Doing Business in the Netherlands 2012 - American Chamber of ...

Doing Business in the Netherlands 2012
Informal capital rulings: Dutch tax authorities acknowledge
that the profit level in the Netherlands is strongly influenced
by the reputation of or other intangible elements owned by the
foreign parent company, justifying a deemed deduction from
the Dutch taxable income based on “informal capital
doctrine,” resulting in lower effective tax rate.
3.3 Holding of Shares
Holding companies have no special tax status under the laws of the
Netherlands. Tax benefits are available to all companies holding
shares in Dutch or foreign subsidiaries. The Dutch tax authorities are
willing to issue ATRs on the applicability of the participation
exemption for intermediate holding companies in international
situations and for ultimate holding companies.
Dividends received by a Dutch company from non-resident
subsidiaries are fully exempt from Dutch income tax under certain
conditions (see application participation exemption as described in
chapter 13). The exemption also applies to capital gains upon the
disposal of shares in subsidiaries. With respect to capital losses and
costs related to the subsidiary, reference is made to chapter 13,
section 13.3.
Thin capitalization rules may apply in the Netherlands, as well as
certain other limitations on interest deduction (reference is made to
chapter 13). Tax treaties concluded by the Netherlands generally
provide that withholding tax on dividends distributed to a Dutch
company holding at least 25% of the shares in the distributing
company is reduced to a substantially lower percentage, often to nil.
Appendix II contains a chart displaying the reduction of foreign
dividend withholding tax rates under the tax treaties concluded by the
Netherlands. The Netherlands has also committed to reducing its
statutory dividend withholding tax rate on dividends based upon the
tax treaties concluded. Based upon the EU Parent-Subsidiary
Directive, dividend distributions made in an EU context are mostly
exempt from withholding tax. This includes dividend distributions
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