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Netherlands: Withholding tax on dividends paid to low-tax jurisdictions, proposed effective 2024

Netherlands: Withholding tax on dividends

The Deputy Minister of Finance, in a 29 May 2020 letter to the Lower House of Parliament, announced that dividend payments made to “low-tax jurisdictions” would be subject to tax, effective 1 January 2024.

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Measures to implement the taxation of these dividends would need to be determined before the current government’s term of office ends.

The government’s goal is to end the Netherlands being used as a gateway to low-tax countries. To accomplish this, it had already been determined to impose a withholding tax on interest and royalties, effective 1 January 2021. Under the proposal, as of 2024, that tax would be supplemented with a withholding tax on dividends. The measure would apply to cash flows to countries with a profit tax rate of less than 9% and to countries that are on the EU “blacklist” even if the Netherlands has an income tax treaty with these countries.

The withholding tax on dividends would be imposed in addition to the existing dividend tax. In the “coalition agreement,” it was agreed that the dividend tax would be repealed and replaced with a conditional withholding tax on dividends. When, in October 2018 (in deviation from the coalition agreement), it was decided not to repeal the dividend tax, the next consideration was whether the conditional withholding tax on dividends proposed at that time would be partly incorporated into the dividend tax. That has now resulted in a decision to levy a withholding tax on dividends as of 2024.

KPMG observation

The measures are intended to prevent dividends within a group flowing untaxed to low-tax jurisdictions. The proposed withholding tax would be expected to focus on situations when dividends are distributed to a parent company holding a controlling interest in the distributing company and to members of a cooperating group of entities with a controlling interest, whereby—with the application of the withholding exemption for participation dividends in the dividend tax regime or by application of measures of an income tax treaty—no dividend tax is levied.

The original bill on the conditional withholding tax on dividends also proposed levying tax on gains on disposals and capital repayments. It is unclear whether these disposals or repayments would also be subject to the newly announced withholding tax.


Read a June 2020 report prepared by the KPMG member firm in the Netherlands

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