The measure will apply to financial flows to countries with a corporate tax rate of under nine percent and to countries on the EU blacklist, even if the Netherlands has a tax treaty with them.
In a bid to tackle tax avoidance, the Dutch government is mulling a new withholding tax on dividend flows to low tax jurisdictions from January 1, 2024.
The new tax – aimed at tackling tax avoidance – would come on top of the withholding tax to be imposed on interest and royalties from 2021.
The January 1, 2014, timeline would provide the tax authority to prepare for the introduction of the rule and would also enable businesses to make the necessary organisational changes, the Ministry noted.
The measure will apply to financial flows to countries with a corporate tax rate of under nine percent and to countries on the EU blacklist, even if the Netherlands has a tax treaty with them.
“The new tax will enable the Netherlands to tax dividend payments to countries that levy little or no tax and will also help curb the use of the Netherlands as a conduit country,” a Finance Ministry press release notes.
State Secretary for Finance, Hans Vijlbrief, explains: “This additional withholding tax represents another major step in our fight against tax avoidance. Financial flows channelled from or through the Netherlands to another country where they are not or not sufficiently taxed, will soon no longer go untaxed. It’s now vital to make even better international agreements to prevent other countries being used for tax avoidance purposes.”
Taking into account interest of developing countries
Meanwhile, the Dutch government has written to the Parliament to work towards taking the interest of the developing countries into account while negotiating or renegotiating tax treaties with such countries.
“Since these countries often have little other tax revenue, it is particularly important that they can levy enough tax on the income generated by activities and investments there,” the press release note.
The government is particularly willing to conclude tax treaties with these countries to give them more taxation rights, including in situations where dividend, interest, or royalty payments are made from these countries.
“For the 47 poorest developing countries, the Netherlands is open to include a ‘source state tax’ on payments for technical services carried out in the developing country.”
“For instance, when a Dutch person carries out a management or consultancy job in a developing country, a tax treaty normally allows tax to be levied only in the Netherlands. The source state tax will also enable the developing country to levy tax,” the release states.
The author is Alex Hunter, Editor, TP News. He oversees and updates the publication and also regularly writes news stories about transfer pricing and international tax law. Alex is reachable at editor@transferpricingnews.com
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Netherlands mulling withholding tax on dividends paid to low tax jurisdictions - TP News
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