By Jian-Cheng Ku & Tim Mulder, DLA Piper Nederland N.V., Amsterdam
The Dutch government, on December 18, published its annual list of low-tax jurisdictions, following several draft versions. The 2020 update to the Dutch list removes four countries that were included on the 2019 low-tax jurisdiction list and adds two new ones.
The Dutch list of low-tax jurisdictions is an add-on to the EU’s list of non-cooperative tax jurisdictions. Multinational businesses operating in the Netherlands and also in countries on the Dutch or EU list may become subject to Dutch tax measures aimed at the prevention of tax avoidance, including controlled foreign company (CFC) rules and limits on private tax rulings.
Countries on the Dutch and EU list
The Dutch list of low-tax jurisdictions is comprised of all countries that, on October 1, 2019, had no profit tax or a statutory corporate tax rate below 9%. Thus, the Dutch 2020 list includes Anguilla, Bahamas, Bahrein, Barbados, Bermuda, British Virgin Islands, Cayman Islands, Guernsey, Isle of Man, Jersey, Turkmenistan, Turks and Caicos Islands, Vanuatu, and United Arab Emirates.
Compared to the 2019 list, Belize, Kuwait, Qatar, and Saudi Arabia have been removed while Barbados and Turkmenistan have been added.
Barbados has a general tax rate between 1% and 5.5% and Turkmenistan has a general tax rate of 8%.
Countries on the EU list non-cooperative tax jurisdictions, as published on November 14, 2019, are American Samoa, Fiji, Guam, Oman, Samoa, Trinidad and Tobago, US Virgin Islands, and Vanuatu.
Relevance of the Dutch and EU list for Dutch tax measures
The jurisdictions referred to on the Dutch and EU list are relevant for the application of the Dutch CFC rules and for the Dutch tax ruling policy.
If a Dutch corporate taxpayer has a direct or indirect interest in a company or permanent establishment located in a jurisdiction listed on the Dutch or EU list CFC rules might apply in 2020. Furthermore, under the updated Dutch ruling policy, no tax rulings will be granted if the ruling covers a direct transaction between a Dutch corporate taxpayer and entity located in a jurisdiction on one of the lists.
The list (or an updated version of it) will also be relevant for the conditional withholding tax on interest and royalties that will be applicable on January 1, 2021.
If a Dutch corporate taxpayer makes an interest or royalty payment to a group company residing in a jurisdiction listed on the Dutch or EU list, the payment could be subject to a 21.7% conditional withholding tax.
Dutch government’s approach to tax avoidance
The Dutch list shows again that the Dutch government is a frontrunner in tackling tax avoidance structures and is ahead of international anti-tax avoidance developments, already implementing CFC rules that are the subject of a recently published OECD proposal for a global anti-base erosion proposal under Pillar Two.
The Dutch government aims to keep the Netherlands a very attractive jurisdiction for foreign investors that have substance and business motives for their investments that operate in or through the Netherlands, while it fights structures solely channeling funds via the Netherlands to low-tax jurisdictions.
The final version of the Dutch draft was published for public consultation on October 7. See our previous tax alert discussing this publication.
Jian-Cheng Ku
Jian-Cheng Ku advises on international tax law and transfer pricing with a particular focus on international tax planning, M&A and private equity transactions, corporate reorganisations, and planning and design of transfer pricing policies.
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Jian-Cheng Ku
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Tim Mulder
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