Netherlands: Amendment to private member’s bill, dividend withholding tax proposal

Netherlands: Amendment to private member’s bill

A private member’s bill on the “Conditional Final Settlement of Dividend Withholding Tax Emergency Act” (submitted in July 2020) has been amended.

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A memorandum on amendment on the bill was previously submitted in September 2020, and at that time, it was announced more changes would follow. In response to criticism from the Council of State, completely new text and an explanatory memorandum were on 9 October 2020 submitted to the Lower House of Parliament. 

Summary

In general, the renewed bill is the same as the proposal submitted in July 2020. Under this proposal, there would be a final dividend withholding tax settlement obligation for cross-border relocations of a taxpayer’s registered office and for mergers, split-offs/divisions, and share mergers if, as a result of these actions, the (deferred) profit reserves of the withholding agent established in the Netherlands is transferred to a jurisdiction that is not aligned with the Dutch dividend withholding tax. This would be a jurisdiction that has no withholding tax on dividend distributions or that grants a step-up for immigration, legal mergers, split-offs/divisions or share mergers.

The original bill only covered withholding agents that were members of a group with a consolidated net turnover of €750 million or more. This group criterion was removed. By removing the group criterion, the bill in principle would apply to all withholding agents established in the Netherlands. A threshold would still apply in the sense that in the event of a relocation of the registered office, legal merger, split-off/division or share merger, dividend withholding tax would only be payable insofar as the withholding agent’s distributable profit is more than €50 million at the time the taxable event occurs.

The proposed tax would be payable if the right to tax the distributable profit of the withholding agent is transferred from the Netherlands to a qualifying state. If the right to tax is transferred to a non-qualifying state, no tax would be payable. In connection with the relevant distinction between qualifying and non-qualifying states, the bill has been expanded to include an anti-abuse provision. 

KPMG observation

For the moment, it is unclear whether the bill can count on a parliamentary majority.
 

Read an October 2020 report prepared by the KPMG member firm in the Netherlands

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