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Dutch 2018 Tax Plan Presented To Parliament

by Ulrika Lomas,, Brussels

26 September 2017

Proposals designed to align the dividend tax treatment of holding cooperatives with that of private companies (BVs) and public companies (NVs) have been included in the Dutch Government's Tax Plan 2018, recently presented to the lower house of parliament alongside the 2018 Budget.

Under existing rules, holding cooperatives are generally not subject to dividend tax in the Netherlands, unlike BVs and NVs. The Government intends to remove this difference but at the same time exempt distributions from dividend tax in cases where shareholders in a holding cooperative, BV, or NV, reside in the European Union/European Economic Area, or a jurisdiction with a tax treaty with the Netherlands, subject to a minimum five percent holding threshold.

The expansion of the dividend exemption is expected to further enhance the Netherlands' standing as a favorable holding company jurisdiction.

Under anti-abuse provisions, the exemption will not apply in situations where an interest is held in the distributing company with the sole aim of avoiding dividend tax (the subjective test), or if the arrangement is deemed to be artificial from a business perspective and lacks economic merit (the objective test). These anti-abuse rules shadow those included in the OECD's BEPS Action 6 recommendations and the EU Parent Subsidiary Directive.

The draft legislation also expands the existing substance test in Dutch law by adding the requirement that the non-resident shareholders acting as intermediate holding companies have payroll costs of at least EUR100,000 (USD119,000) relating to the holding activities; and that they own or rent premises in the jurisdiction of establishment for a period of at least 24 months.

The measures are based on proposals published in consultation form in May 2017, and are intended to be introduced on January 1, 2018.

In addition, the Tax Plan includes a proposal to reduce the rate of tax on corporate income up to EUR250,000 per year to 20 percent.

The Tax Plan also includes provisions allowing the voluntary filing of a country-by-country (CbC) report by the ultimate parent entity located in a country that has not implemented CbC reporting for financial years starting on or after January 1, 2016.

TAGS: tax | business | holding company | Netherlands | interest | law | payroll | legislation | Europe | Tax | BEPS

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