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Crop international newsletter april 2010
Crop international newsletter april 2010
Crop international newsletter april 2010
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Crop international newsletter april 2010

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  • 1. - 1 - www.crop.nl April 2010 International Dutch Tax News Current political situation in the Netherlands: implications on tax policies As the cabinet Balkenende IV collapsed in February 2010 (as his previous 3 also did) and currently acts as interim-government until general elections have been held on June 9, Dutch parliamentary regulations require that Parliament states whether a certain Bill is controversial or not. Thus, several tax Bills have been declared controversial, which means that that matter shall not be dealt with at present in Parliament. For that reason, the discussion that was considered on the system of the interest deductibility, has been set at hold for this moment. Whereas the legislative procedures more or less stopped, the Dutch government was quite active in the field of international taxation. Below we describe some very recent developments in that respect. Tax treaty with Switzerland On February 26 the Netherlands and Switzerland have concluded a tax treaty and protocol to replace the tax treaty that was concluded between the two states in 1951 (!). The treaty generally follows the OECD Model Convention. The maximum rate of dividend withholding tax is 15%. However, in certain situations the rate is reduced to nil, e.g. if a receiving company owns directly at least 10% of the capital of the company paying the dividends. The withholding tax rates on interest and royalties are also nil. Further noticeable issues under the treaty are the following. The Netherlands may continue to issue a “preservative tax assessment” in case of emigration if security is provided. Gains derived from the alienation of shares deriving more than 50% of their value directly or indirectly from immovable property are under conditions taxable in the source state. The provision on director‟s fees also applies to members of the supervisory board. Wages and salaries paid by a Dutch-residing company to its in Switzerland-residing managers are for 50% taxable in the Netherlands and for 50% taxable in Switzerland. If however, the activities are conducted in a Swiss permanent establishment of a company resident in the Netherlands, the activities are taxable in Switzerland. As regards pensions or other similar remunerations that are made under a social security system of a contracting state: these are taxable in the residence state. Notwithstanding this, these payments may Highlights: - Current political situation As a result of the collapse of the cabinet, many tax proposals can not be enacted at this time. - Tax treaty with Switzerland The Netherlands and Switzerland have concluded a new tax treaty that will replace the current tax treaty concluded in 1951. - EU commission urges to amend Dutch exit tax legislation The EU commission has requested the Netherlands to amend the current law on exit taxes when transferring the seat or assets to another Member State. - Tax treaty negotiations with Panama It is expected that in April the Netherlands will start tax treaty negotiations with Panama. - Tax treaty with Hong Kong The Netherlands concluded a tax treaty with Hong Kong, which will reduce withholding taxes substantially. - Splitting up of the Netherlands Antilles The Dutch lower house agreed with a proposal to split up the Netherlands Antilles. This will also have an impact on the tax status of the companies located in some parts of the Antilles and may offer tax planning opportunities.
  • 2. - 2 - www.crop.nl also be taxed in the source state under certain conditions. Under the applications of the treaty the source state has got the right to tax lump-sum payments received for a pension or other similar remunerations or annuities. What is also noticeable is that the treaty does not contain a provision on the taxation of capital, and also does not contain a provision on assistance in the collection of taxes. In the changing tax-landscape with its increasing focus on foreign (non-disclosed) assets, it is noticeable that the contracting states will not exchange information for „fishing expeditions‟. The contracting states are not committed to exchange information on an automatic or spontaneous basis. The exchange of information provisions of the treaty and protocol will be effective from the 1st of March 2010. EU Commission urges the Netherlands to change its exit tax legislation for companies The European Commission recently announced that it had sent several EU-Member States, under which the Netherlands, a reasoned opinion, in which they are “requested” to amend their tax legislation as regards the imposition of an immediate exit tax claim when companies transfer their seat or assets to another Member State. Under Dutch corporate income tax law, there is an exit tax in place on non-incorporated businesses as well as companies. The Commission bases its position on the outcome of the EU-Court of Justice procedures in the Lasteyrie du Saillant (C-9/02) and N-case (C- 470/04) and its Communication on exit taxation (COM(2006)825). The Commission points out that immediate taxation of capital gains, that are accrued but not yet realized at the time of the exit, is not allowed if such taxation would not occur in domestic situations that would be comparable. On the basis of the above named court cases, the Commission takes its position that Member States have to postpone taxation until the capital gains are realized. The Member States now have a period of two months to provide their proposed actions to get their legislation in line with the EU-legislation. Thus, somewhere mid-May 2010 the Commission must have received a reaction from the Netherlands. If the reactions are not satisfactory or no reactions have been provided to the