Netherlands

Netherlands signs Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS

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The Netherlands signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“Multilateral Instrument” or “MLI”) on 7th June 2017. About 70 Ministers and other high-level representatives participated in the signing ceremony at Paris. Eight other countries and jurisdictions have expressed their intention to sign the MLI and more countries are expected to sign by the end of this year.

The Convention enables all signatories, inter alia, to meet treaty-related minimum standards that were agreed as part of the Final BEPS package, including the minimum standard for the prevention of treaty abuse under Action 6. The MLI provisions will generally take effect concerning to withholding taxes on the 1st  day of the calendar year following the last date on which the MLI enters into force for each of the two Contracting Jurisdictions and six months as of this date with respect to all other covered taxes.

 

Netherlands: Bill on country-by-country reporting gazetted

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The lower house of the Dutch parliament adopted a bill implementing EU directive 2016/881, mandating the automatic exchange of country-by-country reporting information among EU member states on 26th April 2017. On 2nd June 2017, EU directive 2016/881bill is published in official Gazette No.215. The Bill takes effect from 5th June 2017, with retroactive effect as of 1st January 2016. In addition, on 7th June 2017, Netherlands signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS).

Netherlands: Amendments to dividend withholding tax rule

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On May 16, 2017, the Dutch government released a public consultation for the previously announced legislative proposals regarding changes to the DWT (dividend withholding tax) rules for holding cooperatives. The Dutch government expected to have the new changes to the Dutch Dividend Withholding Tax Act (DWTA) enter into force on 1st January 2018.

Proposed changes for cooperatives:

Mainly dividend withholding tax will be applied on holding cooperatives, but only if they have qualifying membership rights and the membership rights concerns an entitlement to at least 5% of the annual profit of the cooperative or 5% of the liquidation dividends.

Profit distributions on membership rights in cooperatives will be subject to DWT if the actual activities of the cooperative usually consist for more than 70% of holding participations or of group financing activities. Although the 70% test should be determined mainly based on the cooperative’s balance sheet total, other factors – such as the assets, liabilities, turnover and the nature of activities conducted by employees. The relevant testing period for the 70% test is the year preceding the profit distribution.

Dividend withholding tax exemption:

According to the Proposal, the scope of the current DWT exemption for EU and EEA shareholders will be prolonged to shareholders that are located in a tax treaty jurisdiction, provided that the tax treaty contains a dividend provision.

The Dutch administration proposes to extend the withholding tax exemption for dividends conveyed by Dutch organizations the place their non-resident shareholder may be a substance that:

  • Shareholder need to hold at least 5% interest in the Dutch company;
  • In case of tax treaty, resides in a jurisdiction that has concluded a tax treaty along with a dividend clause with the Netherlands.

In addition to the well-known substance requirements, the following two new conditions are proposed:

  • A payroll expense criterion of at least EUR 100,000 (whereby this amount must be a fee for the holding activities) must also be met;
  • During a period of at least 24 months the intermediate holding company must have its own office equipped with the usual facilities for performing holding activities.

Changes of anti-abuse provisions:

The draft bill acquires the present national anti-abuse procurements in line with EU law and treaty anti-abuse provisions. To evade a cover with those anti-abuse procurements in the Dividend Withholding Tax Act, the foreign substantial interest rules in the Corporate Income Tax Act will in future only apply to capital gains on the substantial interest.

 

Netherlands: Parliament adopted new Bill on CbC reporting requirement

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The Dutch lower house of Parliament adopted the Bill No.34651 to implement country-by-country (CbC) reporting on April 18, 2017. The bill allowed a group entity to serve as the reporting entity and a designated Dutch group entity to file an incomplete CbC report with all the information at its disposal. In addition, the bill clarified that a permanent establishment situated in the Netherlands cannot act as the surrogate parent entity or the designated group entity. The Dutch Lower House on that same day passed a legislation which increased the penalty for noncompliance to €820,000.

Netherlands releases explanation on dividend withholding tax exemption for exempt companies

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The Dutch Tax and Customs Administration has issued an explanation on 30 March 2017 regarding dividend withholding tax exemption for exempt companies. According to the explanation domestic and foreign entities which are exempt from corporate income tax may elect for an exemption from dividend withholding tax for dividends received from 2018. The amendment is generally related to pension funds, exempt investment companies and investment institutions.

 

Netherlands amendments to bill on country-by-country reporting

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The State Secretary for Finance has submitted an amended bill to the lower house of the parliament regarding country-by-country reporting on 21 March 2017. The bill implementing Council Directive (EU) 2016/881 of 25 May 2016 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation (EU country-by-country reporting ) into national legislation. The purposes of amendments that the failure to provide the required notification as a result of an intentional act or negligence of a non-reporting Dutch resident company establishes an offence penalty (vergrijpboete) and if so it will be punishable by a fine up to EUR 20,500.

Netherlands: Decree establishing market interest rates for interest-free liabilities

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Decree No. 2017-22042 of 7 March 2017 establishing the market interest rates for interest-free liabilities have been published in official gazette No. 15371 on 17 March 2017. The Decree updates and replaces the Decree No. BLKB2015/1650M of 10 December 2015 and has been effective since 18 March 2017.

The Decree accommodates an overview of the market interest rates on a per-month basis for the period 2004 to 2016. The most recent rate for December 2016 is 0.3%.