Enbridge case: lack of “substance” of Danish holding company leads to denial of 0% dividend withholding tax under the EU Parent-Subsidiary Directive

The Directive, as transposed by Spain, provides for a 0% withholding tax on dividends paid between entities resident in EU/EEA Member States under certain conditions, but includes an anti-avoidance provision that excludes the withholding tax exemption on distributions made to direct EU shareholders when the majority of the voting rights of the EU parent company are directly or indirectly owned by individuals or legal persons that are not EU residents, unless the incorporation and operations of the EU parent company have a business purpose and substance.