In order to qualify for this exemption, the shareholder must meet at least one of the requirements of the New Tax Treaty, for instance:

• The shareholder is a pension fund, or;
• The shareholder is a public entity, or;
• The shareholder is a listed company or a company of which the majority of shares is held by one or more listed companies, or;
• The shareholder is the head office of the multinational group and is involved in the supervision of the management and group financing activities, or;
• The company of the shareholder has enough substance. This requirement will be met, when the company of the shareholder employs at least three fulltime natural persons. These employees must be engaged in and qualified for the activities the company performs.

Companies which do not comply with one of the requirements of the New Treaty can apply for the grandfathering rule up of the old tax arrangement to and including 31 December 2019. In that case, the Dutch dividend withholding tax rate will be 5%. From 1 January 2020, the grandfathering rule ceases to apply and the Netherlands could tax the dividends distributed at a rate of 15%. When the shareholder however meets specific Dutch substance requirements, no Dutch dividend withholding tax needs to be withheld (under the Dutch domestic withholding exemption, the inhoudingsvrijstelling).

By Marielle Hoefnagels-Eekelaar & Erik de RuijterHLB Netherlands