COMMENTS ON THE FOURTH AMENDMENT OF THE EMERGENCY ACT BILL; CONDITIONAL FINAL SETTLEMENT OF DIVIDEND TAX

08/02/2022

A while back the Emergency act bill; Conditional Final Settlement of Dividend Tax (hereafter referred to as: “the Bill”) was amended. The Bill provides for a notional distribution of the pure profits of Dutch-based companies in certain cross-border reorganizations, to the extent that such pure profits exceed €50 million. A new amendment has been submitted; The Fourth Amendment Bill[1].

 

A new comment has been provided by the Dutch association of Tax Lawyers (“NOB”) in which they state that it is not responsible to introduce the Bill in its current form, as amended in the Fourth Amendment Bill. The NOB writes the following in its comment to the Fourth amendment[2];

• The amended bill does not remove the risk that the levy under the bill may be in conflict with the good treaty faith that must be observed in the interpretation of the tax treaty with the qualifying state.
• A number of bottlenecks have been eliminated by the Fourth Amendment Bill, according to the NOB.
  • By no longer applying the proposed final settlement of Art. 3c Dividend Tax Act 1965 to cross-border reorganizations to EU/EEA states, it is prevented that the final settlement conflicts with the freedom of establishment.
  • It also avoids the disproportionate nature of the proposed final settlement of Art. 3c Dividend Tax Act 1965, under which it should, in principle, no longer be levied on a shareholder who is a resident of an EU/EEA member state or a treaty state.

 

The Fourth amendment of the bill does however raise new fundamental questions and issues:

• Uncertainty and practical impossibility for stock exchange funds to apply the Dividend withholding tax exemption of proposed Art. 4b Dividend Tax Act 1965;
• Uncertainty and practical impossibility for listed companies to apply the proposed Art. 7 paragraph 5 Dividend Tax Act 1965;
• Practical scope of application of the extension of the domicile jurisdiction on the basis of the proposed Art. 2 paragraph 5 of the VPB 1969 and Art. 1 paragraph 3 of the Dividend Tax Act 1965 and the risk that it may be in breach of good treaty practice;
• Retroactive effect and specific focus on one taxpayer.

 

The NOB states that it wants to clarify its standpoint to Dutch Parliament. How these comments of the NOB will be interpretated and utilized by The Dutch Parliament has  yet to be seen.