Conditional withholding tax on interest and royalties
At the state opening of parliament (Budget Day) 2019, the Withholding Tax Act 2021 was proposed, in which a withholding tax on interest and royalty payments will be introduced. This withholding tax applies only under certain conditions, namely when the beneficiary has a (qualifying) interest in the interest and royalty.
The underlying idea is to impose regular corporation tax (highest rate) on outgoing interest and royalty streams to low-tax jurisdictions (which impose less than 9% tax on the payment) or to countries which are on the EU's non-cooperative list and do not wish to cooperate with information exchange. In avoidance situations, as well, the levying of withholding tax on interest and royalties will take place at the paying entity. The interpretation of the term "avoidance" is derived from the current Dividend Withholding Tax Act 1965. If the main goal or one of the main goals is to escape taxation elsewhere, then we can say there is avoidance. In certain cases and with sufficient substance of the beneficiary, taxation of the payment can nevertheless be avoided. The Withholding Tax Act 2021 on interest and royalty payments must be in effect from 2021.