Unilever has plan B if Netherlands dividend tax isn't scrapped

Unilever has a plan B for compensating British shareholders should the Netherlands not scrap dividend tax as the government plans to do. The British-Dutch company assumes that dividend tax will be a thing of the past in the Netherlands by 2020, but even if it isn't, this plan will allow Unilever to set up its head office in Rotterdam without shareholders losing out, NOS reports.

Unilever currently hast two head offices, one in London and one in Rotterdam. Earlier this year the company decided to merge its two head offices into only one head office in Rotterdam and offer only one type of share. This decision was partly made because the Dutch government promised to abolish dividend tax. The move also means that Unilever falls under Dutch law and is better protected against hostile takeovers.

The government's plan to abolish dividend tax has caused a lot of debate in the Netherlands. Should the tax remain in place, the move to Rotterdam could mean that British Unilever shareholders would lose out. Dutch shareholders can settle dividend tax with other taxes, but that is not always possible for foreign shareholders.

Unilever therefore has a plan B to accommodate foreign shareholders if dividend tax is not abolished. Instead of paying out profits, foreign shareholders can receive a so-called capital refund. That is money that the company has in cash, regardless of profit or loss, and shareholders do not have to pay dividend tax on it. This measure can't last forever, as the capital will run out at some point. Currently Unilever has 58 billion euros in cash - enough to pay shareholders for years. In 2017 the company paid out 4 billion euros in dividends.

Next month Unilever shareholders in Great Britain and the Netherlands will vote on the company's relocation to Rotterdam. The move is scheduled to happen before Christmas. Whether shareholders will agree with the move, remains to be seen. According to the broadcaster, British shareholders in particular are concerned about the company's headquarters leaving Great Britain. They fear that Unilever being better protected against acquisitions in the Netherlands could be bad for the company's value.