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Netherlands plans new dividend withholding tax

Netherlands plans new dividend withholding tax

This withholding tax would specifically affect dividend payments made to low-tax jurisdictions

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The Netherlands intends to propose an additional withholding tax on certain dividends, according to an announcement made May 29, 2020. If adopted by the Netherlands' parliament, the new withholding tax would take effect in 2024 and specifically affect dividend payments made to "low-tax jurisdictions". This is one of several measures the Netherlands has proposed or enacted to address the taxation of amounts paid to low-tax jurisdictions, including the introduction of a new withholding tax on certain interest and royalties paid to such jurisdictions, effective 2021.

Details of the new dividend tax and how it will be implemented are expected by March, 2021.

Which dividends would be affected?

This proposed additional withholding tax would apply to dividends paid to countries with a corporate tax rate of less than 9% and to countries named on the EU "blacklist". According to the Netherlands' announcement, the new dividend withholding tax would apply even if the Netherlands has an income tax treaty with these countries.

Background

Previously, the Netherlands introduced a 21.7% withholding tax on certain interest and royalties, including those paid to low-tax jurisdictions, effective January 1, 2021.

The Netherlands government had originally announced in 2017, that it intended to repeal the country's dividend withholding tax and replace it with a "conditional withholding tax" on dividends. However, this earlier proposal was withdrawn in 2018. The Netherlands decided not to repeal the existing dividend withholding tax and to instead further examine how a new "conditional withholding tax" could be integrated with the existing dividend withholding tax.

For more information, contact your KPMG advisor.

Information is current to June 23, 2020. 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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