As of January 1, 2024, the dividend withholding exemption will be expanded. On October 2, 2023, the State Secretary of Finance published a decree stipulating that dividend payments to institutions exempt from corporate income tax are also exempt from dividend withholding tax as of 2024. This extension is a welcome burden reduction for, among others, the non-profit sector with subsidiaries.
Extension withholding exemption as of 2024
In principle, dividend-paying companies are liable to withhold dividend tax, unless the participation exemption in the corporate income tax applies and there is no abuse. Distributions within fiscal unit corporate income tax are also exempt. To apply the participation exemption or form a fiscal unity, the receiving institution must be subject to corporate income tax.
Institutions are exempt from corporate income tax (not subject) if the subjective or objective exemptions are met, for example municipalities, health and welfare institutions, libraries and foundations and associations with low positive or negative results. Receiving institutions that are (partially) exempt can apply for a refund from the Tax Office to receive a refund of the withheld and remitted dividend tax.
Simplification and obligations from 2024
In order to qualify for the withholding exemption from January 1, 2024, the distributing entity must apply for a qualification decision from the Tax Office. In principle, the decision is valid for a period of four years and is revoked if the conditions are no longer met.
The decision should be received prior to the dividend payment. The dividend tax return should be accompanied by a statement with the name and address details of the receiving Vpb-exempt institution.
Cross-border situations
The withholding exemption also applies to comparable foreign non-profit entities. They must demonstrate that they would not have been subject to Dutch corporate income tax had they been established in the Netherlands. For comparable foreign entities established outside the EU/EEA, the additional condition applies that the Netherlands has agreed on an information exchange arrangement with the relevant country.
Conclusion
If you are planning to distribute dividends within your non-profit structure, whereby you participate in companies, be well advised beforehand. Recent developments may affect your tax position. For questions, please contact us via your relationship manager, by phone on 040-2 504 504 or the contact form below.