Netherlands 2018 Budget | KPMG | CA

Netherlands 2018 Budget — More Dividend Withholding Tax Changes

Netherlands 2018 Budget

The Netherlands' 2018 budget was presented on September 19, 2017.


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It contains several proposed tax measures that may affect Canadian multinational companies, including changes to dividend withholding tax obligations and exemptions. The budget also clarifies the requirements to avoid the interest deduction limitation rules, among other changes. Canadian entities that invest in the Netherlands may want to assess the impact of these new rules before they are proposed to come into effect on January 1, 2018.

Withholding tax changes
Following changes in its 2017 budget on the withholding tax rules, the Netherlands has proposed further withholding tax changes to expand the scope of the dividend withholding exemption for distributions to beneficiaries established in treaty countries. Further, the Dutch proposals extend the dividend withholding tax obligation to certain cooperatives, among other changes.

These proposed changes are broadly in-line with changes that were tabled and opened for public consultation in May of this year.

Dividend withholding tax exemption
The proposed changes expand the withholding tax exemption that will apply to participation dividends paid by Dutch companies or holding cooperatives. To qualify, the beneficiary of the payment must be established in a country, outside the EU/European Economic Area (EEA), that has concluded a tax treaty with the Netherlands, with a dividend provision.

The budget adds other conditions that a hybrid entity must meet to qualify for the exemption when it holds an interest in a Dutch company. In addition, the budget removes the withholding exemption on distributions by fiscal investment institutions to exempt entities (such as pension funds).

The budget also includes anti-abuse rules to address situations that meet the following conditions:

  • An entity holds shares of a Dutch company with the principal purpose, or one of the principal purposes, of avoiding having dividend withholding tax levied on another party
  • There is an artificial structure or transaction (e.g., where a structure is set up for invalid commercial reasons that do not reflect economic reality).

Expanded withholding obligations
The budget extends the dividend withholding tax obligation to holding cooperatives on distributions to members that are entitled to at least 5% of its annual profits or liquidation dividends. In general, a holding cooperative is a cooperative where at least 70% of its activities in the preceding year comprise the holding of participations or the direct or indirect financing of related entities or individuals. However, this may not always be determinative, depending on factors such as: number of employees, office space, and the active involvement of the business.

Other budget changes
Among other tax changes, the Netherlands budget also proposes amendments to:

  • Specify that, even in the event of third-party financing, a transaction's business motivation must be demonstrated to avoid the interest deduction limitation rules 
  • Extend the rules for the avoidance of double loss set-off when writing down receivables in fiscal unity situations 
  • Adjust the liquidation loss rules in connection with the degrouping of an intermediate holding company and the avoidance of double loss set-off 
  • Reduce a foreign branch profit by all internal usage payments (e.g., internal rent, lease and royalty payments), within a fiscal unity, attributable to the foreign permanent establishment for the purposes of the rules for avoiding double taxation in the Netherlands
  • Allow Dutch group companies to potentially avoid the requirement to file country-by-country reporting in the Netherlands if the ultimate parent voluntarily files its country-by-country report in the country where it is established, subject to strict conditions
  • Abolish the voluntary disclosure scheme.


For more information, contact your KPMG adviser.


Information is current to October 10, 2017. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

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