Similar to Germany, the Netherlands will introduce a minimum tax by applying a conditional withholding tax on payments to low tax jurisdictions. The Netherlands and Germanu agreed, by issuing a joint statement, to back global efforts to revamp international tax rules for the digital era, as part of efforts by the Dutch government to clean up its reputation as a major enabler of corporate tax avoidance.
In a joint statement issued by the Dutch government, the sufficient measures to tackle the problem of entities that are subject to no or low taxation are needed to support the OECD and EU standards against base erosion and profit shifting (BEPS). In this regard, the Netherlands will introduce a conditional withholding tax on payments to low tax jurisdictions. This measure is similar to the Global Base Erosion (GloBE) proposal initiated by Germany.
The proposal is under discussion within the OECD and it ensures that all internationally operating businesses pay a minimum level of tax and reduces the incentives to allocate returns for tax reasons to low taxed entities. Amidst the undesired risks of double taxation and over‐excessive administrative burdens, the government will remain on adopting the proposal while working on solution to minimize those impacts.
The conditional Withholding tax will be applicable on dividend payments to an entity established in a low tax jurisdiction. A low tax jurisdiction is defined as a state that does not subject entities to profit tax or at a rate of less than 7%. Also states that are on the EU list of non-cooperative countries come under the definition of the term low tax jurisdiction. The conditional withholding tax on dividends is primarily aimed at direct dividend distributions by Dutch entities to affiliated entities in a low tax jurisdiction.
The tax base of the new conditional withholding tax on dividends largely corresponds with that of the dividend withholding tax. The tax is levied on the income from shares, profit-sharing certificates, and certain loans. The manner of levying the tax will generally be similar to that of the dividend withholding tax. The difference is that the withholding tax will be payable over a calendar year, whereas the current dividend withholding tax is due when dividends are paid. The rate of the withholding tax will be based on the proposed corporate income tax rate.
Source: Dutch Government
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