Conditional final settlement for dividend tax

21 September 2020
Article

The proposed bill concerning a final settlement for dividend tax has been recently submitted. This bill intends to safeguard the “deferred dividend tax claim” on the available profit reserves of parent companies established in the Netherlands (head offices) of multinationals with a group turnover of more than € 750 million.

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Written by:
Vincent Wanningen Senior tax advisor
Conditional final settlement for dividend tax

If the parent company moves its seat outside of the Netherlands or enters into a (legal or share) merger or a legal division, a final dividend tax settlement will be levied. This means that a kind of exit tax is levied on the available profit reserves in the dividend withholding tax law.

Objections against bill for conditional final settlement for dividend tax

Two objections can be made: on the one hand, double taxation is possible if the (new) country of  residence or the country of the shareholders does not provide in a scheme for avoidance of double taxation. If the company actually distributes the profit reserves as a dividend, regular dividend tax can be charged without an additional scheme and/or possible additional income tax. This results in double taxation. On the other hand, the Netherlands has entered into many tax treaties that do not provide for such a ‘final settlement’ or exit tax and thus violation of good faith towards treaty partners is at hand. Additionally, there are also constrictive aspects under European law. 

Retroactivity

This can be experienced as very constrictive as of the retroactive character to 10 July 2020 (noon), as there is no choice to be made and, de facto, a new tax is introduced. This exit tax is especially meant for large multinationals with a head office in the Netherlands.

More information?

Would you like more information about the conditional final settlement? Please contact Vincent Wanningen, senior tax advisor with ABAB International, on telephone number +31(0)13-4647209 or send Vincent an e-mail.

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