Proposed amendments to the DDWT regime for co-operatives and other Dutch entities

Alert, June 22, 2017


On May 16, 2017 the Dutch Ministry of Finance published its preliminary proposal to amend the Dutch dividend withholding tax (“DDWT”) regime as from January 1, 2018. Under current Dutch tax laws and regulations, public limited companies (“NVs”) and limited liability companies (“BVs”) are in principle obligated to withhold DDWT. On the contrary, Dutch co-operatives (“Co-ops”) are in principle exempt from this obligation to withhold DDWT. The (current) Dutch government (albeit care-taking in anticipation of a nearly to be formed government after recent elections) intends to amend such selective fiscal treatment of these legal forms and has therefore initiated proposals to amend Dutch tax legislation in this respect.


Headlines of the proposal


Firstly, profit distributions made by a Co-op to its members that hold qualifying membership rights, will become subject to DDWT if the Co-op is regarded as a so-called ‘holding’ Co-op (e.g. performing predominantly holding and/or financing activities).


Secondly, a new DDWT exemption shall also apply to dividend distributions by Dutch entities (i.e. NVs, BVs and Co-ops) to foreign companies that hold a qualifying interest in such Dutch entities and who reside in a third state with which the Netherlands has concluded a tax treaty.


Thirdly, the wording of the existing anti-abuse provision in the DDWT Act shall be amended. If and when implemented, a foreign corporate shareholder of a Dutch entity should meet additional substance requirements in order to be able to claim the DDWT exemption.


Holding Co-ops and Dutch withholding tax

Currently, Dutch NVs and BVs are in principle obligated to withhold a 15% statutory DDWT upon a distribution of a dividend[1]. However, a Dutch Co-op is in principle not obliged to withhold a DDWT upon a profit distribution to its member(s).

1. the activities of such a Co-op usually consist for more than 70% of holding activities and/or group financing activities, and;

2. the non-Dutch resident member of such Co-op holds a so-called ‘qualifying membership’ in the Co-op, meaning this member (an entity or individual) is entitled to at least of 5% of the annual profit of the Co-op or 5% of the liquidation surplus of the Co-op. Such 5% threshold will be determined on a consolidated basis (for corporate members) or together with related persons (in case of individual members).

Note: In private equity investment structures, the Dutch Co-op may still benefit from an exemption under the DDWT, provided the structure is considered an ‘active business’ structure.


Expansion Dutch dividend withholding tax exemption


Currently, under Dutch domestic law an exemption to withhold DDWT may apply to dividends paid to Dutch corporate shareholders, as well as to shareholders residing in the EU and the EEA. Under the proposed legislation, this exemption will be expanded to dividends paid to corporate shareholders which are a tax resident in a country with which the Netherlands has concluded a tax treaty, provided the applicable tax treaty contains a dividend withholding tax paragraph[2] .


Anti-abuse provision


Along with the contemplated expansion of the DDWT exemption, anti-abuse provisions in the Dutch dividend withholding tax Act will be tightened under the proposed legislation. As a consequence, for non-Dutch resident corporate shareholders to qualify for the DDWT exemption, additional substance requirements have to be met. The contemplated amendments will bring the new anti-abuse provisions in the Dutch dividend withholding tax Act in line with the current anti-abuse provisions in the Dutch corporate income tax Act, in the EU parent-subsidiary Directive and in line with the current wording of the Principle Purpose Test[3]. The anti-abuse provision shall apply if both the below mentioned tests are met:

  • Subjective-test: the shares in the Dutch distributing entity are held with a main purpose or one of the main purposes to avoid the levy of DDWT.
  • Objective test: an artiartificial structure or transaction or a series of artificial arrangements or transactions exist.

Normally, the anti-abuse provision shall not apply to an ‘active business’ structure (i.e. one or both tests will not be met). The subjective test may not be met to the extent that the direct non-Dutch resident shareholder of the distributing Dutch entity conducts a genuine active business. The objective test may not be met if there are valid business reasons for holding the shares in the Dutch distributing entity which reflect the economic reality. These valid business reasons may be present if the direct non-Dutch resident shareholder of the Dutch distributing entity has sufficient substance. Besides the ten already existing Dutch substance criteria, two additional criteria should be fulfilled by this non-Dutch resident corporate shareholder:

  • a minimum of EUR 100.000 labor costs relating to the relevant holding activities should be incurred by this shareholder;
  • an office space must be ownded or rented by this shareholder, from where the business activities are performed for at least 24 months.

Legislative procedure

This proposal was subject to public consultation until June 13, 2017 and we anticipate that a formal legislative proposal will be published on Dutch Budget Day (September 19, 2017) after which the new legislation will be addressed by the Dutch parliament. If approved by the Dutch parliament, it is expected to enter into force as per January 1, 2018




Amsterdam, June 2017



Should you have any questions or appreciate receiving more information on this alert, please contact


Richard Smeding at or Gerwin de Wilde at


[1] Although under many tax treaties concluded by the Netherlands the 15% rate is reduced to 5% or even 0%.

[2] (Almost) all tax treaties concluded by the Netherlands contain such dividend paragraph.

[3] OECD’s Action Plan on Base Erosion and Profit Shifting #6: preventing treaty abuse.