The Netherlands: Dividends - new standard reclaim procedure

02.03.2020

Clearstream Banking1 informs customers that its local depository BNP Paribas Securities Services (BNP) recently obtained clarifications from the Dutch Tax Authorities (DTA) on the tax reclaim process, resulting in a change of BNP’s applicable procedure.

Effective

immediately

the following standard reclaim procedure applies to any new refund request and to requests already filed through Clearstream Banking but not yet introduced by BNP to the DTA. 

Background

Dividends paid by Dutch companies to non-resident shareholders are subject to 15% withholding tax. This tax may be reduced or eliminated under an applicable double taxation treaty (DTT) or through the Dutch Domestic law under provisions of Article 10 of the Dutch Dividend Withholding Tax Act of 1965.

Dividends paid by Dutch companies to Dutch shareholders are also subject to 15% withholding tax. 

As in Article 10 of the Dutch Dividend Withholding Tax Act of 1965 (“DWHTAct”), Dutch institutional investors that are exempt from Dutch corporate tax can claim a full refund of the Dutch dividend tax withheld. This includes Dutch pension funds or exempt entities (both legal entities and public entities).

However, Dutch tax-exempt investment funds (“VBI”/“VrijgesteldeBeleggingsinstelling”) are excluded.

With this new tax refund procedure, to determine the eligibility to a full or partial refund it is necessary to assess if the investor is:

  • a direct investor: an investor being the legal owner of the Dutch shares and the ultimate beneficial owner of the Dutch dividends; or
  • an indirect investor: an investor having invested through a Dutch or foreign intermediate entity such as trust, partnership, investment fund or other vehicle/structure holding legal title of the Dutch shares.
    In the case of indirect investors, it is necessary to determine whether the tax can be claimed by the investment vehicle/structure or by its underlying participants/beneficiaries. 

It is therefore important to know if the investment vehicle/structure is considered as tax transparent and if the indirect investor qualifies as the beneficial owners of the Dutch dividends as specified in the Dutch tax legislation. 

Tax reclaim procedure and eligibility criteria

Tax refunds can be claimed based on the DTT provisions or Domestic Law. Each investor is responsible for assessing its status and its eligibility to either the domestic law or DTT provisions.

Please refer to the Refund scenarios spreadsheet attached below that summarises the eligibility for reclaims.

Based on DTT provisions

Direct or indirect foreign investors may benefit from the provisions of the DTT signed between their country of residence and The Netherlands. The reclaim can be requested by each direct or indirect investor or by a transparent Investment vehicle through the “collective tax reclaim procedure”: 
The Dutch Law provides that a tax transparent foreign investment vehicle established in a DTT country can file a tax reclaim on behalf of its underlying investors. This collective claim can only be requested if the tax transparent foreign investment vehicle has obtained an authorisation (licence) from the DTA. Such licence must be requested by the tax transparent foreign investment vehicle directly to the DTA, neither Clearstream Banking nor BNP will be able to assist in obtaining this licence. If granted by the DTA, an authorisation number will be allocated to the tax transparent foreign investment vehicle. This number has to be mentioned in all collective tax reclaim requests. 

A list of countries that have a DTT in place is available on the DTA website

Based on the Dutch Domestic law (Tax Act 1965)

Dutch and foreign tax-exempt entities may obtain reclaims as per the provisions of article 10 of the law. 

The exemption is available to:

Foreign entities fulfilling all the following conditions: 

  • Being the effective beneficial owner of the dividend;
  • Not being subject to profit tax in their country of residence;
  • Being recognised as tax-exempt entities according to Dutch tax legislation;
  • Not performing any investment activity meaning that they do not act as an investment institution;
  • Being resident 
    • in the European Union (EU) or in the Economic European Area (EEA), or
    • in a country that has concluded with the Netherlands an agreement for the exchange of information (TIEA). Lists of qualifying countries are available on the OECD website and the Exchange of Tax Information Portal.
  • The dividends are derived from portfolio investments (for entities resident in a country that is not part of the EU/EEA).

Supranational and International organisations recognised by the Dutch Ministry of Finance. A list is attached below (List of supranational and international organisations). Only the entities in that list can obtain a full exemption.

Dutch institutional investors (including pension funds and exempt entities) that are exempt from corporate tax can obtain a full refund of Dutch dividend withholding tax. 

Dutch tax-exempt investment funds (“VBI” / “VrijgesteldeBeleggingsinstelling”) are excluded.

