Dividend stripping is a problem that occupies several governments. One of them being the Dutch government. In a press release issued by the Dutch Ministry of Finance on July 12, 2022 the Dutch government announces that it wants to take additional measures to combat dividend stripping.

With dividend stripping, the economic and legal rights to dividends are split in order to achieve a tax advantage. For example, the legal ownership of the shares is (temporarily) lent to a party that is in a more favorable tax situation, such as a Dutch shareholder who can offset the dividend tax. In the process the dividend payment is transformed into another sort of payment. Consequently Dutch dividend withholding tax is being avoided.

The Dutch government has investigated how to best improve the approach to dividend stripping. An internet consultation to map out the impact of possible alternative measures was also held. In the coming period, the government will investigate and further elaborate the following additional measures to combat dividend stripping more effectively:

-    A Limitation of the settlement or refund of dividend withholding tax (net return/base approach);

-    Stricter documentation obligations;

-    Legally establishing the reference date on which it is determined who is entitled to receive the dividend;

-    Introduction of a legal provision that determines whether a person (together with related parties) holds the economic ownership in the shares.

It is further investigated whether it is possible to convert these alternatives into effective and feasible measures. It’s also reviewed in which way the information and evidence position of the Dutch tax authorities can be improved. In addition, further research is being conducted into whether an additional measure that focuses on pension funds should be introduced.

Because dividend stripping often takes place across national borders the Dutch government will also be following international developments in legislation and regulations. The ministry emphasizes that since dividend stripping is constantly developing, it is also important that timely adjustments are made where necessary. That is why the Dutch government will monitor the newly to be introduced measures.

The Ministry states that in the coming period, further research will be conducted and it will be examined if and how these measures can be elaborated in a law proposal.

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