Dividend to the US

One of our clients is a US pharmaceutical company with operations in the Netherlands. The Dutch operations are conducted through a Dutch BV company. The shares in the Dutch company are held directly by the US operating company. Fortunately, the BV company has generated profits. If the Dutch BV company distributes a dividend, the dividend is – as a main rule – still subject to 15% Dutch dividend withholding tax. Nevertheless when a tax treaty applies, the Dutch dividend withholding tax rate may be lowered. So far, client applied the 5% tax treaty rate (instead of the domestic 15% rate) on the dividends that were distributed by the Dutch company to the US corporate shareholder.

In November 2017, client was considering to distribute another dividend. As from 2018, however, the Dutch dividend withholding tax act offers more exemptions to US companies that have a qualifying shareholding in a Dutch company. We therefore made an analyses of the dividend tax position of the client first and concluded that in the case at hand the US shareholder qualifies for the new exemption indeed. Hence the declaration of the dividend was eventually made in 2018 (and not in 2017). On behalf of the Dutch company we could now happily fill in the new notification form, which is a requirement for the application of the new exemption.

By doing so, client saved 5% of Dutch dividend withholding tax.