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Netherlands Consults On Dividend Tax Changes

by Ulrika Lomas, Tax-News.com, Brussels

31 May 2017


The Dutch Finance Ministry has opened an internet consultation on proposed changes to the Dutch dividend tax regime, which would expand the withholding tax exemption on distributions to shareholders in tax treaty countries.

The draft legislation is designed to align the dividend tax treatment of holding cooperatives, which are frequently used in international holding company structures, with that of private companies (BVs) and public companies (NVs).

Under existing rules, holding cooperatives are generally not subject to dividend tax in the Netherlands, unlike BVs and NVs. The Government intends to abolish 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.

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 (USD112,000) 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.

Formal legislation is expected to be introduced in the Dutch parliament later this year, and the changes are intended to be introduced on January 1, 2018.

The consultation was released online on May 16, and the Government is accepting comments on the proposals until June 13, 2017.

TAGS: Finance | tax | business | holding company | double tax agreement (DTA) | Netherlands | interest | law | payroll | internet | legislation | transfer pricing | withholding tax | Europe | BEPS

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