The Case: NEO GROUP

The judgment was delivered on 15 October 2026 in a case between a Lithuanian subsidiary and the Lithuanian tax authority, involving dividends distributed via a Cypriot parent company to a Lithuanian group. The dispute centred on whether the exemption could be denied when the intermediate parent was itself economically active, not a mere conduit. For groups with holding layers across several EU jurisdictions, recent Dutch Supreme Court tax rulings show a similar direction: formal compliance at one level in the structure no longer closes the file.

How the Court Answered the Legal Questions

The Court confirmed that the EU anti-abuse rule is not limited to conduit companies. An economically active, genuine parent can still be caught if it participates in a non-genuine chain delivering a tax advantage to an ultimate controlling person.

This is an important clarification of scope, not a change to the rule itself. The anti-abuse provision has always covered non-genuine arrangements; what the Court settled is that conduit companies are only one illustration of that concept, not its boundary. The source Member State may deny the exemption regardless of where in the chain, or at which stage, the tax advantage ultimately arises, including steps occurring abroad between non-residents.

The Court also ruled that matching or identical dividend amounts transferred across steps in a chain, and transfers spread out over an extended period, are relevant indicia of abuse. These factors do not create an automatic presumption, but they will feature prominently in future audits. A deferred purchase price, a debt assignment, or a shareholder loan repaid with freshly received dividends are exactly the kind of back-to-back liquidity trails tax inspectors will now look for.

Finally, tax authorities may assess the distributing subsidiary for withholding tax without proving that subsidiary itself knew of the abusive chain, as long as one participating group company or the ultimate controlling individual had such knowledge. This is a meaningful shift in application, not in substance: the subjective intent requirement still exists, but it can be satisfied anywhere in the group, not only at the level of the entity paying the dividend.

Consequences for Your Holding Structure

Frequently asked questions

What is a non-genuine arrangement under the Parent-Subsidiary Directive?
Under the Directive's general anti-abuse rule, an arrangement or series of arrangements is treated as non-genuine to the extent it was not put in place for valid commercial reasons that reflect economic reality.

Can a genuine operating parent company still lose its dividend withholding tax exemption?
Yes. The Court of Justice confirmed that even an economically active parent that is not a conduit can be denied the exemption if it participates in a non-genuine chain of transactions delivering a tax advantage to an ultimate controlling person.

How does the CJEU define beneficial owner of dividends in an EU holding structure?
The ruling does not redefine beneficial owner as a formal status. Instead, it shifts the analysis to the full chain of transactions, meaning treaty beneficial-owner status at the immediate parent level no longer guarantees protection if an ultimate beneficiary benefits from a non-genuine structure.

Does it matter where in the chain of transactions the tax advantage arises?
No. The source Member State can deny the exemption regardless of the stage or location at which the tax advantage ultimately materialises, including steps carried out abroad between non-residents.

Must a subsidiary know about abuse committed elsewhere in the group?
No. It is sufficient that one participating group company or the ultimate controlling individual had the intention to obtain the tax advantage; the distributing subsidiary itself does not need to have been aware of the abusive chain.