The Dutch Ministry of Finance launched a public consultation in September 2026 on amending the Dutch Treaty Policy, which sets out the position of the Netherlands in tax treaty negotiations. One amendment suggested in the consultation would allow the Netherlands to agree a limited source-state withholding tax on service payments with jurisdictions that qualify as developing countries.
Background
The Netherlands has long acknowledged that the positions of developing countries in treaty negotiations may differ from the positions of developed countries, primarily with respect to withholding taxes and permanent establishments.
This means that developing countries often argue for a withholding tax on technical services, digital services, and insurance premiums, which is not in accordance with the OECD Model Tax Convention on Income and on Capital that the Netherlands applies as the starting point of any tax treaty it concludes.
Currently, the Netherlands is only willing to accept a withholding tax on payments for technical services in relation to the list of least developed countries (a subset of the developing countries category).
Potential change
The Netherlands continues to take the position that a withholding tax on service payments is not in accordance with the OECD model and therefore, in principle, undesirable. At the same time, it is acknowledged that this position has stalled the tax treaty negotiations between the Netherlands and certain developing countries, such as Uganda, Kenya, Nigeria, and Zimbabwe.
As a broad tax network eliminates double taxation and provides legal certainty for taxpayers, concluding a tax treaty may outweigh disagreement on a withholding tax on services in such instances. In the absence of a tax treaty, the source jurisdiction would also not be limited by applying a withholding tax on services.
Therefore, the consultation notes that the Netherlands may agree to a withholding tax on payments relating to services under tax treaties with all developing countries instead of only the ‘least economically developed’ of the developing countries.
This concession would only be made by the Netherlands when there is an overall compromise that limits excessive taxation. For example, the withholding tax rate should be limited or taxpayers should have an option to elect for net-basis taxation.
Key takeaways
The contemplated change in the Dutch Treaty Policy is a clear shift but not unique in Europe: Belgium, Luxembourg, France, and Switzerland have, for example, already accepted such withholding taxes in some of their tax treaties with developing countries.
The tax impact of this potential change in Dutch policy is likely to be minimal in most instances. In this respect, the policy does not amend existing tax treaties concluded by the Netherlands. In addition, this will primarily relate to developing countries with which the Netherlands has not yet concluded a tax treaty. Those developing countries may already apply a withholding tax on payments to Dutch taxpayers in the absence of a tax treaty that restricts this.
Nevertheless, Dutch taxpayers that receive payments relating to services from developing countries should monitor treaty negotiations and may in time need to review their tax gross-up clauses, intra-group service charge policies, and double tax relief position.
