Uncollected dividend tax liability is part of taxable profits, court rules

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In a recently released decision, the Dutch Supreme Court ruled in favor of the Dutch tax authorities and held that a company that was released from its dividend tax liability must add the amount of the liability to its taxable profits for the relevant year for corporate income tax purposes.

The case (No. 12/01957, LJN: BX9148, Mar. 8, 2013) concerned a Dutch limited liability company (BV). As of December 31, 2006, BV’s tax balance sheet showed a dividend tax liability amounting to €45,378. In an earlier year, BV had paid a dividend to its sole shareholder (an individual) from which, in its capacity as withholding agent, it had withheld the correct amount of Dutch dividend tax. The statute of limitation for the collection of the dividend withholding tax, which is levied on the dividend recipient, expired, so the Dutch tax authorities could not collect the amount of withholding tax from BV. Consequently, when issuing the 2006 Dutch corporate income tax assessment, the Dutch tax authorities held that BV should be considered released from its dividend tax liability and that the amount of the liability should be added to BV’s taxable profits.

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