Monday, January 7, 2019
On December 28, 2018, the Dutch Government published in the Official Gazette a list of 21 low-tax jurisdictions. Companies doing business in these territories will face new anti-avoidance measures, intended to tackle tax base erosion and profit shifting.
Jurisdictions on the list have a corporate tax rate of less than nine percent. These include the five territories already on the European Union's tax blacklist: American Samoa, Guam, Samoa, Trinidad and Tobago, and the US Virgin Islands. The other jurisdictions listed are Anguilla, the Bahamas, Bahrain, Belize, Bermuda, the British Virgin Islands, Guernsey, the Isle of Man, Jersey, the Cayman Islands, Kuwait, Qatar, Saudi Arabia, the Turks and Caicos Islands, Vanuatu, and the United Arab Emirates.
Jurisdictions named on the list will fall within the scope of new Dutch controlled foreign companies (CFC) rules, which became effective from January 1, 2019, under the framework of the EU's Anti-Tax Avoidance Directive.
The Directive's new CFC rules are intended to ensure that the EU country in which a parent company is located will be required to tax certain profits that are "parked" in a low or no tax country. The company will be given a tax credit for any taxes paid abroad.
In addition, withholding tax equal to the Dutch headline corporate tax rate will be imposed on interest and royalty payments to these jurisdictions from 2021. The Dutch rate of corporate tax is 25 percent, but it will fall to 20.5 percent by 2021.
The Dutch tax authority will also no longer issue tax rulings to taxpayers with regards to tax structures involving companies established in these listed low-tax territories.
The list of low-tax jurisdictions will be reviewed on an annual basis.