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16 October 2018 / news

New tax measures proposed to improve the Dutch investment climate as an alternative to abolishment of dividend withholding tax

On 15 October 2018, the Dutch government announced tax measures aimed at further improving the investment climate, including a further reduction of the main corporate income tax rate in 2021 to 20.5%.

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These proposed tax measures follow the decision of the same date to no longer abolish the Dutch dividend withholding tax. Further to and in connection with this, the earlier proposed new conditional withholding tax on dividends to low-taxed entities and in abusive situations will be reconsidered. The already announced proposals to introduce a conditional withholding tax on royalties and interest to low-taxed entities and in abusive situations are still expected to come into force as of 1 January 2021.


The 2019 Dutch Budget (the Budget) included the, earlier announced but politically controversial, proposal to abolish the Dutch dividend withholding tax, replacing it with a withholding tax on dividend payments to related entities in low-tax jurisdictions and in cases of abuse, both as of 1 January 2020. Recent developments led to the decision not to abolish the Dutch dividend withholding tax and to reconsider the afore-mentioned conditional withholding tax.

The most relevant relating proposals to improve the investment climate

Now, inter alia, the following measures are proposed instead to further improve the Dutch investment climate:

  • The main Dutch corporate income tax rate will gradually be reduced to 20.5 percent in 2021. The rate for 2019 will remain 25% and will not be reduced to 24.3% as proposed in the Budget. The rate will be reduced in 2020, as was proposed in the Budget albeit that it is not clear to what percentage. This will be followed by a further rate reduction to 20.5% in 2021. Also the lower Dutch corporate income tax rate will gradually be reduced to 15%(instead of 16%)in 2021.
  • A transitional measure will be introduced limiting the adverse tax consequences of a proposed limitation of the depreciation on buildings used within the group,for investments in real estate firstly used before 1 January 2019. Such investments can be depreciated according to currently applying rules in the first three years as from the date of its first use.
  • The 0% tax rate for certain real estate investment funds directly investing in Dutch real estate will not be abolished now that the Dutch dividend withholding tax will remain in force.
  • The retro-active effect of certain pending legislative repair measures to the Dutch fiscal unity regime is changed from 25 October 2017 to 1 January 2018.
  • The proposal remains unchanged for the reduction of the term of the 30% ruling for expats from 8 to 5 years as of 1 January 2019. Nevertheless a grandfathering rule will be introduced for existing rulings that would – as a result of the new regime – end in 2019 or 2020.

The proposal introducing a new withholding tax on dividends, in case of payments to low-tax jurisdictions or in cases of abuse, will be reconsidered as the effect of the combination of the remaining Dutch dividend withholding tax and such ‘additional’ withholding tax first has to be thoroughly analyzed.

The announced introduction of a withholding tax on interest and royalties to low-taxed entities and in abusive situations will not be affected by the fact that the Dutch dividend withholding tax will not be abolished. It is still the intention that such withholding tax will be introduced as of 1 January 2021.


We will keep you updated on further developments. Please contact your trusted adviser at Loyens & Loeff in case you have any queries.

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