October 03, 2023

Changes Announced to Dutch Entity Classification Rules and Tax Regimes for Funds

October 03, 2023/ Ruchelman P.L.L.C.

In the Netherlands, the third Tuesday in September, known as Princes’ Day, marks the opening of the new parliamentary year. The budget for the coming year is announced, including an accompanying Tax Plan. The 2024 Tax Plan was presented by the sitting Dutch government, which is merely a caretaker until a new coalition is formed in November. This year, the Tax Plan contains provisions that will have a significant impact on businesses and financial institutions, particularly in relation to Dutch investment institutions. One major goal is to simplify the tax characterization of various entities to eliminate the opportunity of planning through hybrid entities. The distinction between open and closed C.V.’s is eliminated. The possibility of planning for an F.G.R. to be opaque or transparent is mostly eliminated, but for those F.G.R.’s that adopt the redemption method as the exclusive means of disinvesting in a fund. Where transparent, an F.G.R. will not be eligible to benefit from the V.B.I. regime for collective investment vehicles and its 0% rate of tax. Paul Kraan, a tax partner at Van Campen Liem in Amsterdam, explains all, and advises that the general consensus in the Netherlands is that the legislative process should continue, having been subject to public consultation previously.

March 28, 2023

Telecommuting: Good Intentions, Bad Outcome

March 28, 2023/ Ruchelman P.L.L.C.

In 2017, the O.E.C.D. stated that the question of whether a home office constitutes a P.E. is rarely a practical issue because the majority of employees reside in the state where their employer has an office. Although that observation was undoubtedly accurate at the time, today it is safe to say that it did not age well. Paul Kraan, a Partner of Van Campen Liem, Attorneys and Tax Advisers, Amsterdam, and Mitchell Karman, an associate at Van Campen Liem, Attorneys and Tax Advisers, Amsterdam, explain the international tax implications of remote workers from a corporate income tax perspective, based on the O.E.C.D. Model Convention framework. Not surprisingly they point out ways in which the current framework arguably does not result in a desirable outcome. The article concludes with several recommendations.

May 30, 2022

Bilateral Investment Treaties: A Potential Legal Remedy in International Tax Disputes

May 30, 2022/ Ruchelman P.L.L.C.

Traditionally, international tax disputes tend to focus on provisions in treaties for the avoidance of double taxation. Typically, income tax treaties reduce withholding tax on various types of investment income, provide an increased threshold for imposing tax on business profits, and offer procedures to claim relief in the event of double taxation or the imposition of tax that is not in accordance with the terms of the relevant treaty. However, income tax treaties are not the only legal remedy available in an international tax dispute. Countries also conclude bilateral investment treaties (“B.I.T.’s”) with the aim of protecting and stimulating cross-border investment. In comparison to an income tax treaty, disputes under B.I.T.’s generally are settled by an independent arbitration panel. While a country may “dig in its heals” during the course of the arbitration process, it cannot follow a strategy of agreeing to disagree with its counterpart in the treaty partner country. Once an arbitration panel renders its decision against a government, the award can be converted into a judgment that is enforceable through seizure of assets owned by the government. Paul Kraan, a tax partner at Van Campen Liem in Amsterdam has authored the quintessential monograph on the use of a B.I.T. to obtain relief from confiscatory taxes or unfair treatment imposed by a signatory to an applicable B.I.T.

March 30, 2022

Use it or Lose it: The Future of Shell Entities in the E.U.

March 30, 2022/ Ruchelman P.L.L.C.

Shortly before Christmas, the European Commission published a proposal for a directive laying down rules to prevent the misuse of shell entities for improper tax purposes. The “Unshell Directive” applies to any company or other “undertaking,” regardless of its legal form that (i) is considered tax resident in an E.U. Member State and (ii) is eligible to receive a tax residency certificate. Targeted by the Unshell Directive are entities that have the following characteristics: (a) they lack real economic activities, (b) they are involved in certain cross-border arrangements forming a scheme to avoid and evade taxes, and (c) they allow their beneficial owners or parent company to access a tax advantage. Paul Kraan, a tax partner at Van Campen Liem in Amsterdam, explains the general exemptions, the gateway indicators, the reporting obligations, the presumptions, and potential rebuttals in this attack on certain special purpose vehicles.

March 30, 2021

Implementation of the Mandatory Disclosure Directive in the Netherlands – D.A.C.6

March 30, 2021/ Ruchelman P.L.L.C.

In his Article entitled “Implementation of the Mandatory Disclosure Directive in the Netherlands – D.A.C.6,” Paul Kraan of Van Campen Liem in Amsterdam, zooms in on a number of aspects and features of D.A.C.6 that are addressed in the Guideline, noting that there may be differences in interpretation between the various Member States with respect to the same provisions of the directive. Some are generic, others focus on specific Categories of Hallmarks such as B, C and E and the main benefit test. The article serves as a guide through a maze of troubling issues for which firm answers may not exist at this time.

October 31, 2018

Dutch Corporate Tax Reform: Dividend Tax Remains, A.T.A.D. Arrives, and Tax Rates Drop

October 31, 2018/ Ruchelman P.L.L.C.

Across the globe, the landscape for international tax is in a constant state of change. Nowhere is this more evident than in the Netherlands. On the third Tuesday of September, a repeal of the dividend withholding tax was announced. Within a month, it was withdrawn. Paul Kraan, a partner of Van Campen Liem in Amsterdam, discusses the remaining tax proposals presented by the Dutch government on the eve of the third Tuesday of September. These include provisions related to A.T.A.D. 1, such as G.A.A.R., an exit tax for corporations, a C.F.C. anti-abuse rule, and a cap on the deductibility of net interest expense. Also discussed is an existing unilateral exemption from withholding tax on cross-border dividend payments in (i) the context of an income tax treaty and (ii) the presence of economic substance for the direct or indirect shareholder. This exemption is likely to remain in the law.

October 24, 2017

Double Dutch: Dividend Tax Reform Extends Exemption, Yet Tackles Abuse

October 24, 2017/ Ruchelman P.L.L.C.

This year’s budget in the Netherlands contains a legislative proposal that introduces a unilateral exemption applicable to corporate shareholders based in treaty countries, such as the U.S., subject to stringent anti-abuse rules. In addition, it proposes to bring cooperatives used as holding vehicles within the scope of the dividend withholding tax rules. Soon after the proposals were announced, a coalition government was formed and announced a complete elimination of dividend withholding tax. Paul Kraan of Van Campen Liem in Amsterdam explains.