Substantial Interest and div tax for Coops
Transcript of Substantial Interest and div tax for Coops
![Page 1: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/1.jpg)
HLB Schippers Accountants Tax & Legal Advisers
Jeroen van der Linden
Amsterdam, April 2013
![Page 2: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/2.jpg)
Programme
1. Substantial interest CIT2. Coop and dividend tax3. Anti-dividend stripping
![Page 3: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/3.jpg)
1. Substantial Interest for Dutch CIT purposes
![Page 4: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/4.jpg)
Corporate income tax subjects
• Residents• Non-residents, such as:
- societies and other legal persons;- taxable limited partnerships (Open CV’s) and other companies not having legal personality of which the equity is divided into shares;- special purpose funds
![Page 5: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/5.jpg)
Taxable object for non-resident taxpayers
• Non-resident taxpayers are taxed on their taxable Dutch amount, which is their Dutch income minus losses.
![Page 6: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/6.jpg)
What is Dutch income?(i.o.w. when are foreign companies subject to tax in the Netherlands)
1. Taxable profit from an enterprise run in the Netherlands (so-called Dutch enterprise)
2. Taxable income from a subtantial interest in a company resident in the Netherlands, if the substantial interest does not form part of the assets of an enterprise
![Page 7: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/7.jpg)
When do you have income from a Dutch enterprise?
• Permanent establishment / representative• Real estate located in the Netherlands• Rights to a share in the profit of the equity of an enterprise• Activities performed as a director or member of an advisory board of a
Dutch resident company• Certain activities on, or above the territorial waters as
well as the oceanlevel and below • Income from receivables held on substantial interest companies
![Page 8: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/8.jpg)
Substantial interest for CIT purposes
• Non-resident taxpayer holds at least 5% of the shares in a Dutch company (e.g. BV, NV or Coop), and
• Shareholding is not attributable to an enterprise of the non-resident taxpayer, and
• non-resident taxpayer holds the shares as main purpose to avoid taxation of someone else’s income tax or dividend tax
![Page 9: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/9.jpg)
Main purpose
• Law says “main purpose” or “one of the main purposes”.
• “Someone else’s” income tax or dividend tax.
![Page 10: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/10.jpg)
Main purposePrivate individual is in NL taxed for:Dividend income (Box 2)Capital gains (Box 2)Interest (Box 1)
A BV B Ltd
Private individualNon-Dutch
![Page 11: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/11.jpg)
Main purposeMain purpose to avoidsomeone else’s income tax?
A BV B Ltd
Private individualNon-Dutch
Private individualNon-DutchHoldco
Cyprus
![Page 12: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/12.jpg)
Main purposeHoldco is in NL taxed for:Dividend incomeCapital gainsInterest
A BV B Ltd
Private individualNon-Dutch
Private individualNon-DutchHoldco
Cyprus
![Page 13: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/13.jpg)
Substantial interest for CIT purposes
• Foreign entity can become subject to tax in the Netherlands for:- Ordinary income (dividends)- Capital gains and- (deemed) interest income
![Page 14: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/14.jpg)
Example 1 Substantial interest
NA NV
NL BV
Dividend
NLBV distributes dividend of 100
NA NV subject to tax in the Netherlands for
Treaties / BRK can decrease the CIT f.i. 8,3% (2011)
CIT 100 x 25%
![Page 15: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/15.jpg)
Example 2 Substantial interest
Cyprus
NL BV
Sale of the shares NL BV may cause Cyprus to become subject to tax in the NL
![Page 16: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/16.jpg)
Example 3
LiechtensteinAG
BV
JerseyLiechtensteinStiftung
1/3 1/3 1/3
Loan
Loan
Loan
![Page 17: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/17.jpg)
Practice
“Not attributable to an enterprise”, means portfolio investment.
When are the shares not held as portfolio investement:
• Management activities?• Risk bearing capital?
![Page 18: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/18.jpg)
• 2. Coop and dividend tax
![Page 19: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/19.jpg)
• If a Coop holds shares in Dutch and non-Dutch companies
• with the main purpose• to avoid someone else’s dividend tax or foreign
(wht) tax and• the membership in the Coop does not belong to
the entreprise of the Coop member,• the Coop will be treated as a limited liability
company for Dutch dividend tax purposes.
![Page 20: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/20.jpg)
• In other words a Coop that functions as holding company may become subject to Dutch dividend withholding tax, if the coop member holds its (≥5%) membership share as a portfolio investment and intends to avoid withholding tax.
