News item | 28-06-2022 | 14:42
Due to the various measures taken against tax avoidance in recent years, the money flowing from the Netherlands to countries with a low tax rate has decreased considerably. Based on preliminary figures, the total income flow to these countries has decreased by almost 85 percent from €38.5 billion in 2019 to almost €6 billion in 2021. This is due to the outflow of interest and royalties to countries with a low tax rate. has fallen from €36.4 billion in 2019 to a provisionally estimated €1.5 billion in 2021.
As of 2024, the withholding tax on dividends will come into effect, which will limit these flows even further. This is stated in a letter from State Secretary Van Rij of Finance that was sent to the House of Representatives today. In that letter, the effects of the measures are monitored on the basis of figures from De Nederlandsche Bank. These are provisional figures, partly based on past data.
State Secretary van Rij: “Tax avoidance via the Netherlands has been successfully tackled with many different measures, including the withholding tax on interest and royalties from 2021. These money flows to low-tax countries now flow considerably less through the Netherlands. Yet our fight against tax avoidance does not end there. For example, there are still too many letterbox companies in the Netherlands. The government therefore wants to continue to cooperate with other countries in the coming period to further combat the abuse of conduit companies. That is why we are fully committed to the successful handling of a proposal that the European Commission has made to tackle this.”
With the withholding tax on interest and royalties, payments to countries that levy no or too little tax since 2021 are taxed by the Netherlands. The measure applies to money flows to countries with a profit tax rate of less than 9% and countries that are on the European list of non-cooperative countries. The withholding tax may also apply in abusive situations, for example when the payments are diverted unnecessarily. From 2024, a withholding tax on dividend flows will also apply.
In addition to monitoring the cash flows to countries with a low tax rate, the actual withholding tax returns were also examined. In 2021, €51 million in withholding tax was still paid, while the government had not estimated any revenue. These income flows can partly be explained by companies being too late in adjusting their structure. For another part, the administrative costs associated with a reorganization will probably be too great and the withholding tax will be taken for granted. These flows are expected to disappear in the long run.
It was also examined whether the withholding tax in the Netherlands has diverted money flows to other countries where there is a lot of throughput, such as Singapore and Hong Kong. There is as yet no reason to assume that the flows from the Netherlands have been diverted to these types of countries.
In the coming period, the emphasis in the government’s approach to tax avoidance will mainly be on further international measures, and the implementation of international agreements to introduce a minimum tax and the European Commission’s proposal to combat abuse of conduit companies. These measures make the Netherlands even less attractive for letterbox companies. In addition, the Netherlands continues to monitor developments in tackling tax avoidance every year.