Netherlands publishes tax ‘blacklist’ for CFC rules

By Jian-Cheng Ku, Robin Theuns, &  Rhys Bane, DLA Piper Nederland N.V.

The Dutch Ministry of Finance on December 28, 2018, published a list of so-called ‘low tax jurisdictions’ to which new Dutch controlled foreign company (“CFC”) rules apply.

Pursuant to the European Union’s Anti-Tax Avoidance Directive (“ATAD”), EU Member States are required to implement CFC rules by January 1, 2019.

The Dutch State Secretary of Finance has noted that the Netherlands already sufficiently applies CFC rules in the form of the ‘arm’s length principle’. However, to promote the Dutch government’s wish to combat abusive structures, an additional CFC measure was introduced.

Under this additional measure, specific categories of passive income (e.g., dividends, interest or royalties) received by a CFC (a company in which the Dutch company has an (indirect) interest of 50% or more) are included in the Dutch taxable base.

The additional CFC rules only apply to jurisdictions that are included in the Dutch list of so-called ‘low tax jurisdictions’. There are two categories of jurisdictions included on this list:

1. Jurisdictions on the general EU list of non-cooperative jurisdictions; and
2. Jurisdictions that (i) do not levy corporate income tax or that (ii) levy corporate income tax at a statutory rate of less than 9%.

The list will be updated annually, where the reference date (for the corporate income tax rate and the EU list of non-cooperative jurisdictions) will be October 1.

The list published in the Government Gazette of December 31, 2018, contains:

• EU list of non-cooperative jurisdictions:
  • American Samoa;
  • American Virgin Islands;
  • Guam;
  • Samoa; and
  • Trinidad & Tobago.
• Dutch list:
  • Anguilla;
  • Bahamas;
  • Bahrain;
  • Belize;
  • Bermuda;
  • British Virgin Islands;
  • Cayman;
  • Guernsey;
  • Isle of Man;
  • Jersey;
  • Kuwait;
  • Qatar;
  • Saudi Arabia;
  • Turks and Caicos Islands;
  • United Arab Emirates; and
  • Vanuatu

The list is also expected to define the scope of the anticipated new withholding taxes on interest and royalties, levied at a rate of 20.5% and effective as of January 1, 2021.

A legislative proposal for these withholding taxes is anticipated in Q3 2019.