Tax News Update    Email this document    Print this document  

June 30, 2023

Netherlands issues new explanatory Decree on international tax matters

  • The Dutch State Secretary of Finance has published a new Decree on Corporate Income Tax, Personal Income Tax, Dividend Withholding Tax, International Tax Law (Decree IBRW, or the Decree). The Decree comes into effect on 29 June 2023.
  • The Decree explains and clarifies situations that have been presented in the practical implementation of international tax matters. More specifically, the guidance relates to the application of double tax treaties (DTT) concluded by the Netherlands, provisions for preventing double taxation in relation to other countries of the Kingdom of the Netherlands, and relevant provisions included in Dutch legislation, including the Decree for the Avoidance of Double Taxation 2001.

Executive summary

The explanations and clarifications included in the Decree are thematically arranged, with the following main sections:

  • Tax treaties, including the Netherlands-Curaçao Tax Arrangement (Chapter 2)
  • The Decree for the Avoidance of Double Taxation 2001 (Chapter 3)
  • The Corporate Income Tax Act 1969 and the Income Tax Act 2001 (Chapter 4)
  • The Dividend Tax Act 1965 (Chapter 5)

Furthermore, the Decree includes references to other decrees that pertain to the specific subjects included in the provisions for the prevention of double taxation. This is intended to ensure that taxpayers and practitioners understand the implementation policy of the Dutch State Secretary of Finance in the field of international tax law.

The Decree has come into effect on 29 June 2023. Some of the positions included in the Decree are derived from the Decree of 16 November 2004, no. IFZ 2004/828M, and of the Decree of 4 April 2008, no. IFZ2008/52M, both of which are now revoked. Note that the Decree provides the formal position of the Dutch Tax Authorities but is in principle not legally binding on taxpayers.

Detailed discussion

The most relevant and noteworthy explanations by the Dutch State Secretary of Finance in the new Decree are outlined in more detail below.

Explanations regarding tax treaties (Chapter 2)

Persons in scope of tax treaties

Treaty application for hybrid entities under the Netherlands-United States (US) DTT

Regarding the Netherlands-US DTT, the Decree explains who is considered the beneficial owner of dividends in the case of hybrid-entity recipients where the entity is transparent for US federal income tax purposes and nontransparent for Dutch corporate income tax purposes. Also, the Decree clarifies that the reduced dividend withholding tax rate (e.g., 5%) does not apply to individuals (only to legal entities). The clarifications generally also applies to other DTTs that (1) include provisions similar to the Netherlands-US DTT or (2) apply the Multilateral Instrument (MLI).


Holding period within dividend article under the Netherlands-Japan DTT

For the 12-month holding period within the dividend article, the Decree clarifies that the voting rights and ownership interest should be held by qualifying persons for the full period. However, this does not mean that the composition of the qualifying group of persons must remain unchanged.

Holding period within dividend article under the Netherlands-US DTT

For the 12-month holding period within the dividend article, the Decree clarifies that an internal transfer of the shares within the group will reset the holding period. If the share transfer is the result of a qualifying legal merger in which the acquiring entity takes the place of the disappearing entity, the holding period should not reset.

Dividends to trusts under the Netherlands-US DTT

The Decree clarifies that US-established trusts that receive dividends from a Dutch taxpayer should generally not be entitled to apply a zero-percent rate within article 10 of the OECD Model Tax Convention (MTC), as the trust should (in principle) not be considered a qualifying entity with capital divided into shares.

Methods for elimination of double taxation

Tax Sparing Credit and imputed interest under the Netherlands-Brazil DTT

For non-interest-bearing loans to which interest income is imputed for Dutch tax purposes at the level of the creditor, but no interest expense is imputed for Brazil tax purposes at the level of the debtor, the Decree clarifies that the Netherlands should not grant a Tax Sparing Credit.

Explanations regarding the Corporate Income Tax Act and Income Tax Act (Chapter 4)

Dutch residency fiction

Conversion of a foreign legal entity into a Dutch legal entity

The Decree clarifies that the residency fiction in article 2, paragraph 5 of the Dutch Corporate Income Tax Act should not apply to conversions with continuation of the foreign legal entity. Under the residency fiction, a Dutch entity such as a BV or NV is deemed to be tax resident in the Netherlands by virtue of being incorporated under Dutch law.

