Backbench Bill aimed at enabling provisional final settlement in dividend tax sphere
A backbench Bill was recently tabled in the Lower House of the Dutch Parliament aimed at enabling provisional final settlement in a dividend tax sphere, the proposed legislation being focused on Dutch-based multinational headquarters that abandon the Netherlands in favour of a country where no dividend tax at all is levied or the retained earnings are treated as paid-in capital at the actual moment of arrival. According to the author of the proposed legislation, dividend tax claims should accrue to the Netherlands on the full complement of retained earnings of Dutch-based headquarters irrespective of where said retained earnings have originated. Any one of the following scenarios, to wit:
- that of cross-border transfer of registered seat,
- that of cross-border legal merger,
- that of cross-border demerger, or
- that of cross-border share merger
should involve a dividend tax assessment on the full complement of retained earnings in evidence being imposed on the Dutch-departing company.
The author of the proposed legislation has confined the final settlement duty to companies that form part of a group of companies whose consolidated net annual turnover totals 750 million euros or more. Deferral of payment will be granted upon the company’s request, but will be terminated in response to dividends being effectively paid out by the company once its cross-border restructuring has been finalised. The proposed final settlement duty is not bringing about any double withholding taxation internationally.
It is primarily up to the company to settle up in a lump-sum payment any outstanding dividend tax on the distribution of profits it had thus conserved. No dividend tax will be due and payable where the conserved dividends are deemed to have been paid out to entities with which the company entertains a participating interest affiliation. The company’s lump-sum payment of the outstanding dividend tax on the conserved distribution of profits is to result in the shareholders forfeiting their entitlement to set-off or reimbursement where the dividend tax is concerned. In the event that the company has applied to be granted deferral of payment, entitlement to set-off or reimbursement will by contrast be available where the deferred payment was terminated in response to dividends having effectively been paid out by the company in the wake of its cross-border restructuring.
Transfer of registered seat: supplementary measure
Any company incorporated under the laws of any state other than the Netherlands having been based in the Netherlands for two years or more is to be deemed for another ten years of the date of its transfer of registered seat away from the Netherlands to have continued being based in the Netherlands where it concerns the application of the Netherlands Dividend Tax Act. This is the gist of a supplementary measure forming part of the backbench Bill, as an extension of the “notional place of business” doctrine as per the current dividend tax regime. Said doctrine applies to companies having been incorporated under the laws of the Netherlands, which companies are regarded as having been Dutch-based throughout their existence.
Taxation conventions and EU aspects
The architect of the backbench Bill is convinced that the final settlement duty in the dividend tax sphere he is proposing will neither be at odds with any of the double taxation conventions concluded between the Netherlands and other countries nor be at variance with prevailing EU regulations.
Effective date
The provisional final settlement duty cum extension of the “notional place of business” doctrine is to take retroactive effect from the tenth of July of this year onwards, this being the date of submission for the scrutiny of the Lower House of the backbench Bill. The retroactivity decision has been made as a pre-emptive “anti-announcement effect” measure.
Dutch version: Initiatiefwetsvoorstel voorwaardelijke eindafrekening in dividendbelasting