New Netherlands tax refund rules contain a significant development in the refund procedure for Dutch dividend withholding tax for certain non-residents.
On 29 April 2016 new tax refund rules were published in the Netherlands Government's official gazette. They provide specifics on how Dutch tax authorities will handle requests by non-resident shareholders for the refund of Dutch dividend withholding tax, following new EU case law. This development may be beneficial to companies with operations in the Netherlands.
The rules regulate requests filed by non-resident taxpayers for the refund of Dutch dividend withholding tax for the years 2011-2016. To assess refund requests, a comparison is made between the tax burdens of the non-resident shareholder on the dividends received from their Dutch portfolio shares and the burden of a hypothetical, similar resident shareholder, whose assets would only consist of the shares held by the non-resident taxpayer.
When comparing the tax burden of non-resident individual taxpayers with the tax burden of resident taxpayers, a one-year reference period is taken into account. Also, only costs that are directly related to the collection of dividends (bank fees), are taken into account. Foreign exchange results and financing costs are not qualified as costs that are directly related to the collection of the dividends. Pre-acquisition dividend and costs that relate to other activities of the non-resident company are not taken into account in the comparison.
The Netherlands is not obliged to refund Dutch dividend withholding tax, if the dividend withholding tax will be fully neutralised by the residence state of the recipient of the dividend, through the use of tax credits or excess credits to be carried forward.
The rules also apply to non-qualifying foreign individual taxpayers who are only subject to tax in the Netherlands with respect to a limited tax base. The tax-free amount that applied for domestic tax payers was not taken into account when determining this tax base, however with the introduction of the new rules, non-qualifying foreign taxpayers with Dutch based assets, allocated savings deposits and investments in Dutch real estate, can also take the tax-free amount into account to determine their tax position.
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Our tax compliance experts in the Netherlands are closely monitoring the developments and can assist in assessing whether you are eligible for a refund, and subsequently initiate the refund procedure.
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.
