Thread by @JohanLangerock

I got a lot of questions recently on #tax policy developments in the #Netherlands. So here is a thread!

A lot has happened in the past 2 months. I will try to give a complete overview with implications and consequences for one of the largest #taxhavens in the world.

Enjoy! 👇🇳🇱

First a general comment.

Over the past weeks the Netherlands has been extensively portrayed as a harmful tax haven in the EU, especially by southern European countries.

Many numbers circulate about the Netherlands but missingprofits.world sums it up pretty well.

Several reports have been published in the NL in the past 2 months:

(1) The long-awaited report of an independent commission (known as Adviescommissie ter Haar) on how the NL should reform its laws to make multinationals pay their fair share. 👉rijksoverheid.nl/documenten/rap…

(2) A note written by the administration on how the NL should negotiate double tax treaties in the future. 👉rijksoverheid.nl/documenten/rap…
(3) A note by the government announcing a withholding tax on dividends to low tax jurisdictions (from 2024 onwards) 👉rijksoverheid.nl/actueel/nieuws…

(4) A report by the administration with a vision on the tax system as a whole. 👉rijksoverheid.nl/documenten/kam…

YES, all of this in the last 2 months. Why now? Well elections first half 2021. This is the moment to set the agenda of the elections and the next government.

For corporate tax the first report has been by far the most important one.

The main recommendations:
1. A capped carry forward losses rule (50% of the losses).
2. CFC rules need to be strengthened.
3. No more informal capital deduction if no correction in other country.

Proud that #Oxfam intense advocacy in NL is paying off. 💪

In particular the point of informal capital is crucial. One of the biggest remaining loopholes used by many US MNEs and tech giants.

Oxfam estimated it is worth 5-10 billion in tax avoidance annually from 2020 onwards.

There was not always a consensus in the commission. So the report also recommends even stronger measures like:

1. Stronger interest limitation rule.
2. Limitations to deduction of royalties.
3. CFC rule on active income.
4. A general withholding tax on interests and royalties.

It is very interesting to note that the report is very progressive on international #tax matters:
1. NL should take the lead and strive for harmonisation & consolidation at #EU level.
2. Calls for a minimum effective tax rate.
3. Calls for global unitary taxation.

The government is now expected to share with parliament want it plans to do with the recommendations of this report early July. Also a parliamentary debate is expected. It will be hard for this or the next government not to implement the measures as proposed by the commission.

The note on double tax treaties is interesting. Remember how NL is famous for its extensive network and treaty shopping (enhancing its conduit jurisdiction reputation).

It proposes to allow developing countries some advantages from the UN model like PE & technical services.

The note also says the Netherlands will negotiate higher withholding tax (WHT) rates with developing countries.

Interestingly, the Netherlands will also re-negotiate certain treaties in order to implement its new WHT on interests and royalties to low tax jurisdictions.

The idea to have a WHT on dividends to low tax jurisdictions came in a surprise.

The story of the WHT on dividends is quite a thriller in the NL. Over a year ago the government wanted to get rid of it but that idea faced major opposition. A complete opposite scenario now.

Now the government realizes that the country is also used for many billions a year as a conduit for dividend flows.

Political parties had already proposed to close the loopholes in the current WHT on dividends.

The government now prefers to expand its (conditional) WHT on interests and royalties (that will start in 2021) to dividends from 2024 onwards. Meaning the WHT would be applicable to dividends flowing to jurisdictions with a statutory rate below 9%.

We end with the fourth report, known as the ''building blocks for a better tax system''. The report pretty much repeats the recommendations of the first report on corporate income tax. It is an interesting report though on environmental taxes (calling for tax on meat).

Conclusion

Exciting times ahead in the NL, with potentially many policy changes.
It is clear the NL prefers international reforms over unilateral measures that could effect its investment climate.
Unilaterally, the top priority is to stop the passive income flows.

END