On 29 March 2021, the Dutch Government released for public consultation a draft proposal to revise the Dutch classification rules for entities incorporated under foreign law and partnerships formed under Dutch as well as foreign law. The proposed new entity classification rules are intended to be better aligned with international tax standards. It is expected that this will result in less potential hybrid situations due to mismatches in entity classifications between the Netherlands and foreign jurisdictions. If adopted, the proposed rules would be an improvement for Dutch taxpayers and the Dutch tax practice as it would reduce the number of cases in which a hybrid entity or partnership under the current entity classification rules leads to the potential application of ATAD2 rules or withholding tax rules. After the consultation closes for comments the Dutch Government will issue a legislative proposal that will be subject to review and the regular parliamentary proceedings. If enacted, the proposed changes will take effect as of 1 January 2022.
For more information on the proposed amendments you can contact Lisette Kamysheva.