If a multinational decides to relocate its head office from the Netherlands to another country, the Netherlands may lose its claim to dividend tax. As a result, under certain conditions, final settlement will take place at the time of emigration, under the new Conditional Final Settlement of Dividend Tax Act (Wet conditionele eindafrekening dividendbelasting). There is no option to defer payments or obtain a waiver.

Companies with a profit reserve of more than € 50 million will owe dividend tax on leaving the Netherlands for a non-EU country in the following situations:

1. Relocation of the registered office of a company from the Netherlands to another country;
2. A cross-border legal merger of a Dutch company;
3. A cross-border share-for-share merger of a Dutch company;
4. A cross-border division of a Dutch company.

If the Dutch dividend tax claim is exchanged for a comparable foreign claim, the levy does not apply. In addition, final settlement is not applied if the exemption from dividend withholding tax in participatory relationships applies.

Dividend stripping refers to a situation in which a company wrongly reclaims dividend tax. One structure used to do this involves a temporary transfer of ownership by a body that is not entitled to refunds of dividend tax to a body that is entitled to them. Within this context it is stipulated contractually that the economic benefit and, for example, the exchange risk remain with the transferring party. The burden of proof for plausibly demonstrating that the recipient of the dividend is not the beneficial owner currently rests with the inspector.

The caretaker government is introducing two measures that will allow dividend stripping to be tackled more effectively: 

1. Specifying a record date by law;
2. Reversing the burden of proof in cases where more than € 1,000 in dividend tax is levied per year.

This is expected to allow the inspector to access relevant information at an earlier stage and improve his position as regards the burden of proof.

On 22 December 2021 the European Commission published a proposal for a Directive (ATAD 3) aimed at combating the use of shell entities (also known as ‘letter-box entities’) for abusive tax purposes. The European Commission intends to apply ATAD 3 from 1 January 2024. Whether this date is feasible for its entry into force is still unclear.

The proposal means, amongst other things, that entities in the EU with no or minimal economic activities will be subject to new reporting obligations. They will also not qualify for certain tax advantages.

Any entity that is subject to tax and has cross-border activities may come up against this Directive. An entity is considered to be a shell company if:

• more than 65% of its revenues over the past two years are passive income; and
• 60% of its activities are cross-border activities; and
• the management and administration of the company have been outsourced to third parties.

In addition to these three criteria, a rebuttal provision has been included for shell entities, who will have the opportunity to demonstrate that they were established on the basis of commercial considerations and to provide information on their staff and the place where taxing rights are held.