Impact Of ECJ ‘Danish Cases' On Tax Treatment Of Holding Companies

Author:Ms Eline Goderie
Profession:TMF Group

Foreign intermediate holding companies need to assess the impact of recently announced widening of the Dutch anti-abuse tax legislation in response to landmark ECJ rulings.

The Dutch State Secretary of Finance ("State Secretary") recently clarified his opinion on the EU compatibility of Dutch tax laws and announced changes in the Dutch withholding tax exemption and non-resident corporate income tax rules, to be published on Budget Day, 17 September 2019.1 The announcement follows the judgement of the European Court of Justice (ECJ) in six Danish beneficial ownership cases and their interaction with Dutch tax legislation applicable to (intermediate) holding companies.2


In 2018, amendments to the anti-abuse rule in the Dutch Dividend Withholding Tax Act shifted responsibility to the directors of the distributing company, as it is the distributing company that must determine whether the beneficiary of the dividend meets the requirements of the withholding tax exemption, and if so, file a notification form. The recently announced amendments will place extra responsibility on the directors of the Dutch entity.

According to current legislation, the dividend withholding tax exemption is only available to foreign shareholders of a Dutch entity if the anti-abuse rule does not apply. According to this anti-abuse rule, the withholding exemption will not be granted if the following (cumulative) tests are met:

(one) of the main purpose(s) to hold a (direct) interest in the Dutch entity is the avoidance of Dutch dividend withholding tax ('subjective test'), and the structure or transaction is considered to be artificial ('objective test'). The objective test is considered not to be met (in which case the anti-abuse rule does not apply and the withholding tax exemption is available) if certain substance requirements are met by the foreign shareholder. These substance requirements include having at least €100,000 in salary costs and an own office space.

Amendments to come

The State Secretary considers that the Dutch anti-abuse rules are generally compatible with the Danish Cases, but slight amendments in the application are, in his view, necessary. This means that the current substance requirements may no longer be considered a 'safe harbour', but will rather function as mere indicators for the non-abusive character of a specific case.

This would give the Dutch tax authorities the opportunity to demonstrate that a structure is abusive...

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