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Articles

The Netherlands remains attractive for business with GCC countries after positive evaluation of the Dutch income tax treaties with Qatar and Bahrain

The Netherlands remains attractive for business with GCC countries after positive evaluation of the Dutch income tax treaties with Qatar and Bahrain

The Netherlands remains attractive for business with GCC countries after positive evaluation of the Dutch income tax treaties with Qatar and Bahrain

01.10.2013

The Dutch Ministry of Finance has positively evaluated the income tax treaties concluded by the Netherlands with Qatar (the Qatar Treaty) and Bahrain (the Bahrain Treaty) that became effective as of 1 January 2010. The Netherlands currently has around 95 income tax treaties, including with the six GCC countries.

Under both the Qatar Treaty and the Bahrain Treaty, withholding tax rates are substantially reduced or even eliminated. More in particular, according to the Qatar Treaty; a dividend withholding tax rate of 0% will generally be applicable if the shareholder beneficially owns at least 7.5% of the shares of the company paying the dividends and some other (anti-treaty shopping) conditions are met. Under the Bahrain Treaty; the withholding tax rate for dividend distributions is generally reduced to 0%, provided that the shareholder beneficially owns at least 10% of the shares of the company paying the dividends and some other (anti-treaty shopping) conditions are met.

During the Dutch parliamentary proceedings on the tax treaties; questions were raised regarding the possibility of abuse of the treaties (by investors from third countries). With respect to these concerns, the State Secretary of Finance promised to send an evaluation of perceived abuse of the treaties (if any) to Parliament two years after the treaties entered into force. On 16 October 2013 this evaluation has been sent to Parliament. Based on a comparison of the total amount of investments in the Netherlands through Qatar and Bahrain before and after the moment the treaties became effective and a comparison of the number of requests for a refund of Dutch dividend withholding tax from entities of the two countries before and after that moment, the State Secretary of Finance concludes that no abuse of the two tax treaties has taken place. This confirms that the Netherlands continues to be attractive as a jurisdiction to set up a business and/or establish holding and financing companies for investments in relation to the GCC countries, both inbound and outbound.

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