What You Need to Know About the Dutch Tax Haven Blacklist

Late last year, the Netherlands showed that it would be tough on tax havens and those who choose to use them by publishing a blacklist of tax havens. While the most recent tax haven blacklist from the European Union includes five jurisdictions, the Dutch blacklist includes 21. All of these are low-tax jurisdictions that the Netherlands will be blacklisting as a portion of its challenges to tax avoidance.

The Blacklisted Jurisdictions

The Dutch blacklist includes all five jurisdictions found on the European Union’s blacklist. Those are Trinidad and Tobago, Samoa, Guam, the U.S. Virgin Islands, and American Samoa. In addition to those, the blacklist from the Netherlands adds 16 more jurisdictions, including the United Arab Emirates, the Isle of Man, Guernsey, the Cayman Islands, Jersey, and the British Virgin Islands. The list also includes the Turks and Caicos Islands, Vanuatu, Qatar, Saudi Arabia, Kuwait, Bermuda, Belize, Bahrain, the Bahamas, and Anguilla.

Every jurisdiction on the Dutch blacklist for tax havens has a low corporate income tax rate of less than 9 percent, and in some cases, no corporate income tax.

The Dutch blacklist will receive an update every single year. It is also important to note that if the EU adds jurisdictions to its blacklist that the Netherlands has not yet added to its own list, this will effectively add that jurisdiction to the Dutch blacklist, at least in terms of actions.

What It Means

The blacklist created by the Netherlands will be a part of the country’s fight against various methods of tax avoidance. The Dutch State Secretary for Finance, Menno Snel, indicated that with this strict blacklist, the Netherlands aims to show how serious it is when fighting tax avoidance.

How the List Will Be Used

To better understand the new Dutch blacklist, you must get a feel for how it will be used. First of all, this list will assist with controlling tax avoidance and foreign companies by stopping companies from placing their assets in jurisdictions with low tax rates.

Starting in January 2021, the list will be used for conditional withholding tax on both royalties and interest. In other words, companies with registration in a jurisdiction on the blacklist will have to pay 20.5 percent in tax on royalties and interest that the Netherlands gives them. Finally, the Dutch custom and tax administration will not deliver any transactions rulings related to companies whose headquarters are in blacklisted jurisdictions.

Reactions from Jurisdictions on the Blacklist

Unsurprisingly, the jurisdictions added to the Dutch blacklist have expressed a great deal of displeasure about their inclusion on the list. Officials from the Isle of Man pointed out that their jurisdiction’s regulatory rating is better than that of the Netherlands and indicated surprise at its inclusion. Some from the jurisdiction feel that it may simply be the Netherlands working to fight its own past stigma regarding taxes.

The Cayman Islands indicated its “regret” that the Dutch created its own blacklist with additional jurisdictions, particularly that it included the Cayman Islands. A representative of the Cayman Islands indicated that it does not account for the way that the Cayman Islands have shown it adheres to international standards related to tax transparency as well as its efforts to work with the Code of Conduct Group from the EU to address economic substance concerns.

The Bahamas displayed a similar sentiment, indicating “serious concerns,” particularly if other European Union member states also go further than the list of five blacklisted jurisdictions the EU created. The Bahamas had already begun using diplomatic solutions to discover why the Netherlands included it on the blacklist. This is yet another jurisdiction which indicated its inclusion is unfortunate and/or surprising given its cooperation with the Netherlands in tax-related matters.




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