Dividend payments to minority shareholders

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On 20 December 2011, the European Court of Justice (in C-284/09 EU Commission v Germany) ruled that the German system for taxing dividends paid to minority shareholders that are subject to limited tax liability in Germany and have their seat in another EU/EEA member state constitutes a violation of European law.

The reason for the ruling was that corporations with their statutory seat in Germany were not required to hold at least 10 per cent of the statutory capital of the distributing corporation to benefit from the participation exemption. As a result, the German legislator amended the participation exemption to comply with the requirements of European law with effect from 1 March 2013…

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