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On May 16, 2017 the Deputy Minister of Finance announced the draft bill on the ‘Withholding obligation for holding cooperatives and expansion of the withholding exemption Act’ was opened for public consultation. The document proposes to align the Dutch dividend withholding tax treatment of Dutch holding cooperatives with that of private limited liability companies (BVs)/ public limited companies (NVs) and to expand the scope of the exemption from Dutch dividend withholding tax to apply to active business structures.
The Dutch government has announced that it intends to bring the treatment of Dutch cooperatives more in line with the treatment of Dutch NVs and BVs. In order to achieve this objective the Dutch government has proposed changes to bring certain Dutch cooperatives under the scope of the Dutch dividend withholding tax rules if both of the following conditions are met:
Non-holding or “real” cooperatives (cooperatives running a business enterprise and/or with a large group of members) will remain exempt from dividend withholding tax.
In conjunction with the new withholding tax obligation that would apply to Dutch “holding cooperatives”, the consultation document also includes a proposal to broaden the scope of the domestic dividend withholding tax exemption. The exemption would apply to distributions made by BVs/NVs and holding cooperatives (“Dutch entities”) to parent companies that are tax resident in the EU/European Economic Area or in a third country that has concluded a tax treaty with the Netherlands. In both instances, the interest in the Dutch entity would have to be an interest that would qualify for the Dutch participation exemption or participation credit if the recipient were resident in the Netherlands.
It should be noted that the proposed expanded exemption will be subject to a new anti-abuse rule. The dividend withholding tax exemption will not apply if, cumulatively:
If the proposed measures are adopted, they will likely apply as from January 1, 2018. Thus, potentially affected taxpayers should assess the effect of the proposed changes, which could be beneficial given the broadened exemption but also could be detrimental given that holding cooperatives are now within the scope of Dutch dividend withholding tax and of the anti-abuse rule (which will also be applicable to BVs/NVs).
Feel free to contact us in case you want to receive information about the proposed changes in the Dutch dividend withholding tax, or if you need advice on your specific situation.