Netherlands And Netherlands Antilles Reportedly Reach Final Agreement On New Fiscal Framework

Tax-News.com, London

12 February 2001

Tax-news.com is grateful to Mr Guido H Jansen of PricewaterhouseCoopers in Curacao for providing information for this story: guido.h.jansen@an.pwcglobal.com

PricewaterhouseCoopers in Curacao reported in December on their understanding of the current state of affairs as regards the Tax Arrangement for the Kingdom ("TAK"), the New Fiscal Framework ("NFF") and the Netherlands Antilles offshore regime.

PwC state that information has been received from the Curaçao International Financial Services Association ("CIFA") of the Netherlands Antilles that representatives of the Netherlands Antilles Ministry of Finance and the Netherlands Ministry of Finance have reached agreement in respect of the amendment of the TAK and the NFF.

PwC warn that the information given is based on the interpretations of representatives closely co-operating with the Netherlands Antilles Ministry of Finance and is not based on documents they have themselves analysed.

The following are the main terms of the agreement:

• The NFF will become effective as from January 1, 2001;
  
• For the time being, the proposed Netherlands Antilles dividend withholding tax of 10%, will not enter into force;
  
• The dividend article in the current TAK will be amended in such a way that dividend from a Dutch corporation to Netherlands Antilles corporate shareholders, owning at least 25% of the shares in the Dutch corporation will be exempted from dividend withholding tax, provided that the dividend is subject to Netherlands Antilles sur-tax at a rate of at least 8.3%;
  
• The Dutch corporation will nevertheless have to withhold 8.3% dividend withholding tax from the gross dividend. Via a special procedure this amount will be paid to the Netherlands Antilles tax authorities. The 8.3% which has been withheld upon the dividend distribution in the Netherlands can be credited against the sur-tax in the Netherlands Antilles.
  
• Dividends and capital gains derived from shareholdings in Netherlands corporation will be fully exempted from profit tax in the Netherlands Antilles provided that the shareholding amounts to at least 25% and that the dividend is subject to Netherlands Antilles sur-tax of at least 8.3% on the gross amount of dividends received.
  
• The new dividend article in the TAK will also apply to Netherlands Antilles offshore companies. As from January 1, 2001 dividends paid by Dutch corporations to Netherlands Antilles corporations will be subject to 15% Dutch dividend withholding tax. Netherlands Antilles offshore corporations may elect for the new dividend article;
  
• The possibility exists that grand fathering rules will be introduced for offshore companies, as a result of which offshore companies will be able to use the current article 11 of the TAK during 2001.
  
• The activities of the Exempted Company will be restricted to investments in debt instruments, securities and deposits;
  
• For Netherlands Antilles corporations incorporated before June 30, 1999, subject to profit tax and having a book year which ends within twelve months after the date of publication of the national Netherlands Antilles decree in the gazette (in all likelihood January 2001), the grand fathering rules with respect to the offshore regime will remain applicable.
  
• For Netherlands Antilles corporations incorporated after June 30, 1999, subject to profit tax and having a book year which ends within twelve months after the date of publication of the national Netherlands Antilles decree in the gazette (in all likelihood January 2001), the grand fathering rules with respect to the offshore regime will remain applicable under the condition that these corporations engage in substantial business prior to the end of such book year.
  
• The grand fathering period continues until the year 2020. However, taking into account the level one commitment of the Netherlands Antilles Minister of Finance to the OECD with respect to the abolition of harmful tax regimes in the Netherlands Antilles, the grand fathering period may be shortened.

PwC add a normal disclaimer to the effect that this information is for purposes of general information only, and that for more detailed assistance you should contact one of their tax lawyers/consultants in Curaçao at (telephone) 5999 43 00000 or (facsimile) 5999 46 11119.

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