On 20 September 2016, The Dutch Ministry of Finance (“ the MF”) announced to be working on a new tax act (ultimately entering into force per 1 January 2018) which will have impact on the Dutch dividend withholding tax legislation.
In general Dutch public and private limited liability companies must withhold Dutch dividend tax upon distributing profit to its shareholders, whereas Dutch cooperatives are exempt from that obligation. This is why Dutch cooperatives are often used in corporate structures of international groups.
According to the MF there is no justification for such difference in tax treatment and therefore the MF proposes to neutralize the difference in the tax treatment between Dutch cooperatives and Dutch limited liability companies by bringing the Dutch cooperatives in the scope of Dutch dividend withholding tax.
In addition the MF proposes to abolish the obligation to withhold dividend withholding tax in the situation a shareholder of a Dutch limited liability company or cooperative holds at least 5% of the shares. This is provided that the corporate shareholder is tax resident of a jurisdiction the Netherlands has concluded a tax treaty with and the corporate structure is not considered as tax abusive.
Although no tax bill has been drafted yet, we recommend companies to analyze the impact when it comes to their structures through the Netherlands using Dutch holding cooperatives; particularly when profit is distributed from the Netherlands to non-tax treaty jurisdictions.