NOB REACTS TO THE INTERNET CONSULTATION REGARDING DIVIDENDSTRIPPING.

03/02/2022

The internet consultation 'Possibilities of strengthening measures to prevent dividend stripping' ran from December 15, 2021 to January 26, 2022[1]. This consultation included six alternative measures to address dividend stripping. The NOB (Dutch Order of Tax Lawyers) commented on this consultation and also proposed alternative measures to be added.

The mentioned internet consultation that is structured by the Dutch Ministry of Finance, provides a definition of the term dividendstripping. It is defined as followed;

'In dividend stripping, the economic and legal right to dividends is split up in order to obtain a dividend withholding tax advantage. The (foreign) shareholder retains the economic interest in the shares during the transactions, but (temporarily) transfers the legal ownership in the same shares to another party that is entitled to a more favourable dividend withholding tax treatment.(...) The parties involved in this will generally share the resulting benefit.'

Next to the definition of dividendstripping the definitions of, legal ownership, economic interest, beneficial owner plays an important role in the internet consultation. But because the mentioned definitions can be interpreted in multiple ways the NOB suggest that the proposal also includes case studies to further clarify how to interpret these definitions in regards to dividendstripping and to also give the proposal a more substantive character instead of only focussing on formally-legal character. The NOB brings suggest that additional regulations should be developed in the area of sharing the burden of proof and collecting the necessary information to state whether there is dividendstripping. The NOB suggest to:

• Create a sett of hallmarks that are  typical of dividend stripping transactions; and
• Improving the information and evidence backlog at the Dutch Tax Authorities; and
• A requirement for both domestic and foreign (purported) beneficial owners to provide a number of additional statements in the return or refund application to support their position as beneficial owners of the relevant dividend income.

 

The internet consultation can be read in Dutch here:

Overheid.nl | Consultatie Mogelijkheden versterking maatregelen ter voorkoming van dividendstripping (internetconsultatie.nl)

 

And the comment by the NOB can be read here:

Overheid.nl | Consultatie Mogelijkheden versterking maatregelen ter voorkoming van dividendstripping, reactie (internetconsultatie.nl)