Indian Ministry of Finance issues Circular on MFN clauses in Indian DTAAs

This blog is an update to our previous blogs titled “Reduction of Dividend WHT (to 5%) under India-Netherlands DTAA as India abolishes DDT (from 1 April 2020)” and “Delhi High Court confirms 5% dividend WHT rate under India-Netherlands DTAA”. These blogs affirm that the effective WHT rate on dividends distributed by Indian subsidiaries to their parent companies in the Netherlands could be reduced from 15% (as stipulated in the India-Netherlands DTAA) to 5% (by operation of the MFN-clause in the DTAA) based on a Decree of the Dutch Ministry of Finance and a recent Delhi High Court ruling . On 3 February 2022, the Indian Central Board of Direct Taxes (“CBDT”) issued a Circular stating their interpretation on the MFN clauses in India’s DTAAs with European/OECD member countries, including the Netherlands. The Circular states that the effective WHT rate on dividends under the India-Netherlands DTAA should be 10% (and not 5% as stated in the Dutch Decree and the Delhi High Court ruling). In this blog, we summarize the main contentions of the CBDT with regard to the effective rate of dividend WHT under the India-Netherlands DTAA and also touch upon some considerations for Dutch companies receiving dividends from their Indian subsidiaries.

Transfer Pricing for Intra-Group Financial Transactions: Salient features, prominent court cases and the Dutch transfer pricing perspective

The “Transfer Pricing for Intra-Group Financial Transactions” booklet by NovioTax offers comprehensive insights into the OECD’s 2020 guidelines on the arm’s length treatment of intercompany financial arrangements. It provides detailed coverage of intra-group loans, financial guarantees, treasury functions, and cash pooling arrangements, highlighting the economic rationality required in these transactions. The booklet also explores key […]

Kuwait – South African Protocol affects the lower WHT on Dividends between South Africa and the Netherlands

The following questions have been raised after the recent signing of the KU – SA Protocol, due to the interplay of the Protocol with the Most Favoured Nation (“MFN”) clause in the NL – SA DTAA: What are the effects of the KU – SA Protocol on dividend distributions made between Netherlands subsidiaries and South Africa parent companies? And what does this mean for companies qualifying for a dividend WHT exemption under the NL – SA DTAA? Are South African subsidiaries of Netherlands parent companies (still) entitled to a full elimination of dividend WHT under the NL – SA DTAA? What are the current and future anti-avoidance considerations for claiming 0% WHT on dividends? Can South African or Netherlands companies claim a refund of any dividend WHT paid to Netherlands/South African parent companies and/or what is the statutory time limit? This blog will outline the recent developments surrounding the dividend WHT exemption and address these key questions in relation thereto.

Delhi High Court confirms 5% dividend WHT rate under India-Netherlands DTAA

This article is an update to our previous article, titled: “Reduction of Dividend WHT (to 5%) under India-Netherlands DTAA as India abolishes DDT (from 1 April 2020)”. With the abolition of the Indian Dividend Distribution Tax (“DDT”) and a return to the “shareholder based taxation system” for dividends paid by Indian companies with effect of 1 April 2020, the withholding tax (“WHT”) rates prescribed in respect of dividends in the Indian Double Taxation Avoidance Agreements (“DTAAs”) have become a popular topic for discussion.

Russia – Netherlands DTAA terminated by January 1 2022, will it be replaced?

Further to our blog on January 19, 2021, the Russian government approved a proposal for the termination of the Netherlands – Russia DTAA (1996) on 9 April 2021. On 26 May 2021, the President of Russia signed Law No. 139-FZ, ratifying the denunciation of the Netherlands – Russia Income and Capital Tax Treaty (1996). The termination may take effect on 1 January 2022 (however, negotiations may influence this). It is expected that negotiations will continue, however, unclear whether there will be a new amended treaty will be put in place by 1 January 2022.

DAC6 and the use of safe harbours in non-EU jurisdictions

MNEs making use of safe harbour taxation rules, in the E.U. as well as in third-countries, may oblige the E.U.-based taxpayers within the MNEs to report these safe harbour arrangements to tax authorities in the E.U. under the E.U. Directive on Mandatory Disclosure Rules (“DAC6”). In this blog, we take a look at the safe harbour provisions of non-E.U. jurisdictions (specifically, India and Brazil) and when making use of these safe harbour provisions may give rise to a reporting obligation under Hallmark E.1 of DAC6. The blog also sheds some light on transfer pricing methods for pricing low value-adding intragroup services (“LVAS”) as defined in Chapter VII of the OECD TP Guidelines.

Participation exemption regimes could cost WHT reliefs under EU Parent-Subsidiary Directive and DTAAs

Following some recent Italian Supreme Court rulings, uncertainty remains as to the position of the Italian Revenue Authority on the Withholding Tax Exemption under the EU Parent-Subsidiary Directive and the bilateral tax treaties concluded between Italy and other EU Member States. This blog considers (i) these developments, (ii) the influence of EU case laws on this matter, (iii) the cross-border relief measures and (iv) the impact on holding companies that may (potentially) be exposed to (significant) dividend withholding tax leakage.

Cash pooling during and in the aftermath of the Covid-19 pandemic

As businesses across the world struggle to deal with the economic impact of the Covid-19 pandemic, liquidity and freeing up much needed cash resources has become the main concern for many businesses.

Cash pooling arrangements: a reflection on selected court cases

Cash pooling is a cash-management tool used by Multinational Enterprises (MNEs) to efficiently manage the short-term liquidity requirements of the various entities involved in the enterprise. This intra-group financing tool reduces the reliance of MNEs on third-party financing, thereby reducing banking costs and reducing financing needs by offsetting debit account with credit account. Centralizing the control and management of the shared cash pool to a single entity within the multinational group additionally allows all the cash pool participants to benefit from an optimization of the shared resources, better risk management and a better position towards third-party banks or financers.

Dutch (Corporate Income) Tax Plan 2021

On 15 September 2020 (Prinsjesdag), the Dutch government published the Tax Plan for 2021. Aside from proposals to amend the tax regime for 2021, investigations and consultations regarding further changes have been announced. The legislative proposals will be reviewed, first, by the Lower House of Parliament and then, by the Senate. If the proposals are accepted by both Houses of Parliament, the proposals will enter into effect on 1 January 2021.