THE NETHERLANDS - No Deal Brexit - Dutch transitional tax law to be implemented
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.
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.
Niek de Haan