Category

Tax

New Tax Arrangement For The Netherlands And Curacao

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On 10 June 2014, the proposed new bilateral arrangement for the avoidance of double taxation for the Netherlands and Curacao (the “TNC”) was presented to Dutch Parliament. The TNC shall replace the current Tax Arrangement of the Kingdom and is expected to enter into force as per 1 January 2015.

Amongst other things, the TNC introduces a 0% dividend withholding tax rate, albeit under strict conditions. The TNC further includes a beneficial transitional rule under which shareholdings of at least 25% may apply a reduced 5% dividend withholding tax rate (currently 8.3%) until 31 December 2019.

Revised Draft Legislation Of The Russian Tax Code

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On 27 May 2014 the Russian Ministry of Finance published a revised draft of amendments to the Tax Code of the Russian Federation, introducing controlled foreign corporation (CFC) regulations, “thin capitalization rules” and the concept of “effective place of management”. In addition, a “beneficial owner” definition is introduced for the purposes of applying tax treaties.

The revised draft will be submitted to Russian Parliament for legislative procedures. It is however likely the proposed legislation will undergo further amendments. If adopted, the proposed amendments to the Tax Code will likely enter into force as per 1 January 2015.

OECD Publishes Discussion Drafts From The Base Erosion And Profit Shifting Project

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The Organisation for Economic Co-operation and Development (OECD) has published Public Discussion Drafts on the topics of treaty abuse (14 March), hybrid mismatch arrangements (19 March) and the tax challenges of the digital economy (24 March 2014) in addition to the earlier publication on transfer pricing documentation (30 January). These documents are meant to help governments counter Base Erosion and Profit Shifting, a form of (aggressive) tax planning.

Supreme Court Rules Two Landmark Cases On The Dutch Participation Exemption

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The Supreme Court rules in two landmark case on the qualification shares having certain features of debt instruments for the Dutch participation exemption. The Supreme Court ruled that shares in Dutch or foreign companies cannot be regarded as debt for Dutch tax law purposes and that this characteristic is not affected by certain debt instrument type of features.

Renewed Decree on Substance Requirements

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A new Decree was adopted introducing substance requirements for all Dutch resident companies which qualify as a financing and/or licensing company. Failing these substance requirements may under specific circumstances result in an administrative penalty up to an amount of (currently) EUR 19,500.

Netherlands And Curaçao Reach Agreement On New Bilateral Tax Arrangement

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On December 12, the Dutch Ministry of Finance announced that Curaçao and The Netherlands have reached agreement on the text of a new bilateral arrangement for the avoidance of double taxation (the “Arrangement”). The Arrangement shall replace the current Tax Arrangement of the Kingdom (“TAK”) and, subject to parliamentary procedures in both countries, should become effective per 1 January 2015.

The announcement reconfirms the introduction of a zero percent (0%) dividend withholding tax rate on distributions of profits albeit under strict conditions (the current dividend withholding tax rate under the TAK is 8.3%). The zero percent rate will apply on dividends paid to certain active parent companies qualifying under a “limitation of benefits” provision, which will be introduced. This “limitation of benefits” provision has however not yet been clarified.