Shortly before Christmas 2017, US President Donald Trump signed off one of the biggest tax reforms the United States has seen since President Reagan held office in 1986: the Trump Tax Reform. What does this tax reform mean for you if you are the director of a company with a US shareholder? We explain this for you below.
Will you be affected by the Trump Tax Reform?
One element of the Trump Tax Reform is a one-time tax levy on assets held abroad by companies with a US shareholder (also known as the ‘Toll Charge’). Although this scheme mainly targets large groups, such as Apple and Google, the scope of the Trump Tax Reform is such that the US shareholder of your company may soon also owe US tax at a rate of 15.5% on its share of your company’s retained earnings.
If the US shareholder is unable to finance this tax out of his private assets or his US company is unable to do so out of its company assets, cash may be required from the Dutch company (dividend).
We have provided an example below to explain the scheme.
Example: Dutch company with a US shareholder
Richard is a US national and holds 25% of the shares in a Dutch company. This company has retained earnings of € 200,000, which can be converted to cash in their entirety.
In his US tax return Richard owes a one-time US tax payment of € 7,750 (€ 200,000 x 25% = € 50,000 x 15.5% = € 7,750).
This tax can be paid in eight annual installments. For many taxpayers the first of these will be due on April 15, 2018.
Would you like to find out more about what the Tax Reform means for you?
As you have read above, there is a risk that directors of a company with a US shareholder will be affected by the Tax Reform. Could this apply to you and are you looking for specific advice that is tailored to your situation? If so, please contact one of our international tax consultants. They will tell you all you need to know and will be happy to provide further assistance.