![Page 21: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/21.jpg)
Coop
GmbH
Brazil
0%
0% or 15%
Example Coop and dividend tax (1)
• Is Coop held as portfolio investment?
• Main purpose avoiding tax?• 5% or more?
![Page 22: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/22.jpg)
• If a Coop holds shares in Dutch companies• with the main purpose• to avoid someone else’s dividend tax or foreign
(wht) tax,• the Coop will be treated as a limited liability
company for Dutch dividend tax purposes• to the extent the profit distribution does not
exceed the profit reserves of the Dutch companies when acquired.
![Page 23: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/23.jpg)
Coop
NL BV
Brazil
0%
0% or 15%
Example Coop and dividend tax (2)
• Main purpose avoiding tax?• 5% or more?• Does NL• Did BV have profit reserves when
acquired?
![Page 24: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/24.jpg)
Example Coop and dividend tax (3)
• Coop purchased Dutch BV in 2011• Dutch BV has profit reserve of Eu 4 mio• Coop distributes profit to its member in 2012• First Eu 4 mio will be subject to Dutch
dividend tax.
![Page 25: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/25.jpg)
3. Measures to combat dividendstripping
![Page 26: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/26.jpg)
What is dividendstripping?
• Shareholder with• No or limited right for compensation of
dividend tax provides for• Another person to receive the dividend• Who does have the right to set off dividend tax• In the exchange for the equivalent of the
dividend
![Page 27: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/27.jpg)
Example dividendstripping (1)
Private individual abroad
NL NV
3%15% dividendtax
Dividend distribution 28 Dividend tax 3,5 Net 24,5
Sale cum dividend 128Repurchase ex dividend 100Net 28
NL NV
3%
Sale to bank in NL
Dividend
Private individual abroad
![Page 28: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/28.jpg)
Example dividendstripping (2)
Private individual Abroad
NL NV
15% dividendtax
Private individual sells his shares to NL BV and NL BV concludes a putoption. After dividend distribution, BV sells shares back to private individual.
NL NV
Dividend
NL BV
0% dividendtax
![Page 29: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/29.jpg)
Examples dividendstripping
• Sale shares in Dutch listed companies to bank• Lending of shares• Sale and repurchase (call- and putoptions)• Hanging within concern• Intermediate holding company
![Page 30: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/30.jpg)
Example dividendstripping (3)
Example 1
Canada Ltd.
NL BV
10% dividend tax
Canada Ltd.
NL BV
Cyprus Ltd.
0% dividend tax
0% dividend tax
![Page 31: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/31.jpg)
Example dividendstripping (4)
Example 2
NL BV
Belgium Switzerland
15% dividend tax
Malta Ltd.
NL BV
Belgium Switzerland
0% dividend tax
0% dividend tax
![Page 32: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/32.jpg)
Measures against dividendstripping
• Introduction definition beneficial owner• Sanction: reversing reduction or exemption to
national tariff of 15%
![Page 33: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/33.jpg)
When is a person not considered to be a beneficial owner?
• Recipient of dividend performs a service which is a part of several transactions
• in exchange for the income• which income will actually be received by the
holder of the restricted right and• this holder keeps it’s position in the company
![Page 34: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/34.jpg)
NA NV
BV
8,3%
Cyprus Ltd
BV
NA NV
0%
0%
Please note:When sanction then 15% DT
Example dividendstripping (5)
![Page 35: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/35.jpg)
Bonafide cases
• Bonafide purchaser on the stock exchange• Bonafide withholding agent (based on
declaration recipient of dividend)• Durable reorganisation combined with an
ordinary dividend distribution
![Page 36: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/36.jpg)
Durable reorganisation
• Time between reorganisation and dividend distribution
• Type of dividend distribution• Durableness reorganisation
Safe HarbourIn case of durable reorganisation in combinationwith an ordinary dividend distribution irrespective of the time between reorganisation and dividend distribution
![Page 37: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/37.jpg)
NA NV1
COOPNA NV2
NL BV Sale
NV2 looses it’s current participation, consequently no sanction
Example dividendstripping (6)
![Page 38: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/38.jpg)
Questions?
![Page 39: Substantial Interest and div tax for Coops](https://reader035.fdocuments.in/reader035/viewer/2022062515/55d733e7bb61eb43328b4652/html5/thumbnails/39.jpg)
Thank you for your attention.
Remember, you can always contact us with your questions (without the meter immediately running).