Open limited partnership

It has been clarified that the residency fiction in article 2, paragraph 5 of the Dutch Corporate Income Tax Act should apply to open limited partnerships (open CV) formed under Dutch law.

Explanations regarding the Dividend Withholding Tax Act (Chapter 5)

Dividend permit under treaty with PPT based on MLI

The Decree clarifies the following points with regard to the relationship between the Dutch interpretation of the principal purpose test (PPT) and the anti-abuse provisions in the Dutch domestic dividend withholding tax exemption:

  • The implementation of a separate anti-abuse provision in the Dividend Withholding Tax Act per 1 January 2018 aims to align the domestic anti-abuse provision with the Dutch interpretation of the PPT.
  • The domestic anti-abuse provision is not stricter than the PPT and thus will not be limited by the application of a tax treaty.
  • In cases where the Netherlands acts as the source country, the Netherlands will not go beyond the scope of the domestic anti-abuse provisions when applying the PPT.

As such, the Dutch State Secretary of Finance is of the view that the hypothetical situation that the domestic anti-abuse rules apply while the PPT would not apply, should in principle not arise in practice.


For the sake of completeness, note that the following topics are also addressed in the new explanatory Decree. (See the Decree for additional details).

Tax residency

  • Existing tax-residency disputes of legal entities; Dutch State Secretary of Finance refers to the MAP Decree (Government Gazette 2019,66227)
  • Explanation regarding residency of tax-exempt entities that are not listed as resident in the Netherlands-South Africa DTT

Permanent establishment

  • Clarification on wind farms to be considered a permanent establishment under the assumption that the exploitation qualifies as entrepreneurial activity for purposes of the Tax Arrangement for the Kingdom (BRK).
  • Clarification that "sub"-permanent establishments are not possible.

Income from immovable property

  • Explanation that cross-border farming activities of Dutch taxpayers in Belgium under the Netherlands-Belgium DTT are taxable in Belgium and the Netherlands is required to grant an exemption
  • Clarification that the Decrees issued on 28 May 2022 (no. IFZ2002/507M) and on 15 December 2015 (no. IZV2015/1054M) remain applicable to the current Netherlands-Germany DTT in relation to the allocation of profits of cross border farming activities

Business profits

  • For Dutch positions on profit allocation to permanent establishments, the Dutch State Secretary of Finance refers to the Decree on Profit Allocation to Permanent Establishments 2022 (Government Gazette 2022, 16683)

International shipping and air transport

  • Practical guidance on taxation of profits from storage of containers in the Netherlands used for international shipping and air transportation; container storage activities not exceeding 30 days are considered to directly relate to international transport and therefore should not be taxed in the Netherlands

Associated enterprises

  • For guidance on the arm's-length principal as outlined in article 9 of the MTC, the Dutch State Secretary of Finance refers to the Transfer Pricing Decree (Government Gazette 2022, 16685) and the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (OECD Guidelines)


  • Clarification on the application of a certain temporary rule for dividends considering the Tax Arrangement between the Netherlands-Curaçao (BRNC) in view of anti-abuse rules within Dutch domestic law
  • Clarification under the Netherlands-US DTT for the term "trade or business" in relation to tax-exempt pension funds, the definition under US tax law is followed as no definition has been included in the DTT or in Dutch domestic law
  • Clarification that the meaning of the main-purpose test in the Netherlands-UK DTT should be similar to the meaning of the principal-purpose test in the MLI


  • Clarification that under the Netherlands-Singapore DTT, a Dutch tax credit should be available for Singapore tax levied on the payment of accrued interest upon transfer of a receivable
  • Clarification that under the Netherlands-Malaysia DTT, the Netherlands does not have to grant a tax credit for Malaysian withholding tax related to a long-term payable as such interest payments should be exempt from Malaysian withholding tax under the DTT in view of the Dutch State Secretary of Finance
  • Explanation of the Dutch definition of "business" under the Netherlands-Belgium DTT, which should have the same meaning as "material business enterprise" in Dutch domestic law (as used in certain domestic rules, although revoked)


