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The Netherlands: Dividend withholding tax

The Advocate General at the Court of Justice for the European Union (CJEU) recently published his opinion on two (joined) cases about Dutch entities distributing profits to their parent companies located on Curacao in 2005 and 2006. In both cases, the parent companies claim that the 8.3% Dutch dividend withholding tax levied at the time went against the principle of free movement of capital within the European Union. The Advocate General advised the CJEU to rule in favour of the parent companies.

Based on the Advocate General’s opinion, the Netherlands would have to bring the dividend withholding tax rate in certain cases back to the effective rate in 1993 – the year the standstill provision entered into force. If the CJEU follows the opinion of the Advocate General, it could mean that the Netherlands will no longer be able to levy dividend withholding taxes on dividends distributed to parent companies located on Curacao – provided the dividends would have been exempted under the participation exemption had the parent company been located in the Netherlands.

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