Netherlands concludes new tax treaty with Malawi

The Netherlands has concluded a new tax treaty with Malawi. A key change is the inclusion of anti-abuse provisions. The treaty was signed in Washington by the Dutch Minister for Foreign Trade and Development Cooperation, Lilianne Ploumen, and Malawi’s Finance Minister Goodall Gondwe. ‘This is in keeping with the government’s policy of including anti-abuse provisions in our tax treaties with 23 developing countries,’ said Ms Ploumen. ‘This helps in the fight against tax avoidance.’

The tax treaty with Malawi provides certainty on tax matters and strengthens administrative cooperation, stimulating investment and safeguarding taxing rights. State Secretary for Finance Eric Wiebes, who worked with Ms Ploumen on the revision of the treaty on behalf of the Netherlands, said: ‘The treaty includes arrangements on the exchange of tax information and on administrative assistance to combat tax avoidance and evasion. The revised treaty will enable the tax authorities in Malawi and the Netherlands to work together better.’

The Netherlands aims to support developing countries, bilaterally and through international initiatives, in their efforts to improve their tax systems and the organisation of their tax administrations. This is reflected for example in the agreements on withholding tax rates. Dividends will be subject to 5% withholding tax in the case of shareholdings of at least 10%, and 0% for pension funds. The standard rates in both countries will apply to other dividends. Interest will be taxed at 10% and royalties at 5%.

The tax treaty contains anti-abuse provisions to prevent the benefits of the treaty being used solely to avoid paying tax. Taxpayers who improperly use or abuse the provisions of the tax treaty will lose the right to invoke them. The anti-abuse provisions relate to taxes on dividends, interest and royalties.

The inclusion of anti-abuse provisions is a key feature of this treaty. The Netherlands wishes to play a leading role in tackling tax avoidance. The renegotiation of tax treaties with 23 developing countries is a clear example of the action it is taking on this front.