How do the Thai Tax Authority and the Dutch Tax and Customs Administration deal with dividends obtained from the Netherlands?
Dear readers,
How do the Thai Tax Authority and the Dutch tax authorities deal with dividends obtained from the Netherlands? As a -currently- resident taxpayer, dividend tax is withheld from the dividend payments from my substantial interest in participation in a Dutch BV. In addition, the tax authorities allow me to pay income tax on it (minus the dividend tax withheld).
What will it be like if I am a non-resident taxpayer in a few years due to permanent residence in Thailand? Dividend payments from the Netherlands will then continue.
In the most recent articles by Lammert de Haan about reporting, I did not come across anything about 'box 2' aspects.
Will this be different in the new tax treaty, the text of which I cannot find, than in Article 10 of the old treaty from 1976? Moreover, the text of the treaty makes me dizzy because of the official language and it seems to me that the percentages from that article 10 no longer apply, because they predate the box system.
Many thanks for the answers.
Regards,
John
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Johannes, take a look at Lammert de Haan's advice that you apparently didn't find:
https://www.thailandblog.nl/lezersvraag/belasting-in-thailand-over-freelance-inkomsten-uit-nederland/#comments
But you're talking about "a few years." In that case, I think it makes more sense to wait for the new treaty.
In case you are (sole) director of that BV: I assume that you have discussed with your NL tax advisor the consequences of what can happen if the sole director no longer lives in NL?
Hi Erik,
Thank you very much for your answer!
I had seen that advice, but it concerned box 1 income from work (Articles 15 and 16 of the old treaty). My question is more specific about box 2 dividend (Article 10).
The new treaty will indeed already be in force when I settle in Thailand, but I also wondered if anything was known about a possible new Article 10 because I can't find that treaty, apparently still being drafted; not even as a link in the topics here about that treaty.
John
best is just to wait until new treaty is there.
But what will remain is the following. Has nothing to do with treaty NL Thailand. Just a general rule.
The BV is located at the place where the director-major shareholder (DGA) or de facto management lives. If the actual management of the BV (or NV) emigrates, the BV / NV will move with the owner. The BV must settle on the hidden reserves, fiscal reserves and goodwill. It is important that the Netherlands has concluded a tax treaty with the country to which the de facto manager emigrates.
Hi John,
Indeed, I have paid little attention to box 2 when living in Thailand. This is not a very common situation.
As you describe the situation, it concerns a so-called participation dividend, ie: you then own 5% or more of the share capital. In the other case, we talk about an investment dividend and the rules are different.
Under the current Treaty, both countries are allowed to levy on this. However, Thailand must subsequently grant a reduction in tax, in accordance with Article 23(6) of the Treaty.
You then wonder how things will be arranged in the new Treaty to be concluded with Thailand.
Although the text of the new Treaty is not yet available, I can already express an expectation.
In the OECD model tax treaty, the source state is granted a tax right of 5% for so-called participation dividends (with a minimum capital participation of 25%) and 15% for other dividends.
According to the 2020 Fiscal Treaty Policy Memorandum, however, contrary to the OECD model tax treaty, the Netherlands is aiming for an exclusive state of residence tax for participation dividends (i.e. with a participation of 5% or more).
This aim is also completely understandable from an economic point of view. After all, the Dutch economy benefits from the influx of foreign capital.
Thank you Lambert,
It is becoming increasingly clear to me, especially through your articles and responses, that in terms of taxation there are or will be few or no benefits of living in Thailand. Fortunately, there are still plenty of benefits left in other areas.
The question was what the current article 10 actually entails (in Jip and Janneke language) and whether anyone has seen whether the article changes in the draft treaty.
The rest of your response, a moving BV or its board, is completely out of the question; is also not that easy for a campsite.
Johannes, for a 5% or more shareholder like you, you can easily reproduce Article 10 of the current treaty by 'translating' Articles 1 and 2.
The official text reads as follows:
1. Dividends paid by a company which is a resident of one of the States to a resident of the other State may be taxed in that other State.
2. However, such dividends may be taxed in the State of which the company paying the dividends is a resident, but the tax so charged shall not exceed 25 per cent of the gross amount of the dividends.
My translation in simple Dutch.
1. Dividends paid by a BV in NL to a resident of TH may be taxed by TH. (Resident here means a human being, not a Ltd under Thai law. Otherwise, you will be taken to the other questions.)
2. These dividends (as under sub 1) may also be taxed (so double, see Lammert's text) in NL, but then the tax may not exceed 25% of the gross dividend.
Further on in article 10 it is stated what should be understood by dividend. The rest of the article is about companies that have capital participations in each other, but I do not read anywhere in your questions that this is the case.
I would take Johnkohchang's statement seriously. Emigration of the board of a BV can have unpleasant consequences. Consult with the advisors of the BV in good time. The often used solution is that the emigrant remains a shareholder but resigns from the position of director.
Erik, Johnkohchang's remark (settlement with the tax authorities) should not be taken seriously in this case. Johannes writes about “a campsite”.
This means that this concerns a permanent establishment in the Netherlands.
If Johannes continues this permanent establishment in the Netherlands after emigration, he does not have to settle with the tax authorities regarding the reserves / goodwill, as these will remain in the Netherlands (in his BV).
Thanks Lammert but I will call you about this soon.
this above was a response to johnkochang's input, not the other responses.