A coalition agreement includes measures for the partial repeal of the Dutch dividend withholding tax and the introduction of a partial interest and royalty withholding tax.
Today’s announcement reveals that the four coalition parties negotiating the coalition agreement for the new Cabinet intend to repeal the Dutch dividend withholding tax (except for in “abuse situations” and in instances of dividend distributions to “low tax” jurisdictions).
Although the coalition agreement itself does not state when this would be effective, according to the underlying documents, the repeal is set to be introduced as of 2020.
In addition to the proposed (partial) repeal of the dividend withholding tax, a withholding tax on interest and royalty payments made to low tax jurisdictions would be introduced for “letterbox constructions.” These new withholding taxes apparently would be introduced as of 2023.
The new withholding tax proposals are apparent from the coalition agreement that was presented earlier today by coalition negotiator (informateur) Mr. Gerrit Zalm. It is expected that on 12 October 2017, a final report will be discussed in the Lower House of Parliament and that current Prime Minister Mark Rutte will be appointed as the cabinet formation negotiator (formateur). The new Cabinet will then be assembled and will probably be sworn in during the week of 23 October 2017. The agreement itself does not contain the text of proposed legislation or further explanatory remarks. Consequently, the exact scope and impact of the measures are still unclear.
The “caretaker” Cabinet previously presented a bill on Budget Day 2017 under which distributions by holding cooperatives would, in principle, be subject to dividend withholding tax, while distributions (by capital companies or holding cooperatives) to parent companies established in treaty countries would, in principle, be exempt. At present, it is not known whether this bill, in whole or in part, will be withdrawn. If the bill is not withdrawn, the changes proposed on Budget Day may only be relevant until the measures intended by the new government take effect.
The coalition agreement is not—in essence—expected to affect the substantial interest rules for corporate income tax purposes of non-resident taxpayers or the proposed changes that form part of the bill.
Read an October 2017 report prepared by the KPMG member firm in the Netherlands
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