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Netherlands Puts Tax-Related Conditions on COVID-19 Aid

Posted on June 22, 2020

To mitigate “undesirable tax avoidance practices" in the Netherlands, the Dutch government will provide COVID-19 support to businesses only if they satisfy two tax-related conditions.

In a June 19 release, the Ministry of Finance said that businesses applying for government support during the pandemic cannot be based in a low-tax jurisdiction and cannot make interest or royalty payments to a country that has a low tax rate. The government said that businesses can still receive COVID-19 relief if they meet the conditions within 12 months.

A low-tax jurisdiction, according to the MOF release, is a country with a corporate tax rate below 9 percent or that appears on the EU tax haven blacklist. In February, finance ministers added four jurisdictions to the EU list of noncooperative jurisdictions for tax purposes: the Cayman Islands, Palau, Panama, and Seychelles.

According to the release, the business location condition will apply to a business’ subsidiaries and its shareholders that own more than 10 percent of the business’s shares. The government noted that this condition does not apply when the business “carries out real operations at subsidiaries in low-tax countries.”

“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,” State Secretary for Finance Hans Vijlbrief said in the release.

Recently the Dutch government extended COVID-19 tax relief measures for three months as part of a €13 billion aid package dedicated mostly to subsidizing wages to keep people employed. The COVID-19 aid package, referred to as Emergency Package 2.0, was announced May 20 in a letter to parliament. The economic relief measures followed the country’s first emergency package of nearly €20 billion on March 17, which was set to expire by June 1.

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