Chemical group OCI avoided €750 million dividend tax in Netherlands: report

After Thursday, the chemical group OCI will have paid 5 billion euros to its shareholders tax three through a loophole in the law. The Netherlands missed out on 750 million euros in dividend tax, NRC reports.

On Thursday, the OCI shareholders will vote on two minor changes to the articles of association at the shareholders meeting in Amsterdam. First, they will approve a formal 2.7 billion euros increase in the company’s capital. Then, they will reduce the capital by the same amount. In this way, OCI can pay out 2.7 billion euros to its shareholders tax-free.

OCI, the market leader in fertilizer and the world’s largest producer of plastic melamine, did the same thing in 2022 and 2023. In total, it involves 5 billion euros, avoiding 750 million euros in dividend tax, according to the newspaper.

The question here is whether this “capital” returned to shareholders is, in fact, profits that should be taxed. “You would say it is profit. If it walks like a duck, talks like a duck, tax it like a duck,” Jan van de Streek, professor of tax law at the University of Leiden, told NRC. “But because of the opportunity offered by the law, you stick the label ‘capital’ on it, and then suddenly it is no longer a profit. Anyone who wants to tackle this must change the law.”

AkzoNobel, TomTom, and Ahold, among others, have also previously used this capital return. Dutch law simply offers them the opportunity to do so, Van de Streek said. “It is allowed. It is in the law. So you cannot even say that undesirable use is being made of the tax options here.” The only requirement is that the shareholders agree to an amendment to the articles of association in which capital return is regulated. Capital can always be returned to shareholders tax-free.

A spokesperson for the Ministry of Finance told NRC that it is investigating how many companies distribute tax-free capital to shareholders in this way and whether it should address the issue. “We hope to complete this in the coming months and will then inform parliament. It is our priority.”