On June 19, 2020, the Dutch Government announced that it has decided to provide COVID-19 support to those companies that do not engage in undesirable tax avoidance practices.
The government said that companies engaged in undesirable tax planning can apply for individual support only if they satisfy two tax-related conditions concerning business location and transactions.
First, companies must not be based in a low-tax jurisdiction, i.e. countries with a corporate tax rate of under 9% and countries on the EU blacklist. And secondly, companies must not make payments to a country where the tax rate is too low. Additionally, the Dutch establishments of the company seeking assistance must not pay interest or royalties to group entities in low-tax countries or countries on the EU blacklist.
The business location condition also applies to subsidiaries and shareholdings and to the direct shareholders of the company seeking assistance. This condition only applies to shareholders owning over 10% of the company’s shares. It does not apply where a company carries out real operations at subsidiaries in low-tax countries, the government said.
The government said that since a company that gets into difficulties as a result of the coronavirus crisis may need help fast, it can still obtain support if it agrees to satisfy the conditions within 12 months.