New Dutch government
to abolish dividend withholding tax and lower corporate income tax rates.
After long negotiations following the Dutch general elections in March 2017, a coalition of four political parties have agreed to form a new government in the Netherlands.
The coalition agreement contains the joint policy decisions that the incoming government intends to execute during its four-year term. This agreement was made public on 10 October 2017. The coalition agreement does not yet provide many details of the proposed measures. Consequently, the exact scope and impact of the measures is still unclear.
The following measures are of particular interest in the field of corporate taxation:
• abolition of the dividend withholding tax:
Currently, all shareholders are, in principle, liable to 15% Dutch dividend withholding tax in respect of dividends paid by a Dutch resident company. Dutch taxpayers can deduct the dividend tax paid from their income tax so in fact they pay nil. However for foreign investors the tax is not deductible if their home country does not allow so.
The abolition will make Dutch companies more attractive for foreign investors.
The coalition agreement does not specify the precise effective date of the abolition but seems to suggest that this measure will take effect as of 2020.
In certain situations, distributions before abolition can be made without Dutch dividend withholding tax. This should be checked with a tax lawyer.
• phased reduction of the corporate income tax rate from 25% to 21% between 2019 and 2021:
Overview of the CIT rate reduction implementation:
Taxable income > EUR 200,000Taxable income < EUR 200,000
2018 25% 20%
2019 24% 19%
2020 22.5% 17.5%
2021 21% 16%
• introduction of an “anti-abuse” withholding tax on dividends, royalties and interest paid to very low tax jurisdictions:
The coalition agreement clearly demonstrates an intention to reduce the attractiveness of the Netherlands as a passive flow-through jurisdiction, while also seeking to further improve the country’s attractiveness for active business operations and headquarters. However, the coalition agreement does not offer guidance on the timing and details of the new withholding tax rules; for instance, it is currently unclear what the relevant tax rate(s) will be, when a jurisdiction will qualify as ”low tax”, and (only with respect to dividends) what situations will be regarded as abusive.
In the context of countering tax avoidance through the use of tax havens, the coalition agreement also proposes the introduction of a blacklist of non-cooperative jurisdictions and a country-by-country reporting obligation for multinationals on their activities in blacklisted jurisdictions and EU member states, the latter presumably to facilitate transparency towards EU partners.
• various steps to protect the Dutch corporate income tax base:
example: carry forward of tax losses will be limited to 6 years as opposed to 9 years now.
The new government will have to submit legislative proposals to adopt these measures to the Dutch parliament. It is at this stage, however, not clear when the legislative proposals will be submitted.