Dutch |
Print2 September 2008
In general, a dividend distribution to shareholders by a company resident in The Netherlands is subject to a withholding tax imposed by the Netherlands at a rate of 15%. By virtue of the application of the Agreement between the Kingdom of the Netherlands and the United States of America for the avoidance of double taxation and the prevention and evasion of taxes with regard to taxes based on income of 18 December 1992 (hereinafter: Treaty), as amended last by protocol of 8 March 2004, the Dutch domestic rate for qualifying dividend distributions can be further reduced to 5% respectively 0%.
Late 2007, the Dutch Ministry of Finance published implementation provisions under which a Dutch subsidiary of a US resident shareholder, qualifying either for Article 10, second paragraph, letter a (the US shareholder is a company which holds directly at least 10% of the voting power of its Dutch subsidiary) or Article 10, third paragraph (the US shareholder owned, directly or indirectly, shares representing at least 80% of the voting power of its Dutch subsidiary) of the Treaty will be allowed to withhold a maximum of 5% Dutch dividend tax respectively be fully discharged of the obligation to withhold Dutch dividend tax from the dividend payment to its US resident shareholder.
The Dutch tax payer should file a request with the competent Dutch tax inspector, providing details to substantiate that its US shareholder complies with the terms and conditions of respectively Article 10, second paragraph, letter a or Article 10, third paragraph of the Treaty. The inspector decides by decree open to objection and appeal. The decree will remain in force as long as:
The policy is not new, bur we have just obtained favorable rulings for two separate US clients which gives more insight in the actual application of this policy. The Dutch tax payer can get certainty in advance on the percentage of Dutch dividend tax it needs to withhold on dividend payments to its US shareholder as long as that shareholder complies with the terms and conditions of Article 10 (second paragraph letter a respectively third paragraph). Though the Dutch tax payer is still required to file a dividend tax return for each and every dividend payment, it is allowed to apply the reduced rates immediately instead of for example withholding and paying 15% dividend tax to the Dutch tax administration first and starting up a refund procedure for the difference.
If you require more information on this subject, or if you wish concrete advice on your personal situation, please call our office at the number +31 - 10-2010466 or contact us via e-mail.
Of course, you are also welcome to visit our office.
We will make time for you !