Charlotte Tolman and Michael Molenaars explain the Netherlands’ conditional withholding tax regime, which applies to interest and royalty payments to low-tax jurisdictions and aims to curtail profit shifting, and its implications for hybrid entities.
As of January 1 the Netherlands levies a conditional withholding tax (CWHT) on interest and royalty payments to low-tax jurisdictions (LTJs). The CWHT may also apply for indirect payments to LTJs and if the recipient is a hybrid entity in a non-LTJ. In addition to the CWHT on interest and royalty payments, a legislative proposal is pending to extend the CWHT to dividends. On September 30 the Lower House adopted it, and if adopted by the Upper House, the CWHT on dividends is expected to become effective January 1, 2024. The CWHT rate equals the highest Dutch corporate income tax rate, which is 25 percent but may slightly increase in 2022.
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Source: Tax Notes International, volume 104
Publication date: October 25, 2021