Netherlands: Rules for refunds of Dutch dividend withholding tax based on CJEU judgment

Netherlands: Refunds of Dutch dividend withholding tax

The Dutch government—in a cover letter to the 2021 “tax plan”—announced the introduction of rules for refunding dividend withholding tax (as well as a refund of the tax on games of chance) to foreign entities, in line with a judgment of the Court of Justice of the European Union (CJEU).


A decree (no. 2020-24973) published on 4 December 2020 sets forth the conditions for eligible refunds of a withholding tax on dividends.


The CJEU judgment (C-575/17) established that the free movement of capital was violated when a loss-making French entity was released from its obligation to pay domestic dividend withholding tax until it became profitable again, despite the fact that a foreign loss-making entity was unable to credit this dividend withholding tax, thereby rendering the source tax as a final levy.

Dutch refunds

In the decree, the Deputy Minister of Finance stated that outcomes similar to that in the CJEU case may be possible with regard to refunds of Dutch withholding tax on dividends, if a foreign entity meets three criteria:

  • The dividend withholding tax on behalf of a foreign legal entity during a financial year would have exceeded the corporate income tax payable had the entity been a tax resident in the Netherlands.
  • The foreign legal entity is not allowed to reduce the withholding tax or to credit it under applicable corporate income tax law, dividend withholding tax law, similar foreign tax laws, an income tax treaty or case law.
  • The corporate income tax payable by the foreign legal entity in later financial years would have been lower than the dividend withholding tax had the entity been a tax resident in the Netherlands.

If these criteria are met, the decree allows for a refund of dividend withholding tax, provided that several additional requirements are met, including:

  • The foreign entity is established in another EU Member State or a qualifying third country (this means any country with which the Netherlands can exchange information in line with international standards for the exchange of information).
  • The foreign entity is the beneficial owner of portfolio investments.

A refund request must be filed within three years of the financial year in which the dividend was made available and the correct formalities are to be followed.

Additionally, the decree requires that information enabling the tax inspector to assess the eligibility for a refund must accompany the refund request. Finally, during a five-year period, a foreign entity that obtained a refund must promptly provide the tax inspector with the necessary information to determine whether an excessively high refund was granted, if circumstances permit the foreign entity to later credit/deduct (part of) the previously refunded amount or corporate income tax payable.

KPMG observation

The decree potentially provides a meaningful option for foreign entities that have not been able to otherwise obtain relief for Dutch dividend withholding tax through either a reduced treaty tax rate or an exemption. The provisions in the decree are especially relevant for foreign entities that have received Dutch portfolio dividends and have been or will likely be in a loss-making position or have had a low tax base for several years. In such instances, the withholding tax would have probably exceeded the corporate income tax payable had the entity been established in the Netherlands.

The decree has an effective date of 5 December 2020; accordingly, the window for filing refund requests for dividends received in 2017 is quickly closing. The applicability of this approval may be further limited, since the cover letter to the 2021 tax plan announced that in 2022, changes to the dividend withholding tax law will address the issue of the free movement of capital in foreign investor situations.

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

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