Netherlands: imposing “Dividend-Equivalent Exit Tax” on Relocation of HQ submitted in Dutch Parliament

On 8 December 2021, revisions to the bill for imposing a dividend-equivalent withholding tax (exit tax) on companies moving their tax residence out of the Netherlands has been submitted in the Dutch parliament.

An initial draft was first submitted in July 2020 in response to the plans of large multinationals to move or consolidate their headquarters and management and control outside of the Netherlands, but this was not ultimately approved.

The latest revisions to the bill were submitted by the green-left party following Royal-Dutch Shell’s recent announcement that it is moving its headquarters to the UK, which was approved by shareholders on 10 December 2021.

As revised, the bill would be similar to the initial draft, providing for the introduction of a conditional exit tax that would be imposed in the event a company transfers its tax residence to a non-EEA/EU state that:

  • does not impose a dividend withholding tax; or 
  • grants a step-up when the company becomes a resident of such state and as a result, the profit reserves of the transferred company are regarded as paid-up capital.

The tax would become due at the moment a company’s residence is changed, without the possibility of any tax deferral or waiver. It is also provided that in certain cases, companies established under foreign law would continue to be considered resident in the Netherlands for a period of 10 years after the transfer of their seat to another country.

If the revised bill is approved, it would apply retroactively from 9am on 8 December 2021.

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