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TAX NEWS - may 2010

Netherlands Tax: CA agreement changes procedure for dividend withholding tax exemption for U.S. pension funds

A recent mutual agreement between the competent authorities of the Netherlands and the U.S. amends the procedure for U.S. pension funds to obtain an exemption from dividend withholding tax under the Netherlands-U.S. tax treaty. Article 34 of the treaty allows the competent authorities of the two states to issue, by mutual agreement, regulations concerning the administrative execution of a reduction in withholding tax. (Notably, the Netherlands does not levy withholding tax on interest or royalties, but it does in principle impose a 15% withholding tax on dividends.)

Previously, a U.S. trust, company or other organization that qualified for benefits under article 35 could request treaty benefits, such as a reduced Dutch (dividend) withholding tax from the Netherlands, by supplying U.S. Internal Revenue Service (IRS) Form 6166 or a "qualification" certification issued by the competent authorities in the Netherlands.

As a result of the competent authority agreement, as from 31 March 2010, only Form 6166 can be used to obtain treaty benefits - it is no longer possible for a U.S. tax-exempt trust, company or other organization to request a qualification certification from the Netherlands tax authorities. However, a U.S. resident that already has a qualification certification may continue to claim benefits using the certification for three more years (i.e. until 1 April 2022), provided there is no material change in the facts and circumstances. IRS Form 6166 can be obtained by completing and sending Form 8802, Application for U.S. Residency Certification, to the appropriate IRS office identified in the Instructions to Form 8802.
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