Dutch individuals subject to income tax and Dutch corporate investors subject to corporate tax are excluded from this refund procedure. They should seek the advice of their tax advisors to declare this tax through their annual declarations. 

Documentation requirements

Customers of Clearstream Banking wishing to obtain a refund for themselves or on behalf of a final investor must provide the following documentation by the prescribed deadline. 

For the benefit of the DTT provisions

For all types of investors

  • A One-time Letter of Request to Clearstream Banking for Refund of Dutch Withholding Tax: to be completed by the customer of Clearstream in the name and on behalf of the claimant.
  • Certificate of Residence (COR) issued by the foreign investor's tax authorities. The COR should not be older than two years prior to the year in which the dividend tax was withheld;  
  • Copies of the full chain of letters of request/power of attorney; 
  • Full chain of credit advices (dividend vouchers); 
  • For residents of the U.S.A., the Form IB95 USA or IB96 USA together with a valid form 6166 issued by the IRS. 

In addition, for direct investors

  • Annex 2 - Request for refund of dividend tax under an applicable tax treaty - Foreign applicant, to be provided per tax reclaim.

In addition, for indirect investors investing through a transparent Dutch investment vehicle

  • Annex 2 - Request for refund of dividend tax under an applicable tax treaty - Foreign applicant, to be provided per tax reclaim.

In addition, for indirect investors investing through a transparent foreign vehicle

  • A Confirmation from the Tax Authorities of the investment vehicle’s country or tax opinion from a Big Four tax firm that the foreign investment vehicle interposed is recognised as tax transparent according to the law of its own country;
  • Annex 2 - Request for refund of dividend tax under an applicable tax treaty - Foreign applicant, to be provided per tax reclaim.

In addition, for indirect investors investing through a non-transparent foreign vehicle. 

Important: This category of investors is eligible only if the non-transparent foreign vehicle is in the same DTT country as the benefical owner. In that case the refund is possible by the foreign vehicle only. If they are in different countries, no reclaim is possible.

This refund service is not supported by the local depository nor by Clearstream

Under the collective reclaim procedure
A pre-requisite to this process is the delivery of a licence by the DTA to the investment vehicle. Customers interested in that procedure must request the licence directly to the DTA and seek the advice of their tax advisor for further details in that respect. 
Once the licence number is obtained, customers can request the reclaim to Clearstream with the following documentation (in addition to the documentation to be provided by all types of investors): 

  • A copy of the agreement letter issued by the DTA authorising the foreign transparent investment vehicle to lodge a collective claim on behalf of its underlying investors;
  • A Commitment letter confirming that the vehicle has obtained an agreement from the DTA and by which they commit to inform BNP Paribas, through Clearstream, of any change of circumstances that might render the agreement delivered by the Dutch Tax Authorities to the foreign investment vehicle no longer valid.

For the benefit of the Dutch domestic law (Tax Act 1965) provisions

Under the Tax Act 1965, the following eligible beneficial owners should be considered as fully tax exempt. No partial exemption applies. 

For all types of investors

  • A One-time Letter of Request to Clearstream Banking for Refund of Dutch Withholding Tax: to be completed by the customer of Clearstream in the name of and on behalf of the claimant.
  • Copies of the full chain of letters of request/power of attorney; 
  • Full chain of credit advices (dividend vouchers); 
  • For residents of the U.S.A., the Form IB95 USA or IB96 USA together with a valid form 6166 issued by the IRS. 

In addition, for direct Dutch investors

  • Annex 1 - Request for refund of dividend tax under article 10 - Dutch applicant, to be provided per tax reclaim.

In addition, for direct foreign investors

  • Certificate of Tax Exemption issued by the foreign investor’s Tax Authorities (as proof that the investor is exempt from profit tax in its country of residence) and not older than 2 years prior to the year in which the dividend tax was withheld;
  • Confirmation from the DTA or tax opinion from a Big Four tax firm that the foreign claimant is recognised as an exempt entity according to Dutch tax legislation (that is, that the investor would have been exempt from corporate income tax if it had been Dutch resident);
  • Annex 3 - Request for refund of dividend tax under article 10 - Foreign applicant, to be provided per tax reclaim. 

In addition, for indirect Dutch institutional investors investing through a tax transparent Dutch investment vehicle

  • Confirmation from the DTA or tax opinion from a Big Four tax firm that the Dutch investment vehicle is classified as tax transparent as per Dutch tax law;
  • Annex 1 - Request for refund of dividend tax under article 10 - Dutch applicant, to be provided per tax reclaim.

