Headlines of a new Tax Arrangement for the Kingdom

On December 12, 2011 the Dutch under-secretary of finance has published the Headlines of the new Tax Arrangement of the Kingdom (“TAK”) for the avoidance of double taxation between the Netherlands and Curaçao. The new TAK should enter into force on 1 January 2013.

Non-application anti-abuse measure to substantial interest levy regime for foreign corporate taxpayers

The new Arrangement seems especially good news for the NV (Curaçao) – Coop (the Netherlands) structures and NV (Curaçao) – BV (the Netherlands) structures in which individuals, trusts and private foundations participate directly at the level of the NV. As mentioned in our news flash of last November, the Tax Bill 2012 states that the Dutch non-residents taxation rules are amended to clarify that these constitute a specific anti-abuse provision. The TAK currently provides for the possibility for Curaçao and the Netherlands to levy their taxes based upon any of their specific anti-abuse provisions, notwithstanding any of the other provisions of the TAK. The TAK Headlines confirm that during 2012 the Netherlands will not invoke this anti-abuse provision of the TAK with respect to the non-residents taxation rules and, therefore, the Netherlands will not levy non-resident tax from Curaçao parent companies of Dutch companies or Dutch Cooperatives till the end of 2012.

The (re)introduction of a 0% rate on dividend withholding tax

According to the Headlines, a 0% dividend withholding tax will be introduced besides the normal Dutch dividend withholding tax rate of 15%. A limitation of benefits provision will be introduced stating under which conditions the 0% will be applicable. As a transitional measure through 2019, existing participations in Dutch entities that do not qualify for the 0% dividend withholding tax will become subject to 5% Dutch dividend withholding tax provided that at least 25% of the nominal paid in capital is held by the Curaçao parent company. Under the present provisions of the TAK, the 15% Dutch dividend withholding tax is reduced to 8,3% provided that the Curaçao parent company possesses at least 25% of the nominal paid in capital. The limitation of benefits provisions have not yet been published, so it remains to be seen under which conditions the Dutch will levy any withholding tax and whether other reduced dividend withholding tax rates will be applicable.

Exchange of information

According to the Headlines, a provision of exchange of information according to international standards will be introduced. This is just a modernization of the present exchange of information provisions. In addition, Curaçao is considering to introduce an automatic exchange of information provision under the savings directive. The Netherlands, as a member of the EU, but also other EU member states, have committed themselves to introduce provisions in accordance with the EU savings directive in their overseas territories.