Wednesday, May 7, 2008

EU takes action against Bulgaria, Spain, Portugal and Romania over tax dividends

BRUSSELS (Thomson Financial) - The European Commission said it has taken action against the Bulgarian, Romanian, Spanish and Portuguese and governments over the taxation of dividends. For Bulgaria and Romania, the action comes in the form of a 'letter of formal notice' -- the first stage in infringement proceedings.

For Spain and Portugal, the action comes in the form of a 'reasoned opinion' -- the second stage. The case against Spain and Portugal refers to rules under which dividends paid to foreign pension funds are taxed more heavily than dividends paid to domestic pension funds. For Bulgaria, the matter is rules under which inbound dividends paid to companies may be taxed more heavily than domestic dividends and rules under which outbound dividends paid to companies may be taxed more heavily than domestic dividends.

The case against Romania refers to rules under which outbound dividends paid to companies may be taxed more heavily than domestic dividends. The four member states are asked to reply within two months. The commission has also closed its case against Luxembourg on the higher taxation of outbound dividends paid to companies. Outbound dividends are dividends paid by domestic companies to shareholders resident in other States. Domestic dividends are dividends paid by domestic companies to domestic shareholders. Inbound dividends are dividends paid by companies resident in other states to domestic shareholders.

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