In the Netherlands it is possible to discuss your specific tax position with the Dutch tax authorities and mutually agree on the tax consequences thereof. The Dutch tax authorities and the taxpayer are bound by the agreement they make. The agreement has to be regarding the interpretation and qualification of facts. The ruling has to be in conformity with the Dutch tax legislation. In other words the agreement cannot be in conflict with the Dutch tax legislation (contra legem). In August 2004, the Dutch ruling policy was formalized in an advance tax ruling (ATR) policy and an advance pricing agreement (APA) policy.
Dutch advance pricing agreement (APA)
An APA covers the agreement on an at arms’ length remuneration or on the transfer pricing methodology. The basis for an APA is a transfer pricing study. The Dutch tax authorities and the tax payer agree that the outcome of the transfer-pricing study would form the basis for the determination of the income for Dutch corporate income tax purposes.
The current DDWT exemption for EU and EEA shareholders has per 1 January 2018 been extended to third countries where the non – resident shareholder is an entity that has an interest of at least 5 percent in the Dutch company or resides (for tax treaty purposes) in a jurisdiction that has concluded a tax treaty, including a dividend article, with the Netherlands. The dividend article does not necessary has to minimize the dividend withholding tax to 0%. The extended DDWT exemption may also apply to distributions to a hybrid entity (an entity which is considered transparent in one country and non-transparent in the other).
There are two possible situations:
A hybrid entity is non – transparent for Dutch tax purposes but is transparent under its local tax legislation;
A hybrid entity is transparent for Dutch tax purposes but is non – transparent under its local tax legislation.
We will discuss the application of the DDWT exemption in both situations below.
Silicon Valley has long been the de facto location for budding startups to set their roots and grow into multimillion-dollar businesses, but it may not be the capital of blockchain technology. As of July 2017, 62 out of the 105 total U.S. companies valued at over $1B are located in California. To put that into perspective, New York has the second highest amount with only 15 businesses.
Leaving Silicon Valley
However, with the power of decentralization, blockchain-based startups are proving that you can find success outside of the Silicon Valley bubble. Cities around the world, whether it be through looser regulations, strong financial ties, or some unknown factors, have started vying for the title of “capital of blockchain” and are emerging as meccas for young cryptocurrency companies. Although a forerunner hasn’t emerged yet, there are a few regions beginning to develop as hot spots for this new innovation.
According to a majority of the members of the European Parliament, the Netherlands is, just like Malta, Cyprus, Ireland and Luxembourg, a fiscal paradise and it is demanding (without any underlying jurisdiction, incidentally) that the European Commission place these five countries on its list of tax havens. This list is, of course, is more akin to a pillory than an honor roll.
Does the Netherlands merit being designated as a tax haven? Most inhabitants of the Netherlands would not experience this as being the case; after all, the VAT on shopping, for crying out loud, has increased by 50% this year alone, and the highest bracket in income taxation (over EUR 68,508) remains at 51.75%: a solid deduction indeed. It is true that taxation on company profits has decreased from 20 to 19%, but this latter figure is still considerably higher than in Ireland (12.5%) or Bulgaria (10%), for example. Furthermore, companies making profits higher than EUR 200,000 continue to pay 25% over this threshold.
Since January 1, 2018, the withholding tax exemption has been extended. At the same time, a reporting obligation has been introduced for the application of the withholding exemption on dividend paid to a recipient who is not established in the Netherlands. In this blog I discuss the reporting obligation entered when applying the withholding tax exemption based on the following topics: Declaration of dividend tax , Condition for dividend tax exemption , Misuse of dividend tax exemption , Artificial construction of dividend tax .
Dividend Tax Statement
Within 1 month after the dividend has been paid, the ‘Dividend Tax Declaration’ form drawn up by the Dutch Tax Authorities must state that an application is made of the withholding tax exemption. As a result of this reporting obligation, the Tax and Customs Administration can determine whether the withholding exemption has been correctly applied by the paying company or holding cooperative.
Please note: if no or late notification is made, a default penalty of up to € 5,278 can be imposed or, in the case of intent or gross negligence, even a penalty for offense. Criminal fines can amount to 100% of the tax payable. The question is whether this scheme is EU-proof, but initiating a procedure to find this out is also a costly matter.
The ‘Dividend Tax Declaration’ form must contain the following information: