Horsey wrote:Anyone have any info on the situation with Dutch witholding taxes?
I thought they were low (15%), but have heard rumours of changes (to 0%).
An extract from the RNS linked to in the OP:
"
Unilever N.V. dividends are currently subject to Dutch dividend withholding tax at a rate of 15%. The Dutch government has announced that the Dutch dividend withholding tax will be abolished from 1 January 2020. Following simplification of the corporate structure and until such abolition, shareholders in the new Unilever holding company will be able to receive distributions in the form of a capital repayment for Dutch tax purposes which will be paid without Dutch dividend withholding tax."
So yes, the Dutch withholding tax is currently 15%, and yes, there are proposals to reduce it to 0%. Whether one regards 15% as "low" is clearly a matter of opinion - I do, but I've seen enough complaints on these boards about the UK's 7.5% basic-rate Income Tax on dividend income to be quite certain that that opinion is not universally shared!
And Unilever are also planning to make shareholder payments be capital distributions from the time that they change the corporate structure, at which point they intend to exchange people's shareholdings in the UK company Unilever plc to the same numbers of shares in the new holding company (called "New N.V." in the RNS, though that's clearly just a placeholder for whatever new name they eventually settle on), until the time that the Dutch withholding tax is reduced to 0%.
Or to be precise, they intend to make shareholders
able to receive the payments as capital distributions
for Dutch tax purposes. I can see at least two ways they might do that: they could just make the payments as capital distributions regardless, or they could offer shareholders the choice between dividends and capital distributions in basically the same way that B share schemes used to in the UK. (I should say that I'm not positively asserting that either of those would have the stated effect for Dutch tax purposes, just that it's plausible that they might. I know far too little about the Dutch tax system to be able to positively assert anything about it, other than that it used to cause my father a huge amount of hassle as a long-term ex-pat living in the Netherlands and that I've seen enough of that hassle to regard
not being similarly subject to it as a (hopefully) easily-achieved and very desirable goal!)
The important point about that is that if they just make the payments as capital distributions regardless, I'm reasonably certain that the UK tax system will treat them as such and so take them into account for CGT but not Income Tax (along the same lines as it treats Rolls-Royce's shareholder payments). But if it offers shareholders a choice, I'm reasonably certain that the same tax law change that made B share schemes that offered such a choice between income and capital options ineffective will also apply to that choice, and the result would be that the UK tax system would treat the payments as dividends regardless of the shareholder's choice, and so take them into account for Income Tax but not CGT. I.e. the "for Dutch tax purposes" statement leaves it rather open whether the payments will be dividends or capital distributions for UK tax purposes.
I should add that I'm
currently not concerned about that point. They've clearly made the top-level decision that they want to change the corporate structure, but equally clearly not settled on all the details of the change yet, as there are a lot of details missing from the RNS that would be needed to put it into effect - not just of UK taxation, but also things like the name of the new holding company, a proper timetable for the change, what shareholder meetings will be needed, etc. In short, this RNS is a statement of intention, not a precise proposal they can put to shareholders, and my point in posting this is not to encourage speculation about the tax treatment, but rather to say that the RNS does leave the tax treatment more open to question than a superficial reading might suggest, but speculating about the answer is premature at present.
Shareholders will get their say on the question: the RNS says that the process will involve a scheme of arrangement for Unilever plc (the UK part of the current structure), which will require a fully-detailed proposal to be put to shareholders and a 75% vote in favour to come into effect, and that it will be conditional on (among other things) "approvals of shareholders in current N.V. and PLC". It also does say:
"
Further information will be provided in the shareholder communication which will be circulated in the months leading up to the extraordinary general meetings to be convened to approve the corporate structure change. Proposals are expected to be placed before shareholders around the end of Q3 with implementation anticipated towards the end of 2018."
So I'm expecting somewhere around 5-6 months of uncertainty about exactly what is being proposed before the company publishes a detailed proposal and calls the extraordinary general meetings, and have no intention of spending much of those months on baseless speculations about what those proposals might turn out to be! About the only actions shareholders can take now are (a) share purchases or sales if they feel that what's already known about the proposals make Unilever shares sufficiently attractive or unattractive to justify them; (b) communicating with the company's investor relations people if they want the company to be aware of their feelings about the idea. (Not that it's reasonable to expect any significant amount of attention to be paid to any single small investor's feelings, but there is some hope of a quick "small investors were M% in favour of the proposal, N% against it, with the remaining (100-M-N)% having mixed views that cannot be clearly identified as either in favour or against" summary getting to the directors.)
One final point on the Dutch taxation that doesn't fit in neatly anywhere above: the fact that the Dutch government intends to scrap dividend withholding tax is no guarantee that they will actually end up doing so, and even in the likely event that they do, it's no guarantee that a future Dutch government won't re-impose it! Of course, tax increases on dividends are an unavoidable risk, but at present I'm only at risk from ones imposed by the UK government; if these changes go through, I'll probably be at risk from ones imposed by either government...
Gengulphus