A guide to Netherlands anti dividend stripping

The new tax plan came into effect on January 1, 2019, including the Dutch anti-dividend deprivation legislation. The latter is part of the European Union’s Anti-Avoidance Directive (ATAD 1) and therefore applies to all current EU member states.

Just over a year ago, the Dutch Senate approved the 2019 tax package, which was originally revised and released by the Ministry of Finance on October 15, 2018. The tax package came into effect on January 1, 2019 and includes several changes to corporate income tax in the current legislation of the Netherlands:

• Implementation of the European Union’s Anti-Tax Avoidance Directive (ATAD 1), in particular the Dutch Anti-Dividend Deprivation Rules and Controlled Foreign Companies (CFC) laws;
• Reduce corporate income tax rate;
• The reduction in losses carried forward the timetable and revised the law on depreciation of buildings.

The original proposal was to end the current dividend withholding tax and levy withholding tax on the distribution of inter-company dividends to low-tax regions and certain other situations (such as abuse).

Interest deduction restriction rules

As suggested in the original proposal, the restrictions on interest deduction rules required by ATAD 1 were introduced. The Directive requires EU member states to issue a revenue divestiture rule under which excess (net) borrowing costs (such as currency conversion results and interest payments) can deduct up to 30% of the taxpayer’s pre-tax depreciation, interest, Tax and amortization (EBITDA). Any amount greater than this amount will be classified as non-deductible, but can be carried forward to the next financial year, although all interest can be deducted up to the threshold of 1 million euros (net). The Netherlands previously chose to apply the threshold of 1 million euros, so even if the amount is higher than the 30% threshold, you can always deduct interest expenses of 1 million euros.

The 30% EBITDA rule takes effect on the basis of fiscal unification, and no exception applies to the group. In 2020, specific minimum capital requirements will be introduced for financial institutions such as insurance companies and banks.

As of January 1, 2019, with the introduction of the income deprivation rules, other rules have been abolished, especially the acquisition financing rules and the excessive participation financing rules.