EU Tax Developments: ATAD Transposition, Interest Deductibility, Pension Fund WHT and Public CbCR

Four distinct EU tax enforcement and legislative developments landed in close succession, each carrying immediate implications for multinationals, their advisers, and the accounting firms supporting them. Luxembourg faces a CJEU infringement action over ATAD interest limitation rules. The Netherlands has fresh Advocate General guidance on its own interest deductibility regime. Sweden's withholding tax treatment of foreign public pension funds is headed for a CJEU ruling. And Poland has advanced a public country-by-country (CbCR) reporting bill that will raise disclosure obligations across the region. Here is what each development means in practice.

Luxembourg: CJEU Infringement Action Over ATAD Interest Limitation

The Commission's Case Against Luxembourg

On 20 February 2024, the European Commission filed an action before the CJEU against Luxembourg in Case C-138/24. The complaint centres on the way Luxembourg transposed the interest deduction limitation rules in Article 4 of the Anti-Tax Avoidance Directive (ATAD).

ATAD Article 4(7) permits Member States to exclude specific financial undertakings, as defined in Article 2(5) of the Directive, from the scope of the interest limitation rules. Luxembourg went further: its domestic legislation created a carve-out for securitisation special purpose vehicles (SPVs). The problem is that securitisation SPVs do not qualify as financial undertakings under Article 2(5). The Commission argues this extends the exemption well beyond what the Directive allows.

This referral follows a reasoned opinion sent to Luxembourg in July 2023 that went unresolved. The Commission is asking the Court to declare that Luxembourg has failed to fulfil its ATAD obligations and to order it to bear the costs of the proceedings.

Practical Implications for Firms Advising Luxembourg Structures

Any client using a Luxembourg securitisation SPV to hold debt, and relying on the current domestic exemption to avoid ATAD interest limitation, should treat that position as at risk. A Court ruling against Luxembourg would require a legislative correction, and the timeline for that correction is uncertain. Advisers should model the impact of the interest limitation rules applying in full to affected structures now, rather than waiting for a judgment.

Netherlands: AG Opinion on Interest Deductibility and Abuse of Law

The Anti-Profit-Shifting Rule Under Scrutiny

On 14 March 2024, Advocate General Emiliou of the CJEU delivered his opinion in Case C-585/22, examining whether the Dutch interest deduction limitation rule targeting anti-profit-shifting arrangements is compatible with EU law.

The Dutch rule restricts interest deductions where the AG found it effectively creates a de facto discrimination against certain cross-border arrangements. Despite acknowledging that discriminatory effect, the AG recommended the CJEU find the rule permissible. His reasoning: the restriction pursues a legitimate objective (combating tax avoidance), is proportionate because it tests whether interest is taxed at a reasonable rate rather than eliminating deductibility outright, and is targeted only at wholly artificial arrangements without imposing excessive consequences.

The Arm's Length Question

A particularly significant element of the opinion concerns loans contracted at arm's length. The AG recommends the CJEU revisit its earlier case law on whether arm's-length loans can still be classified as purely artificial or fictitious arrangements. That revisitation could shift how the abuse-of-law doctrine applies to intragroup financing structures across the EU, not just in the Netherlands.

Tax directors managing Dutch holding or financing companies should review intragroup debt structures against the criteria the AG articulated, particularly where interest deductions are material. The Dutch Supreme Court's own upcoming decision in this area, referenced in the source, adds a domestic layer that advisers must track alongside the CJEU outcome.

Sweden: Dividend Withholding Tax on Foreign Public Pension Funds

The Finnish Pension Fund Claims

On 21 March 2024, AG Collins delivered his opinion in Case C-39/23, which arose from claims by three Finnish public sector pension institutions seeking refunds of Swedish dividend withholding tax. Under Swedish law, domestic public pension funds are treated as state agencies and receive a full tax exemption on dividend income. Non-Swedish pension funds face a 15 percent withholding tax on the same dividends.

The Finnish institutions argued they are in a comparable position to Swedish public pension funds and that differential treatment violates the EU free movement of capital rules. Swedish tax authorities and lower administrative courts had rejected earlier similar claims, but the Swedish Supreme Administrative Court referred the question to the CJEU in January 2023.

