Bill on the introduction of a conditional withholding tax on dividends

26 March 2021

On Thursday 25 March 2021, the State Secretary for Finance submitted the Bill on the introduction of a conditional withholding tax on dividends (Wet invoering conditionele bronbelasting op dividenden or the "Bill") to the Dutch parliament. The Bill will combat tax avoidance and excessively aggressive tax planning. The government had already announced in its 2021 Tax Plan (see our 2021 Budget Day specials of 15 September and 8 October 2020) that it intended to introduce a conditional withholding tax on dividends paid to entities or permanent establishments in certain designated low-tax jurisdictions (i.e. a statutory tax rate of less than 9%) and non-cooperative. The withholding tax would only apply to the extent that the recipient owns a qualifying interest in the entity distributing the dividend and also cover abusive arrangements. This controlling interest typically exists when the recipient of the dividends can exercise control over the distributing entity (e.g. through holding 50% of the statutory voting rights). The government announced that the conditional dividend withholding tax would apply in addition to the pre-existing regular dividend withholding tax of 15% (if applicable).

The Bill aligns with these previous announcements and as such does not come as a surprise, especially since it follows the mechanics of the pre-existing withholding tax on interest and royalty payments (as applicable from 1 January 2021). The applicable withholding tax rate corresponds with the highest applicable corporate income tax rate (currently 25%) and any regular dividend withholding tax (max. of 15%) can in principle be offset against the conditional withholding tax. If adopted by parliament, the conditional dividend withholding tax should apply from 1 January 2024.

Please find the link to the Bill and the explanatory statement here. Only available in Dutch.

Read more about the Bill on the introduction of a conditional withholding tx on dividends.