The Wellcome Trust secured a full refund award for six years of French dividend withholding tax (WHT), covering dividends paid from 2006 to 2011. France withheld 25% from the Trust’s French dividends in 2006–2009 under the statutory rate then in force. The UK charitable trust sought repayment from the French tax authority, the Direction générale des Finances publiques (DGFiP), under European Union (EU) free movement of capital rules. It won by showing that it qualified for the same tax treatment as comparable French charities.
Why did the Trust seek more than the treaty refund?
For the 2006–2009 dividends, the Trust put forward two grounds for repayment. Its principal claim sought a full refund because France exempted comparable domestic non-profit bodies. Its fallback relied on the 15% ceiling in the France–UK tax treaty then in force. From a starting rate of 25%, the treaty argument addressed ten percentage points of the gross dividend. The equal-treatment claim addressed all 25.
This foundation WHT case study shows why a treaty-rate deduction deserves a second look. A dividend taxed at the treaty rate can still warrant examination if the source country exempted a comparable domestic recipient. The foundation must identify which exemption applied in the dividend year and show that it met the relevant conditions.
The difference is easiest to see on the face of a voucher. For every €100 of gross dividends subject to the historic 25% rate, €25 went to the French tax authorities. A reduction to the treaty ceiling would return €10, leaving €15 of French tax. A full exemption would reach that remaining €15 as well. These figures illustrate the rates in dispute. The judgments give no corresponding total for the Trust’s portfolio.
Why did the French courts uphold a full refund?
On 22 May 2015, the Conseil d’État dismissed the French budget minister’s appeals concerning the 2006–2009 dividends. For 2006 and 2007, the Versailles court had awarded the balance of the WHT after the first-instance court granted only partial relief. For 2008 and 2009, the first-instance court had already awarded a full refund.
The 2010 and 2011 dividends raised a further question because French law distinguished between two classes of domestic recipient. An ordinary qualifying non-profit faced a 15% charge, whereas a qualifying French public-benefit foundation could receive the dividends exempt. On 19 May 2016, the Versailles Administrative Court of Appeal upheld a full refund after finding that the Wellcome Trust met the second, more demanding comparison.
The Trust’s legal form made the comparison especially important. English law governed Wellcome as a charitable trust, while French law gave the exemption to certain foundations. The Versailles judges therefore asked whether the two systems imposed equivalent safeguards. A difference in the institutions responsible for oversight mattered only if it produced a material difference in those safeguards.
The minister challenged the Trust’s eligibility on several grounds, including its lack of separate legal personality and its payment of governors. The court identified the issues it needed to resolve and called for further evidence. That gave Wellcome a concrete task. It had to show who could redirect its assets, who scrutinised its accounts and who could intervene if its governors breached their duties.
One detail in the French judgment is easy to overlook. The court ordered the state to pay the Trust €10,000 under the rules governing litigation costs. That figure relates to the proceedings and should be recorded separately from the dividend tax award. For trustees reporting a recovery to the board, the distinction matters because legal costs and refunded WHT answer different questions about the financial outcome.
Which documents made the difference?
For the 2010–2011 claims, the Versailles court asked what would happen to the Trust’s assets if it wound up. The Trust’s rules prevented its governors from proposing an amendment to dissolve it. The court also examined UK rules directing assets on dissolution to an organisation with the same or a similar purpose. Those provisions helped establish that the Trust had committed its assets to public benefit on terms comparable to a French foundation.
The court also examined financial reporting and regulatory oversight. It considered requirements for audited accounts and public annual reports, alongside the Charity Commission’s powers to investigate and intervene. Even the governors’ remuneration came under scrutiny. The judges weighed their responsibilities and the approvals for their pay when assessing whether they managed the Trust for private gain.
The investment evidence also mattered. Wellcome owned all the shares in Wellcome Ltd and drew a substantial part of its income from the company’s dividends. The court considered how the Trust used that income and whether it intervened in the company’s management. It accepted that holding the shares was consistent with the Trust’s public-benefit mission. For a foundation that finances grants from an endowment, this is a more useful comparison than the simple size of its portfolio.
The governors’ pay illustrates how specific the evidence became. The Charity Commission and the High Court in England and Wales had authorised the remuneration arrangements, and the governors bore personal responsibility for the financial consequences of their decisions. The French judges considered both features when assessing whether the payments were proportionate. Board minutes recording the authority for a payment, its purpose and the responsibilities attached to it can matter years after the governors concerned have left office.
For another foundation, the practical starting point is the trust deed or statutes in force during each dividend year. Audited accounts and regulatory records can then show how the foundation operated under those rules. A separate set of records must connect that evidence to the claim amount. Dividend vouchers and custodian statements allow the foundation to reconcile the gross dividend, tax deducted and any relief already received.
Who beneficially owned the dividend?
The Wellcome judgments turned on comparability with French non-profit bodies. A foundation making a treaty claim faces a separate question wherever the treaty requires beneficial ownership. It must establish who had the right to use and enjoy the dividend and whether that recipient had an obligation to pass it on.
