Netherlands: proposal exit tax for cross border reorganisations – amendments and further guidance
On 12 March 2021, some amendments and further guidance were issued on the pending bill of law for an exit tax for Dutch dividend withholding tax (DWT) purposes. The bill of law intends to tax certain cross-border mergers, demergers, migrations and share-for-share mergers. At the same time, a report of the International Bureau of Fiscal Documentation (IBFD) on (conditional) exit withholding taxes in other countries was published. The amendments merely include changes of a more technical nature, which do not (fully) reflect the objections made by the Council of State and in Dutch tax literature. It remains uncertain whether a majority in Dutch parliament will be in favour of this initiative.
Initial proposal and earlier developments
The original proposal was published on 10 July 2020 (see our Tax Flash), and a (first) amendment was published on 18 September 2020 (see our Newsletter). On 9 October 2020 a bill was sent to the House of Representatives that included further amendments (see our Newsletter). On that date, the initiator of the bill of law also published the opinion of the Council of State. The latter raised serious objections and advised to withdraw the proposal.
Most relevant changes
Despite criticism on the revised proposal, the amended bill of law only includes relatively minor technical amendments. These are:
- Introduction of a new provision to prevent potential double DWT taxation in case of share-for-share mergers with an acquiring company in a qualifying state;
- Inclusion of a provision clarifying that the settlement of the DWT liability and the right of recourse (including any change in value) are disregarded for Dutch corporate income tax purposes; and
- A delegation clause in the Dutch Dividend Withholding Tax Act 1965 based on which further rules may be adopted to prevent cumulation of DWT and Dutch personal income tax.
Objections raised in Dutch tax literature from an international tax treaty law and EU law perspective and the opinion of the Council of State are not taken into account in the memorandum of amendment. It is still unclear whether there will be a majority for the proposed exit tax.
We will keep you informed of further developments. For further information, please contact your trusted advisor.