Dutch dividend withholding tax incompatible with EU law and may result in refund previous message

Dutch dividend withholding tax incompatible with EU law and may result in refund

In various judgements the Dutch Supreme Court recently ruled that the Dutch dividend withholding tax is not in accordance with EU law, since it may result in a higher tax burden for foreigners compared to Dutch tax residents.

In order to calculate whether foreigners are subject to a higher tax and may request for a refund of Dutch dividend withholding tax, a specific calculation needs to be made. For individual taxpayers we have illustrated this with the following example.

  • A Belgian resident has an aggregate share portfolio in Dutch companies with a total market value of € 1 million
  • The Belgian resident receives a dividend of € 100,000 which is subject to Dutch dividend withholding tax at a rate of 15%, resulting in Dutch dividend withholding tax of € 15,000.

If the Belgium resident would hypothetically live in the Netherlands, the same portfolio of shares would be subject to the so-called Box III levy. Any Dutch dividend withholding tax can be credited against this Box III levy. Ultimately, the Dutch tax burden in this situation would be as follows:

  • € 1 million minus tax free amount of € 24,436 (2016) = € 975,564. The later amount is subject to tax at a rate of 1,2% resulting in a tax payable of € 11,707.

This calculation shows that the Dutch tax resident is taxed more favourable. Therefore the Belgium tax resident will be able to request for a refund of Dutch dividend withholding tax (€ 15,000 minus € 11,707).

Way forward

In particular for individuals with shareholdings in companies with a high dividend yield (value stock), it may be attractive to investigate whether a refund of Dutch dividend withholding tax is possible. Also for foreign corporate tax payers it may be advantageous to determine if additional refunds of Dutch dividend withholding tax are possible.

If you have any comments or questions, please contact Guido van Asperen (guido.van.asperen@fisconti.nl or +31615041623)

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