In a policy decision of 25 April 2016 State Secretary for Finance Wiebes has implemented three rulings in which the Supreme Court, following the example of the European Court of Justice, grants foreign investors the right to a dividend tax refund and the application of the tax-free allowance.
Dividend tax
An investor residing outside the Netherlands who invests in Dutch shares is not entitled, under Dutch tax legislation, to a set-off against the Dutch dividend tax (15% of the gross dividend) withheld on the dividends paid. For this foreign taxpayer, the dividend tax withheld constitutes a final levy. For a foreigner, investments in Dutch shares do not form part of the Dutch tax base for income from savings and investments (Box 3). The foreign taxpayer is therefore not required to submit an income tax return in the Netherlands in this regard.
To the extent that the final tax burden on dividends received by the foreign investor in the Netherlands is greater than that borne by a comparable investor resident in the Netherlands, the foreign investor is entitled to a refund of dividend tax on the difference, except where the difference in tax burden can be fully offset in the investor’s country of residence under the tax treaty.
The application for a refund must be submitted to the Tax and Customs Administration within 5 years of the end of the calendar year in which the foreign investor received the Dutch dividend (if the investor is not a natural person, a shorter period applies: 3 years). A separate application must be made for each calendar year.
Tax-free assets
A foreign investor who invests in assets that are taxed in the Netherlands as income from savings and investments (Box 3) is, contrary to the Dutch tax legislation currently in force, entitled to the tax-free allowance. Pending a change in the law, the State Secretary approves, in the decision referred to above, that the tax-free allowance be taken into account.
The most common type of investment made by a foreign national, which is taxed under Box 3 in the Netherlands, is property (for example, a holiday home situated in the Netherlands).
Tax assessments issued to foreign investors following the publication of the aforementioned decision will take the tax-free allowance into account. The Tax and Customs Administration will only be willing to reconsider older tax assessments if the foreign investor has safeguarded his or her formal rights by means of (pro forma) objections.