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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
- Current political situation
As a result of the collapse of the cabinet,
many tax proposals can not be enacted at
- 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
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
- Splitting up of the Netherlands
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
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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
EU Commission urges the Netherlands to
change its exit tax legislation for
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
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
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
Hong Kong and the Netherlands sign
agreement on the avoidance of double
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
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interpretation of the Agreement. Furthermore, under
the Agreement, taxpayers may request an
The Agreement needs to be ratified in the
Netherlands and Hong Kong before it can enter into
Applicability of Dutch domestic law, Dutch
and Antillean treaties and exchange of
information to Bonaire, St. Eustatius and
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
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
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: firstname.lastname@example.org E: email@example.com
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