Proposal on exit-tax for Dutch dividend withholding tax in case of certain cross-border reorganisations

On 10 July 2020, an opposition member of the parliament submitted a legislative proposal to introduce an exit-tax for Dutch dividend withholding tax purposes in case of cross-border reorganisations such as mergers, demergers, migrations and share-for-share exchanges. The exit tax consists of a 15% dividend withholding tax levy on the profit reserves available immediately prior to the reorganisation. 

The exit-tax only applies to companies that:

• are part of a group whose consolidated net group turnover amounts to at least EUR 750 million; and
• move to a country that (a) does not levy a dividend withholding tax or (b) does levy a dividend withholding tax, but allows for a step-up to fair market value for purposes of its withholding tax on dividends.

If enacted, the legislative proposal will have retroactive effect to 10 July 2020, 12pm CET.

Purpose of the proposal

Currently, no dividend exit taxation is levied in case of cross-border reorganisations whereby a company is no longer established in the Netherlands. The aim of this proposal is to ensure the levying of dividend withholding tax in the event that the profit reserves of a company as a result of a cross-border reorganisation (cross-border mergers, demergers, migrations and share-for-share exchanges) are transferred to a country where these profit reserves upon distribution are not subject to dividend withholding tax.

If one of the above-mentioned cross-border reorganisations occurs, the company will be deemed to have distributed its profit reserves immediately prior to the cross-border reorganisation and thus Dutch dividend withholding tax is payable.

Deferral of payment and settlement

Under certain conditions and upon specific request of the company, a deferral of payment may be granted. Furthermore, the legislative proposal provides for a credit of the dividend withholding tax against any corporate income tax and personal income tax that may be due over the (deemed) dividend distribution.

Target group

The exit-tax applies to cross-border reorganisations of companies established in the Netherlands (head offices) that are part of a group as referred to in Article 24b of the Dutch Civil Code or similar foreign regulations with a consolidated net turnover of at least EUR 750 million. The proposal appears to be a response to the announced departure of Unilever and the publications regarding the possible departure of Shell’s head office from the Netherlands. From the explanatory notes to the proposal follows that the proposed exit-tax focusses on dividend withholding tax claims on the profit reserves to which the portfolio shareholders of a listed company are entitled.

For more information on the (potential) impact of the legislative proposal, please contact one of the persons below.