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The Netherlands in international taxation

‘anti-abuse measures’ in profit and dividend taxes

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Dutch participation exemption

Capital gains and dividends on qualifying participations exempt from corporate income tax in the Netherlands

Main conditions: • shareholding of at least 5% in participation, and• participation should not have more than 50% passive assets

If the participation has more than 50% passive assets, participation exemption still applies if it is sufficiently taxed according to Dutch standards (‘subject to tax test’)

No specific CFC-legislation included in the Corporate income tax act

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Dutch participation exemption

The following participations are considered “Passive investments”:

-If more than 50% of the assets of the participation consists of < 5% investments in companies; or -If the participation is operating as intra-group finance or leasing company Assets used for intra-group financing activities; -If more than 50% of the assets of the participation consists of assets not used within the business enterprise of the participation.

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Dutch limitations on interest deductions

- Anti-abuse regulations base erosion

For intra-group interest payments in specific situations , however counter evidence possible (business reason or “reasonable tax test”)

situations:- loans taken up for repayments of capital and/or dividends- capital contribution in a subsidiary

- acquisition or enlargement of a subsidiary

- Thin capitalization rules debt-equity ratio of 3:1

- Fraus legis doctrine

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Dutch withholding taxes

Dividends: Dutch dividend tax rate of 15%- often reduced under tax treaty- structuring possibilities to avoid (reduced) rate

Anti-dividend stripping rule:

No reduction of Dutch dividend tax if between the Dutch company and its shareholder a new company is interposed which is entitled to a more reduced dividend tax rate than the previous shareholder

Interest and royalties: no Dutch withholding taxes levied

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Dutch concept of beneficial owner

• Dutch tax law does not contain a general definition of beneficial ownership

•However, Dutch corporate income tax law does contain a article that indirectly defines beneficial ownership

• credit of foreign withholding tax is not allowed if a company is involved in intra-group finance activities

whereby its equity at risk is the lowest of: • 1% of the debts receivable; or• € 2,000,000

Furthermore: substance requirements should be met in order to avoid spontaneous exchange of information

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Dutch tax treaty policy

In the past, hardly no anti-abuse clauses in tax treaties

The last 10-15 years: more and more anti-abuse clauses(such as “limitations-on-benefits”-clauses and specific articles in the protocol, e.g. Dutch-Maltese tax treaty protocol art. )

Recently published policy of Dutch Ministry of Finance refers specifically to inclusions of anti-abuse clauses in new to be concluded or re-negotiated treaties

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Contact details

THE HAGUE Parkhaghe Parkstraat 20 P.O. Box 177 2501 CD The Hague

AMSTERDAM World Trade Center Amsterdam Tower H, 25th floorZuidplein 2061077 XV Amsterdam

Martin Bergwerff (martin@hamelinktooren.com)Olga Tsetlina (olga@hamelinktooren.com)

Tel: +31 70 310 50 70www.hamelinktooren.com