Dutch legislative amendments per 1 January 2018 aim to strengthen tax climate whilst tackling tax avoidance
The past few months have provided a clear view on what we can expect from the Netherlands in terms of its approach on tax. The old government announced formal legislative proposals on Dutch Budget Day that have effect from 1 January 2018. A few weeks later, nearly seven months after the elections in March 2017, a newly formed government released its coalition agreement which contained some interesting fiscal measures. These tax measures are aimed to take effect from 1 January 2019, subject to the parliamentary process. In this blog we will start with discussing the impact of the legislative amendments effective on 1 January 2018, which have been adopted by the upper house of the Dutch parliament on 19 December 2017.
30 Nov. '17 Patrick T.F. Schrievers
The legislative amendments are generally in line with earlier announcements, and are likely to benefit international structures involving Dutch entities, but may also adversely impact structures in which a Dutch holding cooperative is involved.
The new law (i) introduces a dividend withholding tax (“WHT”) obligation for holding cooperatives; and (ii) broadens the general exemption from the WHT obligation. A holding cooperative is a cooperative whose activities for at least 70% consist of holding participations or financing (directly or indirectly) related entities or natural persons. Under the current legislation, such cooperatives, which are also used in international tax structures, are not subject to dividend WHT, except for certain “abusive” situation. Legislation is now proposed to align the dividend WHT treatment of cooperatives to entities with a capital divided into shares. Currently, for these companies a general exemption applies in domestic situations and to payments from EU/EEA countries. Hence dividend distributions by for instance BV’s and NV’s are in principle subject to 15% dividend WHT.
The legislation aims to eliminate the above-mentioned difference between holding cooperatives and public and limited liability companies by imposing the withholding obligation on such cooperatives and to broaden the general exemption from the withholding obligation for public (NV’s) and limited (BV’s) liability companies. With its law to fully eliminate dividend WHT at a domestic level, as a result of which in principle group companies do not have to rely on tax treaties, the Netherlands follows neighboring jurisdictions as Belgium, Denmark and the UK. However, to avoid artificial structures where the Netherlands is used as a “flow-through” jurisdiction, anti-avoidance measures have been put in place and in particular sufficient substance is required to ensure that the dividend exemption is only applicable in active/genuine situations.