|TAX ARRANGEMENT BETWEEN THE NETHERLANDS AND CURACAO|
Aruba, October 26, 2015 - "New opportunities in international holding structures".
On September 10, 2015 the Second Chamber of the Dutch Parliament and on September 29, 2015 the First Chamber of the Dutch Parliament approved the bilateral tax arrangement for the avoidance of double taxation between the Netherlands and Curaçao: Tax Arrangement between the Netherlands and Curaçao (“TANC”). The TANC contains significant changes in comparison to the current Tax Arrangement for the Kingdom of the Netherlands (“TAK”).
The TANC will enter into effect as per January 1, 2016, thereby replacing the TAK. This new tax arrangement was necessary to make the tax system within the Kingdom of the Netherlands compliant with new international standards and aligned with the constitutional reform of the Kingdom of the Netherlands on October 10, 2010, when the Netherlands Antilles ceased to exist as a jurisdiction and Curaçao became a separate jurisdiction within the Kingdom of the Netherlands.
Requirements for a 0% withholding tax rate regarding dividends
A rate of 0% dividend withholding tax applies to a shareholding of at least 10% by the entity receiving the dividend (in most cases the entity distributing the dividend is a resident of the Netherlands and the entity receiving the dividend is a resident of Curaçao) if one or more of the following criteria are met by the entity receiving the dividend:
•its shares are traded on a recognized securities exchange (direct securities exchange test);
•at least 50% of its shares are held directly by a shareholder whose shares are traded on a recognized securities exchange (indirect securities exchange test);
•the entity is the headquarters of a multinational group of companies or provides an essential part of the financing of the multinational group;
•the entity has sufficient ties with the country of residence, i.e. at least three full-time active employees who are residents of the country in which the entity is resident and who manage the assets of that entity at a substantial level (“sufficient ties test”);
•the entity carries on a business in the country of residence and the dividend paid out in the other country derives from the carrying on of that business (activities test);
•at least 50% of the shares are held directly or indirectly by individuals who are residents of one of the countries or both countries.
In case of non-compliance with any of these criteria but compliance with the 10% shareholding criterion, a request can be made on the basis of the catch all provision. This request will be granted if it is clear that obtaining a tax exemption is not the main purpose or one of the main purposes of incorporating, acquiring or maintaining the entity receiving the dividend.
Based on the Explanatory Memorandum (‘Memorie van Toelichting’) this provision is included in the TANC to facilitate the entity receiving the dividend if it meets the Dutch nexus requirements for holding entities and the shareholding forms part of business assets.
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