For indirect Dutch institutional investors investing through a tax transparent foreign investment vehicle

  • Confirmation from the DTA or tax opinion from a Big Four tax firm that the foreign investment vehicle is classified as tax transparent as per Dutch tax law;
  • Annex 1 - Request for refund of dividend tax under article 10 - Dutch applicant, to be provided per tax reclaim.

In addition, for indirect foreign investors investing through a tax transparent Dutch investment vehicle

  • Certificate of Tax Exemption issued by the foreign investor’s Tax Authorities (as proof that the investor is exempt from profit tax in its country of residence) and not older than 2 years prior to the year in which the dividend tax was withheld; 
  • Confirmation from the DTA or tax opinion from a Big Four tax firm that the foreign claimant is recognised as an exempt entity according to Dutch tax legislation (that is, that the investor would have been exempt from corporate income tax if it had been Dutch resident); 
  • Confirmation from the DTA that the Dutch investment vehicle is considered as tax transparent as per Dutch tax law.
  • Annex 3 - Request for refund of dividend tax under article 10 - Foreign applicant, to be provided per tax reclaim. 

In addition, for indirect foreign investors investing through a tax transparent foreign investment vehicle 

  • Certificate of Tax Exemption issued by the foreign investor’s Tax Authorities (as proof that the investor is exempt from profit tax in its country of residence) and not older than 2 years prior to the year in which the dividend tax was withheld; 
  • Confirmation from the DTA or tax opinion from a Big Four tax firm that the foreign claimant is recognised as an exempt entity according to Dutch tax legislation (that is, that the investor would have been exempt from corporate income tax if it had been Dutch resident); 
  • Annex 3 - Request for refund of dividend tax under article 10 - Foreign applicant, to be provided per tax reclaim.

In addition, for supranational and international organisations

  • In case of indirect investment via an investment vehicle, a confirmation from the DTA or tax opinion from a Big Four tax firm that the foreign or Dutch investment vehicle is recognised as tax transparent according to Dutch tax law;
  • Annex 4 - Request for refund of dividend tax under article 10 - Supranational/International organisation, to be provided per tax reclaim. 

Frequency/Validity of the forms

Document

Frequency

Validity period

One time Letter of request for tax refund of Dutch dividend withholding tax

Per claimant

Until a change of circumstances

Dividend vouchers

Per payment

Valid for the concerned dividend payment for which tax reclaim is filed

Certificate of Residence issued by the foreign investor’s tax authorities

Per claimant

Not older than 2 years prior to the year in which the dividend tax was withheld

Form IB95 USA or Form IB96 USA

Per tax reclaim

Valid for the concerned dividend payments for which tax reclaim is filed

Certificate of Tax Exemption issued by the foreign investor’s tax authorities

Per claimant

Not older than 2 years prior to the year in which the dividend tax was withheld

Confirmation from the Dutch Tax Authorities or tax opinion from a Big Four tax firm

Per claimant

Not older than 2 years prior to the year in which the dividend tax was withheld

Self-declaration from the claimant

Per tax reclaim for third party accounts

Valid for the concerned dividend payments for which tax reclaim is filed

Commitment Letter

Per claimant

Until a change of circumstances

Deadline for receipt of documentation

The statutory deadline for reclaiming withholding tax is five years after the end of the calendar year in which the income is paid. The deadline can vary depending on the DTT of the country of residence of the beneficial owner. Please refer to the official DTT list on the website of the DTA.

The deadline by which Clearstream Banking must receive the documentation for an application is, at the latest, two months before the relevant statutory deadline however BNP strongly recommends to submit tax reclaims at least six months prior to the relevant statute of limitation.

All refund applications received after Clearstream Banking deadline will be processed on a best-efforts basis. However, in such cases, Clearstream Banking will apply an extra charge and accepts no responsibility for forms that have not reached the Dutch Tax Authorities by the date considered as being the statute of limitations deadline.

With respect to tax refunds in general, customers are reminded that Clearstream Banking accepts no responsibility for their acceptance or non-acceptance by the tax authorities of the respective country. It is the customer’s responsibility to determine any entitlement to a refund of tax withheld, to complete the forms required correctly and to calculate the amount due.

Further information

For further information, please contact the Clearstream Banking Tax Help Desk, Clearstream Banking Client Services or your Relationship Officer.

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1. Clearstream Banking refers collectively to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248, and Clearstream Banking AG, registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500.