Companies receiving government support must abandon undesirable tax avoidance practices
The government decided today that companies engaged in undesirable tax planning can apply for individual support only if they satisfy two tax-related conditions concerning business location and transactions.
State Secretary for Finance Hans Vijlbrief explains: ‘Big companies facing difficulties as a result of the coronavirus crisis are eligible for government support if they make an important contribution to Dutch society. But at a time like this, it would be inappropriate to ask for taxpayers’ money while avoiding paying tax. That’s why individual businesses will have to meet certain conditions.’
The two conditions are as follows:
- Business location – Companies must not be based in a low-tax jurisdiction.
This means countries where the tax rate is too low, i.e. countries with a corporate tax rate of under 9% and countries on the EU blacklist. There are currently 24 countries in this category.
- Transactions – Companies must not make payments to a country where the tax rate is too low.
The Dutch establishments of the company seeking assistance must not pay interest or royalties to group entities in low-tax countries or countries on the EU blacklist.
The business location condition also applies to subsidiaries and shareholdings and to the direct shareholders of the company seeking assistance. This condition only applies to shareholders owning over 10% of the company’s shares. It does not apply where a company carries out real operations at subsidiaries in low-tax countries. An example would be an internationally operating company in the Netherlands that produces goods, via a subsidiary in a low-tax country with a sizeable workforce, for the Dutch head office.
Since a company that gets into difficulties as a result of the coronavirus crisis may need help fast, it can still obtain support if it agrees to satisfy the conditions within 12 months. The support package will include specific agreements on this.
The government’s decision is consistent with the many other measures it has already taken to tackle tax avoidance. It will help put an end to undesirable tax avoidance strategies and prevent money flowing to low-tax jurisdictions without being taxed.
The conditions presented today are part of a broader package of conditions governing support for individual companies.