Announced interest withholding tax limited to intra-group payments
On 23 February 2018, the Dutch State Secretary of Finance published a letter (Letter) addressing, amongst other matters, the previously announced introduction of an interest withholding tax.
An important clarification is that the new withholding tax will only apply to intra-group payments. Payments of interest on, for instance, publicly held listed securities (like notes or bonds) should therefore fall outside of the scope of this new withholding tax.
As stated in the Letter, the Dutch government wants to introduce a withholding tax on intra-group payments of interest by Dutch resident companies to entities resident in a jurisdiction with no or a low statutory tax rate or a jurisdiction included on the EU list of non-cooperative jurisdictions (the EU Black List; which currently contains only 9 jurisdictions). The rate of this new withholding tax remains unclear as does the minimum statutory tax rate that is considered acceptable. A similar withholding tax is announced for intra-group payments of dividends and royalties.
The withholding tax rules will include an anti-abuse provision that appears to be aimed at artificial arrangements that divert payments of interest, dividends and royalties through a high-tax jurisdiction to ultimately end up in a low-tax or EU Black List jurisdictions.
The new withholding tax on dividends to low-taxed jurisdictions is expected to be introduced as of 1 January 2020, coinciding with the abolition of the current, generally applicable, dividend withholding tax. The new withholding tax on interest and royalties will be introduced as of 1 January 2021.
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