So far, the field of cross-border taxation of dividends paid to individual investors in the EU Member States has not been subject to harmonisation. The differences in the Member States’ tax systems give rise to obstacles to the internal market. As a consequence, individual investors may be discouraged from investing in shares of foreign corporations. Hence, the benefits of international risk diversification are not fully exploited. The discussion of possible solutions to these issues has recently received a new impetus as the European Commission has held a consultation on the issues of cross-border dividend taxation in spring 2011. In this article we discuss the alternative solutions pointed out by the European Commission and present an original proposal. We show that dividends paid to individual investors should not be taxed at source by drawing on a set of normative criteria comprising conformity with European Law, efficiency, simplicity, and equity considerations. We furthermore argue that the abolition of withholding taxes should be accompanied by introducing automatic exchange of information. The analysis of alternative reform options is preceded by a brief, yet comprehensive summary of the taxation of dividends in the EU Member States highlighting the shortcomings of the current dividend taxation


Evers, Lisa
Spengel, Christoph


European Union Member States; Harmonisation; Dividend Taxation; Individual Investor; Withholding tax; Dividend Income; Interest Income; Savings Directive; Discrimination