Update Dutch tax developments

Transcription

1 Update Dutch tax developments INTERNATIONAL TAX SERVICES Oil & Gas Seminar 2017 Rotterdam, 23 November 2017 Jan Bart Schober

2 Legislative proposal Dutch dividend withholding tax General In September 2017, the Dutch Ministry of Finance published the 2018 budget. The main tax proposals relevant for international investors relate to the Dutch dividend withholding tax (DWT) regime and the Dutch non-resident corporate income tax (NRCIT) rules. The following legislative changes are proposed: Introduction of an obligation to withhold DWT for cooperatives that function as holding entities, i.e. cooperatives that are considered so-called Holding Cooperatives. A new attractive DWT exemption for Dutch entities held by companies resident in a state with which the Netherlands has concluded a tax treaty including a dividend article. Revision of the anti-abuse test to which the current and new DWT exemption will become subject. Introduction of more restrictive and more extensive substance requirements in this anti-abuse test. The NRCIT rules for substantial shareholdings (in general 5% or more) in Dutch entities will be slightly changed. All changes are scheduled to enter into force on 1 January 2018, except for the changes in relation to the more restrictive and more extensive Dutch minimum substance requirements. i.e. 1 April The proposals may change in the course of parliamentary process discussions. 2 2

3 Coalition Agreement Proposed future changes On 10 October 2017, the incoming government of the Netherlands presented its plans (Coalition Agreement) for the years These plans include some substantial tax changes for cooperatives. Corporate income tax (CIT) rate The Netherlands has currently a main CIT rate of 25% and a lower tax rate of 20% for the first part of the profits (i.e. EUR 200,000). The new government intends to reduce the corporation tax rate gradually. The main corporation tax rate would be reduced gradually to 21%: o 2019: 24% o 2020: 22.5% o 2021 and onwards: 21% Partial abolishment DWT The incoming government intends to partially abolish the DWT as per 2020, except: In case of abuse; or if dividends are paid to low-tax jurisdictions. Withholding tax on interest and royalties The Coalition Agreement mentions that withholding tax on interest and royalties will be introduced for outgoing financial flows to countries with very low tax rates (low tax jurisdictions). 3 3

4 Future proposed changes Implementation earnings stripping rule of the EU ATAD The Dutch plans hold that the deduction of net borrowing costs is limited to the highest of I. 30% of the earnings before interest, taxes, depreciation and amortization (EBITDA) or II. an amount of EUR 1 million. No worldwide group ratio escape rule will be implemented. The earning stripping rule will need to be implemented as per 1 January The legislative proposal is expected to be released in the first quarter of CFC Legislation MS of a taxpayer shall treat an entity or PE as CFC if: Group control test: i.e. direct or indirect >50% affiliation via voting right, capital or profit entitlement (for PEs no minimal ownership requirement); and Low-tax jurisdiction test: i.e. in CFC s country de facto tax paid results in an effective tax rate lower than 50% of the effective tax rate that would have been charged under the applicable corporate tax system in the parent MS Effective date: 1 January 2019, no grandfathering Covers entities and permanent establishments (PEs) OECD Multilateral instrument The MLI will only apply to existing tax treaties that are explicitly listed by both contracting states. In most participating countries, the MLI will be subject to the same domestic ratification procedures that apply to the ratification of bilateral tax treaties in general. In most countries, ratification by parliament is required in accordance with the applicable constitutional procedures for (tax) treaties Implementation in the Netherlands expected per January

5 Developments for Dutch E&P companies Impact of developments Benefit of a reduced Dutch CIT rate will party be compensated by SPS The earnings stripping rule is expected to be applicable to the SPS Earnings stripping threshold (EBITDA) extraction permits are not considered an asset on which can be depreciated/amortized Specific developments Net present value of decommissioning and abandonment reserve should be calculated on the basis of sound business principles (i.e. against market rate of interest). Currently, long term interest rates are close to 0%. Tax authorities generally agree that a 0% rate may be applied from

6 CV Jan Bart Schober Partner Tax advisor International Tax Services Jan Bart Schober is a member of the International Tax practice group and a member of the Energy team. He advises multinational companies, financial institutions and funds on cross-border transactions. Jan Bart has extensive experience in structuring investments in E&P assets by oil and gas companies, as well as on acquisitions, joint ventures and corporate restructurings in the energy industry. Jan Bart leads our MENA Region team and is a member of our Russia/CIS Region team. Previously, he headed our Middle East practice from Dubai for nearly 5 years and worked in our London offices. Jan Bart frequently lectures on tax law on various occasions. He is a member of the Dutch Association of Tax advisers (NOB), the IFA and the Dutch Association for Tax Research. T: M: E: jan.bart.schober@loyensloeff.com 6