On Budget Day the Dutch government announced new tax legislation which changes the dividend withholding tax regime. The new regime could impact structures involving Dutch (holding) companies.
The proposed changes aim to (i) extend the dividend withholding tax exemption, (ii) subject a Dutch holding cooperative to dividend withholding tax and (iii) target tax abuse. The changes are expected to come into force on 1 January 2018.
Structures involving Dutch holding companies should assess whether future profit distributions will remain exempt from Dutch dividend withholding tax. (i) Dividend withholding tax exemption
The new legislation proposes that the dividend withholding tax exemption will be extended for all Dutch resident entities. However, the exemption will only apply if:
- The recipient of the dividends is a resident of the EU, EEA or a country that has concluded a tax treaty with the Netherlands and which includes a dividend withholding tax article, and;
- The recipient of the dividends could have applied the participation exemption.
(ii) Holding cooperatives
A cooperatives that qualifies as a 'Holding Cooperative', will be subject to dividend withholding which is similar to Dutch BV's and other entities with a capital dividend into shares. Regular cooperatives will remain exempt from dividend withholding tax.
(iii) Anti-abuse provisions
The dividend withholding tax exemption will only apply in case of structures which are based on sound business reasons which reflect economic reality. Active investments structures will not fall under the scope of the anti-abuse provisions.
Please note that the relevancy of the above mentioned legislative changes may be limited to the year 2018, since the new government has already announced that they intent to abolish the dividend withholding tax in the Netherlands as per 2019.