Political developments are hard to predict. The case of the Dutch dividend withholding tax is a prime example of how quickly the political wind can change. 

What has happened? 

The Dutch coalition government headed by prime minister Mark Rutte launched plans in 2017 to abolish the dividend withholding tax. What followed was an unprecedented debate in the Dutch parliament and the media about the pros and cons of the tax for the Dutch investment climate. The Dutch even took to the streets to voice their anger over the government's plans. Eventually, the government had to withdraw its proposal. 

The Green Party's new proposal

Not even two years later, Bart Snels, a member of the Dutch parliament representing the Green Party, one of the opposition parties, has announced a legislative proposal to close a number of loopholes in the dividend withholding tax legislation. 

• Among the loopholes to be closed, according to the announcement, is the possibility to exit the Netherlands without incurring any dividend withholding tax, for example, through a cross-border legal merger. The proposal would introduce an exit tax in those situations. 
• The proposal would also subject all distributions to tax havens made by entities with the legal form of a cooperative (coöperatie) subject to dividend withholding tax; at present only distributions by so-called "holding cooperatives", cooperatives predominantly engaged in holding and financing activities, are subject to dividend withholding tax. 
• Finally, the proposal would bring in new anti-dividend stripping rules and rules to prevent foreign investment funds from claiming a refund of Dutch dividend withholding tax under EU law. 

Is it likely to be supported?

Even though the Green Party is in the opposition, it is likely that the proposal will be supported by the government - a government headed by the very same prime minister who sought to abolish the tax only two years ago. The main reason for this radical change in position is that the government has lost its majority in both houses of the Dutch parliament and, therefore, needs the support of the opposition parties, including the Green Party, to push through legislation in other areas. In addition, combating tax avoidance and evasion is one of the top priorities of the current coalition government. 

The text of the legislative proposal has not yet been published and an effective date is not known yet. It is, however, certain that, within two years, we have gone from plans to pull down the dividend withholding tax fence around the Netherlands to plans for its reinforcement. The political wind has definitely changed in the Netherlands.