Danish tax authorities allowed to tax dividend flowing from Netherlands via Denmark to Cyprus

Erasmus School of Economics

The Court of Justice of the EU in Luxembourg issued two judgments in February that, according to tax experts, herald the end of the Netherlands as a transit port in corporate structures which are set up to avoid taxation. The tax avoidance route that the Danish tax authorities put a stop to, ran from the Netherlands via Denmark to Cyprus.

According to Peter Kavelaars, Professor of Fiscal Economics at Erasmus School of Economics, very ordinary multinationals will worldwide get a lot of trouble because of these judgements.

In one of the judgments, NetApp bv, a Dutch subsidiary of the American technology company of the same name, is playing a prominent role. The NetApp-case illustrates the scope of the EU judgements. They affect all companies that channel dividends, interest and royalties out of the EU via intermediaries in, for example, the Netherlands.

There are many corporate structures which have empty companies, so the impact will be enormous, says Professor Kavelaars. He expects that divers European tax authorities will use the judgements to impose a tax assessment on companies which have such empty companies in their corporate structure.

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