With the judgement in case C-601/23 of 19th December 2024, the Court of Justice of the European Union (CJEU) declared the incompatibility with the free movement of capital, pursuant to art. 63 of the Treaty on the Functioning of the European Union (hereinafter, “TFEU”), of the Spanish legislation that provides for the subjection to withholding tax of dividends paid to non-resident foreign companies that are in a situation of tax loss.
The judgement is of relevance for all EU and non-EU companies subject to withholding taxes on dividends (but the same principle is applicable, mutatis mutandis , also for interests and royalties) that find themselves in a situation of tax loss in their country of residence and confirms the conclusions already expressed by the EU judges in case C-575/17 of 22nd November 2018 in Sofina with which the similar previous French legislation was sanctioned and in cases C-115, 118, 119, 299/16 (the so-called “Danish Cases”) on withholding taxes on interests.
