The Supreme Court rules in two landmark case on the qualification shares having certain features of debt instruments for the Dutch participation exemption. The Supreme Court ruled that shares in Dutch or foreign companies cannot be regarded as debt for Dutch tax law purposes and that this characteristic is not affected by certain debt instrument type of features.
A new Decree was adopted introducing substance requirements for all Dutch resident companies which qualify as a financing and/or licensing company. Failing these substance requirements may under specific circumstances result in an administrative penalty up to an amount of (currently) EUR 19,500.
On December 12, the Dutch Ministry of Finance announced that Curaçao and The Netherlands have reached agreement on the text of a new bilateral arrangement for the avoidance of double taxation (the “Arrangement”). The Arrangement shall replace the current Tax Arrangement of the Kingdom (“TAK”) and, subject to parliamentary procedures in both countries, should become effective per 1 January 2015.
The announcement reconfirms the introduction of a zero percent (0%) dividend withholding tax rate on distributions of profits albeit under strict conditions (the current dividend withholding tax rate under the TAK is 8.3%). The zero percent rate will apply on dividends paid to certain active parent companies qualifying under a “limitation of benefits” provision, which will be introduced. This “limitation of benefits” provision has however not yet been clarified.