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Withholding Tax on Interest and Royalties

The 2021 Tax Withholding bill has been submitted. As a result, payments made from the Netherlands to low taxation countries may – once the proposal has been approved – be subject to an additional tax of 21.7%. This will concern payments made within the same organization (not to individuals) where the recipient of the interest or royalties is resident in a low taxation country (<9%).

When will the Tax Withholding bill be introduced?

The Withholding Tax Act 2021 has currently only been proposed and must still be approved by the Lower and Upper Chamber. The provisional date at which the bill will become law is scheduled for January 1, 2021.

Why is this legislation important?

The Netherlands wishes to maintain its reputation as a country of investment. In addition, the government seeks to prevent abuse of its extensive network of tax treaties. However, the amendment does not only apply to situations where treaties are being abused. International companies with significant presence in the Netherlands will also be affected by the bill. However, companies have until the end of 2020 to adjust their payment structure in order to avoid this unnecessary additional charge of 21.7% on interest and royalties.

Tax Withholding Act: Prevent additional tax payments

The government does not assume they will collect effective tax revenue as a result of this legislation. In fact, they expect companies to stop or “shift” their cash flows in order to avoid this taxation. We advise you to have your current tax structure assessed to ascertain how this bill might affect it. This will enable you to take the necessary steps required to avoid the additional tax of 21.7%.

If you have any questions about the Witholding Tax Act 2021 feel free to contact our tax experts.

Crowe Peak
Olympisch Stadion 24-28 1076 DE Amsterdam, The Netherlands
+3188 2055 000 contact@crowe-peak.nl