Dutch Withholding Tax as of 1 January 2021
As of January 1, 2021, the Netherlands will levy tax on interest and royalty payments to associated companies that are tax resident in so-called ‘low-tax jurisdictions’ or non-cooperative jurisdictions as well as in abusive situations.
In general, the conditional withholding tax on interest and royalty payments applies in case of interest and/or royalty payments to associated companies that are tax resident in:
- A jurisdiction with a statutory tax rate lower than 9%
- A jurisdiction that is mentioned on the European Union (EU) list of non-cooperative jurisdictions
Please note that the conditional withholding tax might also apply in certain abusive situations. For example, in the situation where an interest payment is made to an associated company that is resident in a non-low-tax jurisdiction and is also not on the EU-list. When this company then almost immediately on-pays the interest payment to a company which is resident in a low-tax jurisdiction, the withholding tax rate of 25% applies.
The withholding tax rate is linked to the highest Dutch corporate income tax rate, which will be 25% in 2021.
In addition, the Dutch Cabinet has announced that it is considering to also include dividend payments under the scope of this legislation as per January 1, 2024.
Does your company pay interest and/or royalties to associated companies resident in low-tax jurisdictions? We recommend you assess all intercompany interest and/or royalty payments from the Netherlands to those companies. It is also recommended to assess whether any intercompany payments might be considered as abusive situations for the purposes of this new tax legislation.
If you have any questions about the new Dutch conditional withholding tax and how it might impact you, feel free to contact the specialists at Crowe Peak.