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Will dividend withholding tax between Netherlands and Curaçao go down?

Recent news of Blue Clue

Will dividend withholding tax between Netherlands and Curaçao go down?

Netherlands and Curaçao have reached an agreement on the new rules on the avoidance of double taxation between the Netherlands and Curaçao. For Curaçao the exemption of dividend withholding tax is important. To prevent avoid abuse the shareholder on Curaçao will have to meet extra conditions.

Key information

Netherlands and Curaçao have reached an agreement on the new rules on the avoidance of double taxation between the Netherlands and Curaçao.

An important element in agreement for the Netherlands is the taxation of pension income. Based on this new agreement the Netherlands may levy tax on pension income that was build up in Netherlands but after emigration is received by resident of Curaçao. The Netherlands can also levy gift and inheritance tax up to five years after emigration from the Netherlands to Curacao.

For Curaçao the exemption of dividend withholding tax on dividends received from Dutch participations is very important. To prevent ubuse the Curaçao shareholder will have to meet extra conditions in order to receive the dividends free of dividend withholding tax. For the International Financial Sector of Curaçao it will be important that the extra conditions will be in line the international rules.

Main features of the scheme and application of Article 35a current BRK

  • Up to 5 years after emigration inheritance and gift tax may be levied by the other country;
  • the Netherlands and Curacao will exchange (automatic) information in accordance with international standards;
  • in addition to a withholding tax rate for dividends of 15% there will be a nil percent rate for active companies. There will be limitation of benefits clause;
  • existing participations / shareholdings of at least 25% who do not qualify for the nil percent rate a dividend withholding tax rate of 5% until the end of 2019;
  • for non-state pensions are shared right to levy a source state tax of 15%. Existing cases will be grandfathered;
  • a source state taxation for the rewards of athletes and artists;
  • a withholding tax for providing services for more than 183 days (service PE);
  • a withholding tax for dividends and capital gains tax on "pre-emigration" substantial interest;
  • rules for hybrid entities;
  • a mutual arbitration agreement;
  • in 2014 remains, in anticipation of the new bilateral argreement, article 35a of the current BRK will not be applied in relation to article 17, paragraph b, of the Dutch Corporation Tax Act 1969.

The intention is that the new agreement will be in force as of January 1, 2015. Current cases will be grandfathered. The new agreement will replace the existing agreement of 1964. Netherlands is also preparing a new agreement with Aruba and St. Maarten.

Source: Ministry of Finance, 12 December 2013 17:06

What does this mean for our relationships?

Apparently, the dividend withholding tax between the Netherlands and Curacao go down under conditions such that "the relationship with the international market can still be found." Although all the press release provides some clarity, we are very much looking forward to draft agreement itself!