  • Clarification that under the Netherlands-Indonesia DTT a split should be made between licensing activities and services for royalty payments that relate to both, unless the services are ancillary to the licensing activity (i.e., maximum of 10% of the payment)
  • Clarification that certain subscription fees paid by end-users for accessing and using online products and services do not qualify as royalty

Capital gains

  • Clarification that under the Netherlands-US DTT the assessment of whether an interest in an entity qualifies as an interest in a "real estate entity" should be made at the time the interest is disposed of, or at the time the entity is liquidated


  • Clarification that for the policy on MAPs, the Dutch State Secretary of Finance refers to the Decree for Mutual Agreement Procedures (Official Gazette 2020, 32689)

Entitlement to benefits

  • Clarification related to the Netherlands-Germany DTT that the treaty may not prevent the Netherlands to apply domestic anti-abuse provisions

Decree for the Avoidance of Double Taxation (Chapter 3)

  • For the policy on avoiding double taxation, the Dutch State Secretary of Finance refers to the Decree for Avoiding Double Taxation under the Application of Tax Treaties and Other Double Tax Avoidance Arrangements (Official Gazette 2023, 12301)

Deductible expenses

  • Clarification that any Swiss dividends withholding tax that is not refunded by the Swiss government in relation to refund acceleration, while the zero-percent withholding tax rate under the Netherlands-Swiss DTT applies, is not deductible from the Dutch taxable base as collection costs

Exit taxation

  • Clarification that a revaluation reserve should be released upon migration of a Dutch taxpayer without continuing a Dutch permanent establishment; this release is included in the Dutch taxable base, however, in case of migration within the EU/EER a protective assessment should be observed

Branch exemption

  • Clarification that the Dutch branch exemption should be available to British overseas areas (British Antarctic Territory, South Georgia, and the Falkland Islands)
  • Clarification that tax reductions and exemptions, including the branch exemption, should in principle not be available in case of an unresolved tiebreaker regarding treaty residency
  • Explanation on the allocation of interest expenses in view of a permanent establishment of a Dutch fiscal unity, calculated on the average interest rate on the liabilities of the entity with the permanent establishment on a standalone basis, rather than on the liabilities of the entire fiscal unity
  • Clarification that a termination loss of a permanent establishment should be considered by the initial head office in the year of actual termination in a situation where the permanent establishment activities have been temporarily continued by another group entity as head office

Nonresident taxpayer obligation

  • Clarification that a reinvestment reserve by a nonresident taxpayer may be formed at cessation of the nonresident taxpayer obligation if Dutch taxation of future release is guaranteed for example through an agreement with the Dutch Tax Authorities

Loss utilization

  • Clarification that losses of a Dutch permanent establishment can be offset against profits in later years of a subsequent Dutch permanent establishment by the same foreign taxpayer (head office)


For additional information with respect to this alert, please contact the following:

Ernst & Young Belastingadviseurs LLP, International Tax and Transaction Services, Amsterdam

Ernst & Young Belastingadviseurs LLP, International Tax and Transaction Services, Rotterdam

Ernst & Young LLP (United States), Netherlands Tax Desk, New York

Ernst & Young LLP (United States), Netherlands Tax Desk, Chicago

Ernst & Young LLP (United States), Netherlands Tax Desk, San Jose/San Francisco

Ernst & Young Tax Services Limited (Hong Kong), Netherlands Tax Desk, Hong Kong

Ernst & Young (China) Advisory Limited (China Mainland), Netherlands/EMEA Tax Desk, Shanghai

Ernst & Young (China) Advisory Limited (China Mainland), Netherlands/EMEA Tax Desk, Beijing

EY Corporate Advisors Pte Ltd (Singapore), Netherlands/EMEA Tax Desk, Singapore

Ernst & Young LLP (United Kingdom), Netherlands Tax Desk, London

Ernst & Young Tax Co (Japan), Netherlands/EMEA Tax Desk, Tokyo

Published by NTD's Tax Technical Knowledge Services group; Carolyn Wright, legal editor