A private members bill—presented 10 July 2020 in the lower house of Parliament—proposes to introduce a final settlement requirement to resolve dividend withholding tax obligations if there is a cross-border relocation of the registered office, a cross-border merger, a cross-border division or a cross-border share merger—in other words, when there is a cross-border reorganization by companies (head offices) resident in the Netherlands that are members of certain defined corporate groups.
The current rules for the dividend withholding tax do not include a final settlement requirement if the withholding obligation for dividend tax ends because a company is no longer a resident of the Netherlands. In most situations, the Netherlands is not able to levy dividend withholding tax on the (deferred) profit reserves present at that time because the company no longer has a withholding obligation for Dutch dividend tax purposes or a treaty for the avoidance of double taxation prevents the taxation.
The bill aims to secure the dividend withholding tax in the event that, as a result of a reorganization, the (deferred) profit reserves are transferred to a jurisdiction that does not “take over” the Dutch dividend withholding tax claim. This concerns two situations—one for a jurisdiction that does not have a withholding tax on dividends that is similar to the Dutch dividend withholding tax, or the other regarding the (deferred) profit reserves as paid-in capital.
According to the proposal, there would be a tax similar to that in the Dutch dividend withholding tax law if the withholding tax is ultimately levied on dividends that are distributed by the “last link” (head office) in a group chain—for example, withholding tax on intra-group dividends distributed to countries that are included on a “blacklist.” Taxation at a zero rate or “almost zero” rate also would not be sufficient.
Qualifying countries would also be those countries that regard the (deferred) profit reserves transferred as part of a cross-border reorganization as paid-in capital, so that there is no foreign claim on existing Dutch profit reserves.
Read a July 2020 report prepared by the KPMG member firm in the Netherlands
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor 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 on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.