New dividend withholding tax rules for cooperatives

An outline of the new dividend withholding tax regulations for cooperatives was published by the state secretary of Finance. This follows the earlier announcement that the current exemption for cooperatives will be abolished (our news message). We describe this outline below.


The new regulation

The Dutch government would like to impose dividend withholding tax on distributions by a cooperative to a participant holding 5% or more in a so-called ‘holding cooperative’. A holding cooperative will be defined as a cooperative which activities consist for 70% or more out of the holding of subsidiaries and/or the financing of group companies. Distributions from non-holding cooperatives remain exempt from Dutch dividend withholding tax, as is the case with distributions of holding cooperatives to participants holding an interest smaller than 5%.

Nonetheless, distributions to participants holding a larger interest in a holding cooperative can also be exempt if (i) the parent company is a resident of an EU/EER-member state or in a country with which the Netherlands has a full tax treaty and (ii) no abuse is taking place. This regulation for holding cooperatives becomes equal to the regulation regarding normal companies (BV / NV).

The anti-abuse provision will become more strict than the regulation in place and international developments surrounding the principal purpose test of the BEPS project will be taken into account, according to the state secretary. More details about the outline and scope of the new anti-abuse provision have not been provided.

Furthermore, please note that if a non-tax treaty resident is holding an interest in a holding cooperative dividend withholding tax will always become due.


Next steps and timing

The state secretary intends to publish a draft legislative proposal in the first half of 2017 and to propose the tax bill in the second half of 2017. It is the intention that the new regulation will become active as from 1 January 2018. If the draft legislative proposal is published, more details about the anti-abuse provision (and the legislation in general) will become clear.


Check your situation

If your structure involves a cooperative, we advise to check the impact of the new regulation on your situation. We would be happy to assist you with this impact analysis and to see whether any alternatives may exist.

Please contact us, if you have any questions regarding the above.


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