Tax treaty between The Netherlands and Panama has been signed

30 November 2010

The Netherlands and Panama signed a tax treaty on 6 October 2010. It is expected that the tax treaty will become into force in 2011. The main features of the tax treaty are described below.

Dividends

The general withholding tax rate regarding dividends amounts to 15%. The general withholding tax rate is reduced to 0% if the following conditions are met.

• The dividend receiving company should at least own 15% of the shares in the dividend paying company under the condition that the shares of the dividend receiving company are traded on a recognized stock exchange or 50% of the shares of dividend receiving company are owned directly or indirectly by a company/companies whose shares are traded on a recognized stock market.
• Dividends received by a public body.
• The company receiving the dividends owns at least 15% of the shares in the dividend paying company and qualifies as a headquarter company.  

Interest  

The general withholding tax rate regarding interest is 5%. The general withholding tax rate is reduced to 0% if interest payments are made to qualifying financing entities (including financial institutions) or a pension fund.                                

Royalties

The withholding tax rate regarding royalties is 5%. No reduced tax rates apply.

Capital gains on shares

Capital gains realized with the transfer of shares may be taxed in the source State. The seller of the shares should at least own 10% of the shares during 12 months (individuals) or 24 months (companies) before selling of the shares.

Capital gains can only be taxed in the residence State if the owner of the shares owns less than 10% of the transferred shares, the capital gains on the shares is a result of a reorganization, merger, demerger or similar transactions or the seller of the shares is a pension fund unless the capital gains are derived from a (in) directly conducted business by the pension fund.

Emigrated substantial shareholders

States could still tax dividend payments to substantial shareholders (own more than 5% shares) for 10 years after their emigration.    

Should you have further questions or remarks, please contact us our office at 010-2010466 or directly with 

Ton Smit

Telephone: 010-2010470

E-mail: ton.smit@taxci.nl

 or

 Fariq Ishaak

Telephone: 010-2010461

E-mail: fariq.ishaak@taxci.nl