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New Dutch Tax Bill Ignores "Fiscal Unity"

New Dutch Tax Bill Ignores "Fiscal Unity"

A new Dutch bill may affect taxpayers who apply Dutch "fiscal unity" to their corporate group.

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According to the bill, entities will have to apply certain corporate income tax and withholding tax rules without being able to benefit from Dutch tax-consolidation (called "fiscal unity"). The fiscal unity regime can allow certain advantages, such as profit-offsetting or eliminating certain inter-company transactions. These new rules are in response to a recent EU court decision.

Under the bill, which was introduced on June 4, 2018, entities will not be able to apply Dutch fiscal unity to several provisions in the Corporate Income Tax Act and the Dividend Withholding Tax Act that concern, among other items:

  • Anti-profit shifting 
  • Rules on investment participations 
  • Anti-hybrid measures in the participation exemption 
  • The interest deduction limitation for excessive participation interest 
  • Trade in loss-making and profitable companies 
  • The "remittance reduction" for redistributions.

Most of the provisions in the bill will be retroactive to October 25, 2017, subject to transitional rules for small and medium-sized enterprises.

Background
Generally, the Dutch fiscal unity regime allows a Dutch parent company and its Dutch subsidiaries to be treated as a single entity for Dutch corporate income tax purposes. In February 2018, the Court of Justice of the European Union decided that certain elements of this regime should be available to taxpayers with EU subsidiaries outside the Netherlands. According to the court, it would be contrary to the EU's "freedom of establishment" if these rules only applied to groups with Dutch subsidiaries.

Previously, the Dutch government responded to this judgment by announcing that it would proceed with retroactive measures that effectively provide that some corporate income tax and dividend withholding tax rules would be applied as if there is no fiscal unity, including in domestic corporate relationships.

For more information, contact your KPMG adviser.

Information is current to June 26, 2018. 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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