THE NETHERLANDS - No Deal Brexit - Dutch transitional tax law to be implemented

May 2019

On 4 February 2019, the Dutch Secretary of Finance announced in a letter that the Netherlands will introduce (temporary) transitional legislation if there is a no-deal Brexit.

In this letter, the Dutch Secretary of Finance mentions that the uncertainty in relation to the upcoming Brexit is undesirable. Therefore – to prevent that immediate (tax) consequences and administrative burdens will occur for taxpayers – it is announced that a transitional tax law would be introduced in the event of a no-deal Brexit.

A few examples of negative implications of a no-deal Brexit, which are expected to be covered by the announced transitional legislation, are listed below:

• European Directives
  European Directives, such as the Parent-Subsidiary Directive, Interest and Royalty Directive and the Merger Directive would no longer apply. Consequently, withholding taxes could apply, depending on provisions of the NL-UK tax treaty;
• Dutch fiscal unities
  Currently, it is possible that two Dutch companies, of which the shares are held by the same UK-company, are included in a Dutch fiscal unity (sister fiscal unity). However, in the event of a no-deal Brexit, the UK would be considered a third country (non-EU). As a result, fiscal unities between Dutch entities and UK entities will end by law, because the requirements for a sister fiscal unity would no longer be met.
• Extension of payment
  No extension of payment would be granted by the Dutch tax authorities in relation to ‘exit tax’ liabilities.

Next steps

If you are doing business in the UK and/or have a group structure in which UK-companies are included, we strongly advise you to review which implications a no-deal Brexit may have for your company. Please contact your BDO adviser to assess whether your company might be affected by Brexit.

Hans Noordermeer
[email protected]

Niek de Haan
[email protected]