This is contribution number 12 by KPMG Meijburg & Co regarding the implementation of the EU Parent-Subsidiary Directive.
The Netherlands' corporate tax system fully complies with the requirements of the Parent-Subsidiary Directive (hereafter the Directive) as implemented on January 1, 1992.
1. Dividend distributions by Dutch companies - dividend withholding tax
Not withstanding treaty and domestic rates no Dutch withholding tax is due if the following requirements are met:
2. Dividend distributions to Dutch resident companies - participation exemption
Before the implementation of the Directive the Netherlands already refrained, under the participation exemption, from taxing any benefits (dividends and capital gains) derived from subsidiaries abroad. This special facility remains unchanged and generally applies if the following requirements are met:
The implementation of the Directive required one major amendment: For participations in companies, resident in a EU Member State, the passive investment restriction above is not applicable provided that:
3. Recent developments regarding the implementation:
As of October 1, 1994, the minimum participation of at least 25% for the reduction of dividend withholding tax, has been reduced to a minimum participation of 10%. The reduction will, however, only apply if the parent company is established in an EU Member State which applies the same threshold (the so-called reciprocity requirements).
The extended exemption will apply to profit distributions which are made available on or after October 1, 1994.
This message is most likely to be relevant for EU companies with Dutch subsidiaries or Dutch parent companies.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Further information can be obtained from Mr Alfred GM Groenen, MCL, KPMG Meijburg & Co, Amsterdam (Netherlands); fax 31 (20) 656 1247
© Mondaq Ltd 1995 Tel +44 171 820 7733.
The Netherlands' corporate tax system fully complies with the requirements of the Parent-Subsidiary Directive (hereafter the Directive) as implemented on January 1, 1992.
1. Dividend distributions by Dutch companies - dividend withholding tax
Not withstanding treaty and domestic rates no Dutch withholding tax is due if the following requirements are met:
- Both parent and subsidiary take one of the forms listed the Directive.
- The parent company holds a 25% or more participation in the subsidiary for at least one year.
- The subsidiary is a resident of another EU Member State and is, without the option of being exempt, subject to tax in that Member State.
- The subsidiary is not, under the terms of a double taxation agreement concluded with a third state, resident for tax purposes outside the European Union.
- The double taxation agreement between the Netherlands and the resident State of the parent company should not contain an anti-abuse provision which disqualifies the parent from any favourable treatment with respect to dividend withholding tax.
2. Dividend distributions to Dutch resident companies - participation exemption
Before the implementation of the Directive the Netherlands already refrained, under the participation exemption, from taxing any benefits (dividends and capital gains) derived from subsidiaries abroad. This special facility remains unchanged and generally applies if the following requirements are met:
- The Dutch holding company participates for at least 5% in the subsidiary.
- The participation is not held as a passive investment.
- The foreign subsidiary is subject to tax abroad.
The implementation of the Directive required one major amendment: For participations in companies, resident in a EU Member State, the passive investment restriction above is not applicable provided that:
- The parent company holds a 25% or more participation.
- Both parent and subsidiary take one of the forms listed in the attachment to the Directive.
- The subsidiary is a resident of another EU Member State and is, without the option of being exempt or the application of a preferential tax regime, subject to one of the taxes mentioned in the Directive.
- The subsidiary is not, under the terms of a double taxation agreement concluded with a third state, a resident for tax purposes outside the European Union.
3. Recent developments regarding the implementation:
As of October 1, 1994, the minimum participation of at least 25% for the reduction of dividend withholding tax, has been reduced to a minimum participation of 10%. The reduction will, however, only apply if the parent company is established in an EU Member State which applies the same threshold (the so-called reciprocity requirements).
The extended exemption will apply to profit distributions which are made available on or after October 1, 1994.
This message is most likely to be relevant for EU companies with Dutch subsidiaries or Dutch parent companies.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Further information can be obtained from Mr Alfred GM Groenen, MCL, KPMG Meijburg & Co, Amsterdam (Netherlands); fax 31 (20) 656 1247
© Mondaq Ltd 1995 Tel +44 171 820 7733.
