The Netherlands to Drop Exemption for Overseas Directors Fees
In a decree No. 2022-178650 of 8 July 2022, the Dutch Secretary of State for Finance has stated that from 2023, the Netherlands will drop the exemption method to prevent the double taxation for the remuneration of directors and supervisory board members under its tax treaties. Instead, the Netherlands will give a foreign tax credit.
The purpose of this change is to tax the remuneration of a director or member of a supervisory board of an overseas company who resides in the Netherlands on the same basis as the income of a director or a member of a supervisory board of a Dutch company.
This change is one of the changes announced in the Tax Treaty Policy Memorandum, a letter addressed to Parliament on 29 May 2020, expressing the Netherlands' wish to do even more to take developing countries' interests into account. Since these countries often have little other tax revenue, it is particularly important that they can levy enough tax on the income generated by activities and investments there.
The Netherlands is therefore willing to make agreements with these countries to give them more taxation rights, including in situations where dividend, interest or royalty payments are made from these countries. For the 47 poorest developing countries, the Netherlands is open to include a 'source state tax' on payments for technical services carried out in the developing country. For instance, when a Dutch person carries out a management or consultancy job in a developing country, a tax treaty normally allows tax to be levied only in the Netherlands. The source state tax will also enable the developing country to levy tax.