Effective WHT rate on dividends reduced to 5% under India-Netherlands DTAA after India abolishes DDT
One of the key features of India’s Union Budget for 2020, presented by the Finance Minister on 1 February 2020, was the elimination of the intensely unpopular Dividend Distribution Tax (“DDT”) with effect 1 April 2020 and a return to the “shareholder based taxation system” for dividends. The maneuverer is part of the policy package intended to position India as an attractive investment destination for foreign investors.
Brazilian Court rules on interpretation of substantial economic activity of Dutch holding companies for application of thin-capitalization rules
On December 31, 2019, the Brazilian Administrative Council of Tax Appeals’ published its decision involving the substance of “economic activity” of a Dutch holding company, lending to its related entity in Brazil. The case involved the application of the Brazilian thin-capitalization rules. The Brazilian court ruled that the lender, a Netherlands holding company, had insufficient economic activities. Hence, the thin-capitalization rules applied and part of the interest was not-deductible in Brazil. Consequentially, it resulted in (a partial) double taxation for the Group.
Interrelating treaties lower the WHT on Dividends between South Africa and the Netherlands
Tax courts in the Netherlands and South Africa have confirmed that the effective withholding tax (“WHT”) rate on dividends under the Netherlands – South Africa Double Tax Avoidance Agreement (“NL – SA DTAA”) is 0%, should a company hold at least 10% of the shares in the company paying the dividend. This rate remains conditional upon two factors: the exemption from dividend WHT in the South Africa – Kuwait DTAA (“KU – SA DTAA”) remaining in force and the most favoured nation clause in the South Africa – Sweden DTAA (“SW – SA DTAA”) remaining unchanged. The decisions of the Tax Courts, which apply to dividends flowing between South Africa and the Netherlands, has interesting implications for multinational companies looking to invest in the Netherlands or in South Africa.
Google Ireland not taxable in France via its French subsidiary
On 25 April 2019 the Paris Administrative Court of Appeal confirmed the decision ruled on 12 July 2017 by the first-instance Court that Google Ireland Limited did not have a permanent establishment in France between 2005 and 2010 and was therefore not taxable in France. The key question before the first-instance Court in the original case was if Google Ireland Limited had a permanent establishment (PE) in France. The French tax administration (FTA) argued that the online advertisement services that Google Ireland Limited provided to customers in France through a French Google subsidiary (Google France SARL) constituted a PE in France, and was therefore taxable. The Paris Administrative Court of Appeal found that the establishment in France did not have the capability to carry out the advertising activities in France on its own behalf and declined the statement of the FTA.
CJEU cases on beneficial ownership and treaty abuse – case overview
On February 26, 2019, the Court of Justice of the European Union (CJEU) issued its landmark judgements in six cases which deal with the application of the EC Parent-Subsidiary Directive and the EC Interest and Royalty Directive. The majority (5 out of 6) of the cases involved Luxembourg or Cyprus holding and financing companies. Effectively the Luxembourg and Cyprus holding companies formed part of a pooled investment group collecting funds from generally non-EU investors.
The Dutch implementation of ATAD1
From January 1, 2019, the first EU Anti-Tax Avoidance Directive (2016/1164) (hereafter: ATAD1) is implemented by all EU Member States. A number of its provisions impact the field of (inter)national taxation. In the Netherlands we have seen the introduction of an earnings stripping measure and CFC legislation. In addition a number of provisions limiting the deduction of interest expenses have been abolished. This contribution intends to provide a summary. To serve its’ purpose we have also itemized a number of observations obtained in day-to-day to practice in relation to the earnings stripping provisions and its’ relation to the Dutch fiscal unity, ECJ legislation and transfer pricing.
Latest ruling in US highlights importance of managing tax compliance in digital economy
On 21 June 2018, the US Supreme Court issued its highly anticipated decision in South Dakota v. Wayfair. In the context of the current debate on the taxation of the digital economy and observing the March, 2018 EC proposals this decision may have a significant impact. The case was even called the “tax case of the millennium” and will basically change not only the US sales tax landscape but will also have far-reaching implications for non-US businesses supplying goods and services to the U.S.
BREXIT – what actions are required for companies doing business with and within the UK
More than a year has passed since the UK formally opted to leave the EU. We published our first blog on Brexit shortly after the UK formally triggered Article 50 of the EU treaty (withdraw from the Union). At that time, we discussed the likely scenario of a transitional period after the time-frame to conclude a final withdrawal agreement with the EU within two years. We also discussed the likely tax implications and potential steps that could be taken to mitigate or reduce the tax impact of a Brexit. In this blog, we will assess the latest status in the negotiations between the EU and the UK, and update our views and takeaways.
The attribution of Location Savings in a transfer pricing context
When multinational companies (“MNEs”) choose a location to set up activities, they have to consider many factors, including among others local market circumstances, level of production expenditure, available infrastructure and the political/tax climate. We continue to see a trend of relocations of low-risk, manufacturing activities to China, Brazil or India (i.e. the more prominent emerging markets, where labour / manufacturing costs are generally lower than in the Netherlands) as well as Germany, observing generally lower investments expenditure compared to The Netherlands.
Summary of international and Dutch tax developments in 2017
2017 was a year in which the international tax climate continued to change rapidly: the OECD persisted in its efforts to tackle tax avoidance, the European Commission opened state aid investigations into the tax treatment of Apple in Ireland and IKEA in the Netherlands, and some key jurisdictions introduced or proposed significant tax legislation, thereby affecting all multinational enterprises having arrangements in these jurisdictions. It was also a year of major political change, with elections in Italy, Netherlands, the UK, Germany and France, and a new president in the USA. In blog 9, we have discussed the implications of the new legislation introduced by the Dutch government as of 1 January 2018. In addition, the new government announced some of its tax plans for the coming years, which means that we expect even more changes for the Dutch budget in autumn. In this blog, we will look back at tax year 2017 and review the changes that have an impact on businesses / multinational companies in the Netherlands. It should be noted that we have focused on the relevant items that on a day-to-day base affect our clients.
