Tax budget proposals for the fiscal year 2018 was announced on September 19, 2017, by the Dutch Ministry of Finance. According to the paper, several amendments to tax law should enter into force as per January 01, 2018, if approved. Most importandly for business - the Dutch Dividend Withholding Tax Act.
The proposal contains 2 key amendments:
1) Introduction of a broader domestic dividend withholding tax exemption for dividend distribution to recipients residents in the EU/EEA or a country that has concluded a tax treaty with the Netherlands covering dividends, combined with the introduction of a specific anti-abuse rule.
2) Treat Cooperatives (COOPs) similar to limited liability companies (BVs and NVs).
The first of the proposed amendments suggests that no Dutch dividend withholding tax will be due on distributions if the recipient (non-individual) is the beneficial owner and meets the following cumulative criteria:
1) Holds at least 5% in the distributing company (or even lower in specific cases).
2) Is resident in the EU/EEA country or a jurisdiction that has entered into a tax treaty with the Netherlands covering dividends.
The recipient should also meet a number of requirements, whereby:
1) He should meet subjective test - not be holding interest in the distributing company for the purpose of tax avoidance in the Netherlands.
2) An objective test should also be followed, meaning that the arrangement (-s) under review should not be artificial (the recipient enterprise should be carrying active business or may be acting as an intermediate holding company).
Intermediate holding companies are expected to satisfy the substance criteria.
Proposals also speak about putting a notification period for distributing enterprise (the distributing entity should notify the Dutch Tax Authorities within one month following the distribution about the fact that the requirements for applying the domestic exemption are met).
The second amendment is aimed at altering the position of COOPs, which are currently not subject to dividend withholding tax (except for specific situations). Proposals put forward the intention to eliminate the difference between distributions of limited liability companies (BVs and NVs) and Dutch COOPs, that act as holding/financing companies. Under the revised Dividend Withholding Tax Act only Holding COOPs will be deemed as companies with distributions being subject to dividend withholding tax. COOPs not qualified as Holding structures, will still not be subject to the Dutch state levy. A Holding COOP shall be qualified as such in case it is a part of an international holding structure and on 70% or more shall perform holding activities and/or intercompany financing activities. Only distributions made by Holding COOPs to (affiliated) members who (indirectly/directly) hold an interest of at least 5% will become subject to 15% Dutch dividend withholding tax (unless the member can benefit from the above mentioned Dutch dividend withholding tax exemption or treaty exemption).
The Proposals introduced are currently being reviewed by the Dutch Parliament and may be subject to further amendments potentially. Voting is to take place on November 16, 2017, If adopted the amendments will take effect as from January 01, 2018.