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Unilever Concerned By Possible Dutch Exit Tax

by Ulrika Lomas,, Brussels

18 August 2020

Unilever may scrap plans to overhaul its company structure if an exit tax proposed by a Dutch opposition party is passed.

Unilever has been owned through two separately listed companies, a Dutch NV and a UK PLC, since its formation in 1930. In June 2020, Unilever announced plans to unify its group legal structure under a single parent company. This was to be achieved through a cross-border merger, by means of which Unilever NV would be merged into Unilever PLC, based in the UK. Unilever PLC would continue to be incorporated in the UK and would remain UK tax resident.

Unilever disclosed in a prospectus issued on August 10, 2020, that potential changes to Dutch tax law could mean that the boards decide not to proceed with the unification proposal. The prospectus noted that a proposal for an exit tax has been introduced in the Dutch parliament by opposition party GroenLinks.

Unilever said that the measure would impose "an exit tax on certain types of transactions where, effectively, a company which is tax resident in the Netherlands and with consolidated net revenues of at least EUR750m moves to a 'qualifying state.'" This, Unilever estimates, would result in a tax bill of some EUR11bn.

Unilever noted that the passage of the bill is at present uncertain. The boards will proceed with their proposals, provided that unification remains in their best interests, the prospectus states.

Previously Unilever had considered instead unifying its structure in the Netherlands. The Netherlands had proposed abolishing tax on dividends and introducing a withholding tax on dividends paid to low-tax jurisdictions. However, in October 2018, after Unilever's board voted against the proposal, the Government dropped those plans and instead decided to target a greater reduction to its corporate tax rate.

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

TAGS: tax | Netherlands | interest | law | United Kingdom | legislation | transfer pricing | withholding tax | dividends | exit tax | BEPS

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