In recent years, the Dutch government has implemented various measures to combat tax avoidance by multinational companies. The effects of these measures are monitored annually, as reported in the Parliamentary Letter on Monitoring the Effects of the Approach to Tax Avoidance (Ministry of Finance, 11.12.2024).

Key Findings:

• The conditional withholding tax on interest, royalties, and dividends has significantly reduced financial flows to low-tax jurisdictions, decreasing from €37 billion in 2019 to €7 billion in 2023.

• The earnings stripping measure (ATAD1) has effectively limited tax avoidance through interest deductions: companies now pay less interest and hold less debt.

• The hybrid mismatch rules (ATAD2) have successfully addressed tax deferral through cv/bv structures.

Parliamentary Letter:

The monitoring report presents, for the first time, the effects of many measures. This report analyzes these measures in detail, summarizing the results in a table. European and international developments are also discussed alongside national initiatives. For further details, refer to the letter in Dutch: Download the Parliamentary Letter. Effects not yet fully measurable:

• The withholding tax on dividends directed to low-tax jurisdictions.

• The impact of the Anti-Mismatch Legislation on informal capital structures.

The government will continue to monitor the effects of these measures annually to ensure their effectiveness.

Explanation of Measures:

1. Earnings Stripping Measure (ATAD1):

• Introduced under the EU’s first Anti-Tax Avoidance Directive (ATAD1) and implemented in 2019.

• Objective: To prevent tax avoidance through excessive interest deductions, which are often used to shift profits.

• Mechanism: Companies may deduct interest expenses up to 20% of their EBITDA (operating profit before interest, taxes, depreciation, and amortization), with a minimum threshold of €1 million.

2. Hybrid Mismatch Rules (ATAD2):

• Implemented under the second Anti-Tax Avoidance Directive (ATAD2) since 2020.

• Objective: To neutralize mismatches in tax treatment between countries that allow for double deduction of costs or avoidance of tax on income.

• Example: The cv/bv structure, where an entity is considered taxable in one jurisdiction and non-taxable in another, enabling tax deferral or exemption.

The Parliamentary Letter highlights that the measures are delivering demonstrable results. Continued monitoring will ensure that the full impact of all measures becomes clear. The Dutch government remains committed to international and European cooperation as the most effective strategy to combat tax avoidance.