New Dutch dividend stripping measures explained


On September 19, the Dutch government presented its 2024 Budget Plan, introducing new measures against dividend stripping.

What is dividend stripping?

There are two categories of transactions that are considered to be dividend stripping: cum ex and cum cum transactions. Cum ex schemes usually involve some form of derivative financial instruments, such as securities lending and short positions. Three parties enter into a complex set of transactions around the pay date of a dividend. When the dust settles, not one but two parties involved in the transaction will reclaim the withholding tax on the dividend. This leaves the tax authorities not only missing the withholding tax revenue but effectively paying withholding tax it never collected. On the other hand, in cum cum transactions the owner of shares will lend or otherwise transfer their shares shortly before the pay date of a dividend to a counterparty. The counterparty will be able to fully or partially credit or reclaim the dividend withholding tax. The original owner of the shares was not. After the dividend is distributed, the shares are transferred back to the original owner. The conditions of the transaction are such that the economic ownership remains with the original owner all along.

Current dividend stripping rules

The Netherlands already has a form of anti-dividend stripping measures. One of the conditions for crediting or reclaiming withholding tax is being the beneficial owner. However, there is one provision in the Dutch Dividend Tax Act describing conditions under which a person can not be the beneficial owner. Effectively, this situation arises when an individual, typically the borrower of shares, claims to be the beneficial owner and engages in transactions with another party around the dividend pay date. The burden of proof that a person is not the beneficial owner is on the tax administration. However, proving that is extremely difficult: these transactions often take place in large volumes on stock exchanges, and the proof required often lies with foreign counterparties and is therefore hard to obtain.

Beneficial ownership explained

Watch the FSTC23 webinar on beneficial ownership, in which Taxology CEO Jeroen Van Der Wal and other tax experts discuss the importance of beneficial ownership in the realm of financial crime and taxation.


The 2024 Budget Plan proposes to shift the burden of proof of beneficial ownership onto the person claiming to be the beneficial ownerAs a part of the proposed measure, the transactions that may be considered dividend stripping will be extended to transactions undertaken by related parties (e.g. parent companies, subsidiaries) of the taxpayer or recipient of the dividend. The Plan does state that the OECD model convention and Commentary and case law from the European Court of Justice on beneficial ownership are the framework for interpreting the meaning of the concept, however, it does not discuss how beneficial ownership can be proven.

Other countries such as Germany, Belgium, and Denmark, have addressed this issue by requiring the submission of beneficial ownership statements, or a transaction history demonstrating a minimum holding period of 6 months before and after the pay date of a dividend.