Netherlands government publishes revised draft list of low tax jurisdictions

By Jian-Cheng Ku & Rhys Bane, DLA Piper, Amsterdam

On October 7 the Dutch government released its latest draft list of low tax jurisdictions for public consultation.

The list only contains the Dutch low tax jurisdictions, not the jurisdictions designated as non-cooperative jurisdictions by the EU. The non-cooperative jurisdictions on the EU list will be added to the Netherlands’s final low-tax and non-cooperative jurisdiction regulation, expected late December 2019 and applicable as of January 1, 2020.

The low-tax and non-cooperative jurisdiction regulation is relevant for the application of the Dutch controlled foreign company rules -rules and for the Dutch tax ruling policy.

The 2021 list will also apply to the proposed conditional withholding tax on interest and royalties (for the purpose of the scope of the conditional withholding tax).

Proposed changes

The Dutch government has proposed 4 changes to the list. In the first place, the Dutch government plans to remove Belize and Saudi Arabia from the list and, in the second place, the Dutch government plans to add Barbados and Turkmenistan to the list.

Removals from Dutch list

The Dutch government removed Belize from the list because it incorrectly understood the Belize system of taxation based on turnover, due to which it believed the comparable statutory corporate income tax rate would have been less than 9%.

The Dutch government removed Saudi Arabia from the list because it incorrectly understood the Saudi Arabian system of taxation, where companies with non-resident shareholders are taxed at a rate of at least 20% and where resident shareholders are subject to Zakat at 2.5%.

The Dutch government has, in this respect, calculated that the Zakat is similar to a corporate income tax rate in excess of 13%.

Additions to Dutch list

 The Dutch government has added Barbados to the list because Barbados has lowered its statutory corporate income tax rates below 9%.

The Dutch government has added Turkmenistan to the list because in 2019 it missed that the 8% corporate income tax rate was the generally applicable corporate income tax rate in Turkmenistan, as opposed to the 20% rate that applies certain specific types of companies (i.e., hydrocarbon sector, branches of foreign entities and companies with a majority shareholding by the government).

EU list

The most recent EU list of non-cooperative jurisdictions (of June 21, 2019) contains the following jurisdictions: American Samoa, Belize, Fiji, Guam, Marshall Islands, Oman, Samoa, Trinidad and Tobago, United Arab Emirates, US Virgin Islands, and Vanuatu.

On October 4, the European Council announced it would remove the Marshall Islands and the United Arab Emirates from the list.

Expected final list

If no changes are made to the proposed Dutch list and the EU list as determined on October 4, the final list published in December 2019, is expected to be as follows: Anguilla, American Samoa, Bahamas, Barbados, Belize, Bermuda,, British Virgin Islands, Cayman Islands, Fiji, Guam, Guernsey, Isle of Man, Jersey, Kuwait, Oman, Qatar, Samoa, Trinidad and Tobago, Turkmenistan, Turks and Caicos Islands, United Arab Emirates, US Virgin Islands, Vanuatu.