CFE Statement on the exemption of inbound dividends from non-corporate taxes under the Parent-Subsidiary Directive
Opinion Statement ECJ 4/2025 regarding the decision of the CJEU in Banca Mediolanum (joined cases C-92/24 – C-94/240
CFE Tax Advisers Europe welcomes the clarity provided by the judgment and notes that it strengthens the PSD’s function as a minimum harmonisation instrument to prevent economic double taxation of cross-border dividends. The Statement highlights that the ruling has significant practical implications for Member States whose tax systems include non-corporate taxes that directly incorporate dividends into their bases. Member States operating under the exemption system must ensure that no more than 5% of qualifying dividends is subject to any corporate or non-corporate taxation, an interpretation with broad relevance for EU corporate tax frameworks.
The ruling may influence the design of multi-layered tax systems. One question that arises is whether Member States may “spread” the 5% taxable portion across several taxes, or whether the corporate-tax charge exhausts the permissible PSD margin. The Italian legislature’s response, extending the 95% exemption to IRAP, illustrates one approach to ensuring compliance.
The Court additionally addressed arguments concerning potential reverse discrimination, noting that such issues fall outside EU law where they arise from purely domestic situations. Wider questions about the treatment of reverse discrimination remain a matter for national constitutional frameworks, as recently discussed in ECtHR case law concerning the Merger Directive.