The AG's Framework for Comparability

AG Collins confirmed that the different treatment of resident and non-resident pension funds constitutes, in principle, a restriction of the free movement of capital where the non-resident fund is in an objectively comparable situation to the resident fund and the restriction cannot be justified by overriding public interest reasons.

On comparability, the AG rejected Sweden's argument that foreign public pension funds cannot be comparable because they do not support the Swedish social security system. He held that each fund by definition supports its own national system, and accepting Sweden's logic would make it impossible to compare even structurally identical funds operating in different jurisdictions. Instead, comparison must be made within the context of each fund's own social security system, taking into account its principal characteristics, purpose, functions, and core tasks. Technical differences of a minor nature are not decisive.

On justification, the AG dismissed administrative convenience as an overriding reason in public interest. He also rejected Sweden's balanced-allocation-of-taxing-powers argument, concluding that the need to preserve that balance does not justify taxing foreign pension fund dividends while exempting domestic equivalents.

What This Means for Non-Swedish Public Pension Investors

If the CJEU follows the AG's opinion, Sweden will need to either extend the dividend exemption to comparable foreign public pension funds or apply withholding tax to domestic funds. Institutions currently subject to the 15 percent withholding tax should assess whether they meet the comparability criteria the AG set out and consider whether protective refund claims are warranted before any applicable limitation periods expire. Advisers with clients in this category across all EU Member States should check whether equivalent withholding tax asymmetries exist in other jurisdictions, given that the comparability framework the AG articulated has broad application.

For firms managing EU cross-border tax positions, staying current with CJEU referrals like this one is increasingly a core part of compliance. The EU ViDA 2026 VAT digital reporting roadmap and the treatment of EU Pillar 2 qualified IIR status for Cyprus illustrate how rapidly the EU tax compliance landscape is shifting across multiple fronts simultaneously.

Poland: Public CbCR Bill Advances and Updated Non-Cooperative Jurisdiction List

Lower Chamber Approval

Poland's lower chamber of parliament has approved a draft public country-by-country reporting bill. Public CbCR requires in-scope multinationals to disclose tax and financial information broken down by jurisdiction, making that data publicly accessible rather than available only to tax authorities under the existing OECD CbCR framework.

Poland is implementing the EU's public CbCR Directive, which applies to multinational groups with annual consolidated revenue exceeding EUR 750 million. Once enacted, qualifying groups with operations in Poland will need to prepare and publish CbCR reports meeting Polish legislative requirements, in addition to any filing obligations in other Member States where they have a presence.

Updated National Non-Cooperative Jurisdiction List

Alongside the CbCR bill, Poland has also updated its national list of non-cooperative jurisdictions. Transactions with entities in listed jurisdictions typically attract enhanced documentation requirements, withholding tax consequences, or denial of certain deductions under Polish domestic rules. Firms advising Polish taxpayers with cross-border arrangements should verify whether any counterparty jurisdictions appear on the revised list and update transfer pricing and withholding tax analyses accordingly.

Qualified Majority Voting in EU Tax Matters: Commission Communication

On 20 March 2024, the European Commission adopted a Communication on pre-enlargement and policy reforms. One element directly relevant to EU tax practitioners: the Commission is inviting EU institutions to consider introducing qualified majority voting (QMV) for EU tax legislation, replacing the current unanimity requirement in the Council.

The Commission's reasoning is practical. In a larger Union, unanimity means any single Member State can block tax legislation. The Communication references the so-called passerelle clause as one mechanism through which QMV could be introduced without a full Treaty amendment. This is not a legislative proposal, but it signals direction. If QMV were adopted for tax matters, the pace at which EU-wide tax directives are agreed and implemented would accelerate substantially, compressing the time firms and their clients have to prepare for new obligations.

Compliance Priorities Across the Four Developments

Immediate Actions by Jurisdiction

Firms that rely on structured compliance workflows, including those using digital asset accounting software for clients with crypto-linked treasury positions or cross-border token flows, should ensure their EU tax monitoring processes capture CJEU referral outcomes promptly. An AG opinion, while not binding, is followed by the Court in the majority of cases and shifts the legal risk calculus immediately.

Source: KPMG EU Tax Centre, E-News Issue 193