German, Spanish, US and Belgian investment funds have won a judgement over French withholding taxes from the European Court of Justice, which has been hailed as good news for institutional investors and savers.

The ECJ confirmed that French rules that impose a withholding tax on dividend payments made to non-resident funds (UCITs), but which exempt from tax the same payments made to comparable domestic funds, breach EU law.

The ruling is an example of how the European fund management industry is attempting – not always successfully – to remove some of the local, national regulatory hurdles before a genuine single market in investment.

The ruling is a positive step, Kit Dickson, UK financial services tax partner at Deloitte, said in a statement.

“The decision is good news for institutional investors and savers, not just in the EU but also elsewhere. It is bad news for France, against which claims of over €4 billion ($5.2 billion) have already been made, and potentially other EU member states that have similar tax rules. Following the ECJ ruling, the cases will return to the French courts for the decision to be implemented,” Dickson said.

”The ECJ did not block future claims (temporal limitation), which had been requested by the French tax authority. Funds with investments in EU securities will be considering their position and whether to take action to recover excess taxes that have been charged on their income in recent years. France and other member states may be considering whether there is a need to change legislation,” Dickson added.

To view an article examining developments in French tax laws regarding collective investment schemes and other issues, click here.