A nominee’s name on a tax voucher may identify the custodian while leaving the underlying recipient unclear. The custody agreement, account designation and dividend credit can connect the nominee to the claimant. If a foundation instead owns units in a pooled fund, the fund documents may identify a different recipient of the underlying share dividends. That distinction determines whose entitlement the adviser needs to examine.
How should trustees reconcile a historic refund claim?
Start with the dividend rather than the portfolio’s annual tax total. For each distribution, identify the issuer, security, dividend date and account, then match the gross amount and deduction to the custodian’s records. Keep the currency of the original payment visible. Otherwise, a difference between the custodian’s exchange rate and the foundation’s reporting rate can look like a shortfall in the refund.
Next, trace any later adjustment to the same distribution. A custodian may report the initial deduction on one statement and credit treaty relief on another. In that situation, the original voucher establishes the starting amount, while the later credit reduces the balance still in dispute. A change of custodian makes the historic account number particularly valuable because it gives the former custodian a way to locate the payment.
The Wellcome proceedings also show why dividend dates, claim dates and judgment dates belong in separate fields. A judgment delivered years after a dividend says little about how long another foundation has to lodge a fresh claim. Record the deadline applicable to each payment, the date of any submission and the authority’s acknowledgement. If someone already pursued treaty relief, retain the original request so an adviser can establish which dividends and legal grounds it covered.
When the tax authority approves a claim, compare its decision with the schedule submitted. The decision may cover several dividends, while the cash reaches the foundation through a single custodian credit. Retaining that allocation allows trustees to close the correct years and explain any balance still outstanding. It also gives the investment committee a record of which deductions the foundation challenged.
What changes for foundations under the EU’s FASTER Directive?
The EU’s FASTER Directive introduces a digital tax residence certificate and faster relief procedures within its scope. Member States must transpose the Directive by 31 December 2028 and apply the provisions from 1 January 2030. A residence certificate addresses where a claimant resides. A foundation seeking a public-benefit exemption will still need evidence of the legal and operational conditions for that exemption.
For trustees, the distinction between residence and charitable status has a practical consequence. A digital certificate can identify the residence of the entity named on it, but the custodian may hold the shares under a nominee account. Neither record explains what the foundation’s governing instrument allows on dissolution. Keeping those records together makes it easier to answer separate questions about residence, receipt of the dividend and entitlement to a domestic exemption.
How does a specialist assess a foundation’s WHT claim?
Global Tax Recovery (GTR) is a UK-based specialist in dividend WHT recovery. We identify the claimant, assess treaty and statutory entitlements, and reconcile dividend records against custodian deductions and earlier refunds. We prepare evidence, liaise with custodians and tax authorities, and file and track eligible claims. Under our no-win, no-fee model, a fee becomes payable only when the client receives a refund, subject to the engagement terms.
What should foundation trustees take from the Wellcome rulings?
The Wellcome Trust secured a full refund award because it proved its entitlement under the French rules that applied in each period. For the earlier dividends, the treaty ceiling of 15% would have left part of the original 25% deduction in place. The claim based on equal treatment reached that balance.
The decisive evidence for 2010 and 2011 concerned what the Trust’s governors could do with its assets. The court examined restrictions on dissolution, audited reporting and the regulator’s enforcement powers. Trustees assessing comparable claims should preserve the versions of those records that applied when the foundation received the dividends.
A foundation can quantify a claim only after it identifies the recipient, establishes the applicable rate and credits any relief already obtained. Matching that calculation to each custodian voucher gives trustees a figure they can substantiate. Where the evidence establishes a repayment right, trustees can pursue the excess dividend WHT as a recoverable asset.
What questions do foundations ask about dividend WHT recovery?
Which dividends did the Wellcome Trust’s refund awards cover?
The French courts upheld full refunds of WHT on the Wellcome Trust’s French dividends for 2006–2011. The Conseil d’État ruled on the 2006–2009 payments in 2015, and the Versailles Administrative Court of Appeal upheld the refund for 2010–2011 in 2016.
Can a foundation reclaim WHT after receiving the treaty rate?
A foundation may have a further claim if the source country exempted a comparable domestic body in the relevant year. The Wellcome Trust sought a full exemption for 2006–2009 and relied on the 15% treaty ceiling as a fallback.
Does charitable registration establish entitlement to a full refund?
Charitable registration helps establish a foundation’s status in its home country. In the Wellcome Trust proceedings for 2010–2011, the French court also examined restrictions on assets, financial transparency and regulatory supervision before it upheld a full refund.
Does a court award establish when the foundation received its money?
A refund judgment establishes the legal outcome. A foundation can verify settlement by matching the tax authority’s remittance or the custodian’s cash credit to the relevant claim.
How does a specialist help foundations recover dividend WHT?
Our foundation recovery service covers eligibility, payment-level reconciliation, supporting documents, filing and follow-up with custodians and tax authorities. Under the no-win, no-fee model, the foundation pays a fee only when it receives a refund, subject to the engagement terms.
