Dutch Government Issues Draft Decree On Transitional Tax Rules In The Case Of No-Deal Brexit

; posted on
March 14th, 2019

The Dutch State Secretary for Finance sent a draft decree containing a temporary transitional regime applying in the event of a "no-deal" Brexit to the lower house of the Parliament.


Due to the withdrawal from the European Union without withdrawal agreement (no-deal Brexit), the UK will be considered as a third country. The new status of the UK may have tax consequences for an individual and corporate entity that might constitute uncertainty in conducting business particularly during the course of a tax or financial year. Therefore the Deputy Ministry issued statutory transitional rules to overcome the issue.

The draft decree of transitional tax rules contains a general approval in which the UK is still regarded as a Member State of the European Union for certain tax laws during the tax year 2019 or the current financial year that commenced before March 30, 2019. As such, the current regime would continue to apply to these existing tax laws to avoid acute tax consequences and the administrative burden as a result of a change during the financial year.

Participation Exemption and Fiscal Unity

The draft decree governs the participation exemption and fiscal unity regime as the regimes are impacted by the status of the UK as a third country.

In the event of a no deal, the participation exemption would expire on 30 March 2019 if a Dutch private limited company holds an interest in a UK-based company and this interest represents at least 5% of the voting rights, but not 5% of the nominal paid-up capital. In order to avoid an exemption transition during the financial year and related attribution issues, this voting right criterion under the draft decree also applies to participation in the UK until the end of the current financial year that commenced before March 30, 2019.

With regard to fiscal unity regime, the draft decree regulates that Sister and Papillon fiscal unities with a top or intermediate company in the UK will not, on the basis of the draft decree, terminate before the end of the current financial year (which commenced before March 30, 2019) due to a no-deal Brexit. The aim is to give time, where appropriate, to make adjustments to the group structure.

Source: Dutch House Of Parliament

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