding company resident on the Netherlands Antilles (NV), which was owned by a…