Commission, the Commission may take the issue to the EU Court of Justice. Tax treaty negotiations between Panama and the Netherlands Apparently the Netherlands shall commence tax treaty negotiations with Panama for a first-time tax treaty with that country. The Ministry of Economy and Finance of Panama announced that negotiations with the Netherlands for a tax treaty are scheduled to start in April 2010. As lately several treaties on exchange of information on tax matters have been concluded, it is quite logical that also Panama was considered as a target to conclude a tax/exchange of information agreement. Hong Kong and the Netherlands sign agreement on the avoidance of double taxation On March 22, a comprehensive agreement for avoidance of double taxation between the Hong Kong Special Administrative Region and the Kingdom of the Netherlands has been concluded. The Agreement applies to taxes on income and intends to avoid double taxation as well as to prevent tax evasion. Reasoning behind this Agreement is that the signing of the Agreement will contribute to the expansion of mutual investments and strengthens the economic relations between the Netherlands and Hong Kong. Under the Agreement, withholding tax rates on passive income including dividends and royalties will be lowered. In the Netherlands, a withholding tax rate of 0% applies to dividends received by qualifying persons holding at least 10% of the share capital of the paying companies, as well as dividends received by banks and insurance companies, pension funds, headquarters companies and certain other qualifying entities. To other dividends, a withholding tax rate of 10% will apply. Up to now and under the lack of a tax treaty, the Netherlands can impose a 15% dividend withholding tax when a Dutch BV distributes a dividend to its Hong Kong parent company. No source taxation will apply to interest payments, as there is no withholding tax for such payments in either party. For royalties, Hong Kong has agreed to limit its withholding tax to 3%. Furthermore, the Agreement contains a provision on the exchange of information in respect to tax matters, which is based on the OECD standard. It offers an opportunity for the tax authorities of Hong Kong and the Netherlands to consult each other in order to resolve disputes on the application or
  • 3. - 3 - www.crop.nl interpretation of the Agreement. Furthermore, under the Agreement, taxpayers may request an arbitration procedure. The Agreement needs to be ratified in the Netherlands and Hong Kong before it can enter into force. Applicability of Dutch domestic law, Dutch and Antillean treaties and exchange of information to Bonaire, St. Eustatius and Saba The Lower House voted in favor of a Bill splitting up the Netherlands Antilles. At present, the Netherlands Antilles consist of the isles Curacao, Bonaire, Saba, St. Maarten and St. Eustatius. Aruba already has got a separate position within the Kingdom. On October 10, 2010, the Netherlands Antilles will be split up. Curacao and St. Maarten will be granted the substantially autonomous status. Bonaire, St. Eustatius and Saba (the so-called BES Islands) will be granted the status of a special municipality of the Netherlands. This has got some effects on the tax position of these isles within the Kingdom of the Netherlands. Companies established in the BES Islands would be deemed to be a resident in the Netherlands, as a result of which they would be subject to Dutch corporate income tax and dividend withholding tax. It is yet unclear whether these companies will also become entitled to the benefits of the Dutch tax treaties. Nevertheless, qualifying companies would have the option to be subject to the BES Islands profit distribution tax and property tax, instead of Dutch corporate income tax and dividend withholding tax. The option would be available for companies with an active business, which derive at least 50% active income, companies which generate passive income such as dividends, interest and royalties and employ at least three resident employees and own real estate with a value of at least USD 50,000, which is used for business purposes. Furthermore, those companies must have an own office that is equipped with the facilities that are common in the financial sector. The possibility to opt would also be in place for companies established in trade and service free zones and finally for companies which are for 95% owned by a resident individual, who in turn owns a participation of at least 50% in one of the above-mentioned entities. The tax regime for Curacao and St. Maarten would remain the same: the current profit tax ordinance would remain applicable on these islands. The Netherlands Antilles‟ tax treaties and tax information exchange agreements would continue to apply to Curacao and St. Maarten, which will be the legal successors of the Netherlands Antilles. It has yet to be clarified to which extent Dutch tax treaties and tax information exchange agreements would apply to the BES Islands, because they will become part of the Netherlands and the Netherlands Antillean tax treaties and TIEAs would no longer apply to them. Obviously, this might trigger possibilities for tax planning. We‟ll monitor the developments closely and inform you further if developments occur. For information please contact: Marco Visser or Frans Tempel T: +31 33 495 25 00 T: +31 33 463 57 27 E: visser@crop.nl E: ftempel@crop.nl Disclaimer: CROP registeraccountants and CROP belastingadviseurs makes no representation nor gives any warranty (either express or implied) as to the completeness or accuracy of this publication. CROP registeraccountants and CROP belastingadviseurs is not liable for the information in this publication or consequences of the use of this publication. CROP registeraccountants and CROP belastingadviseurs will not be liable for any direct or consequential damages arising from the use of the information contained in this publication.

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