On 14 June 2019, the Dutch State Secretary of Finance (State Secretary) announced he will propose legislation amending the rules for foreign intermediate holding companies with ‘relevant substance’ that qualify for the Dutch dividend withholding tax (DWT) exemption. The proposal entails the possibility of counterproof for the Dutch Tax Authorities (DTA) that, even if the relevant substance criteria are met, a structure is abusive and the DWT exemption does not apply. It should enter into force on 1 January 2020 and would similarly apply to the Dutch non-resident corporate tax rules. Existing rulings will continue to be valid until explicitly notified differently by the DTA. 

Foreign intermediate holding companies that rely on meeting the relevant substance criteria to qualify for the Dutch DWT exemption, or to disqualify as non-resident corporate taxpayer, should assess whether they are at risk for scrutiny and challenge by the DTA based on the proposed changes.

On 26 February 2019, the Court of Justice of the European Union (CJEU) rendered a ground-breaking decision on tax avoidance and beneficial ownership in the so-called ‘Danish Cases’. In reaction hereto, Members of Parliament raised detailed questions regarding the consequences for the Dutch DWT exemption and the Dutch participation exemption.

The State Secretary considers the Dutch DWT exemption’s anti-abuse rule generally compatible with the Danish Cases, but slight amendments in the application thereof are in his view required. He does not anticipate that these would lead to material differences compared to the existing situation. Currently, satisfying the ‘relevant substance’ criteria functions as safe harbour for foreign intermediate holding companies in business structures. Under the expected proposals, the DTA would have the possibility to demonstrate that a structure is abusive, even if the relevant substance criteria are satisfied.

The State Secretary is still assessing whether changes to the Dutch participation exemption regime are required based on the Danish cases.

The State Secretary stated that the announced legislative proposal will be published on 17 September 2019 (Budget Day).


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

This article was sent as a Tax Flash newsletter on 17 June 2019.

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