Netherlands to get tougher on tax avoidance with new withholding tax

The cabinet will push ahead with its stated intent to take a tougher stance on tax avoidance, proposing a new withholding tax which would cap dividend flows to tax havens effective from 2024, a statement from the government said. The new measure would make it less attractive for corporations to transfer their dividends from or via the Netherlands to international tax havens, defined as countries which offer a profit tax rate of less than 9 percent.

The proposal comes after it emerged that corporations benefit from tax havens considerably more than had been previously calculated. An estimated 37 billion euros was stashed away from government reach in 2018, 15 billion more than the government originally thought.

"With this additional withholding tax, we are again taking a major step to tackle tax avoidance. Now it is important to make even better agreements about this internationally, so that tax cannot be avoided through other countries," State Secretary for Finance Hans Vijlbrief said in a statement on Friday.

The withholding tax would mark a hardening stance against tax avoidance, two weeks after the government affirmed that companies whose business is organized in international tax havens are still entitled to claim Covid-19 support money. Several other European nations have forbidden those companies from taking part in their national assistance schemes amid allegations of tax avoidance.