It is “not responsible” to implement the emergency law to ensure that Unilever remains in the Netherlands, the Council of State has ruled. But initiator Bart Snels (GroenLinks) is hopeful that the law will make it anyway.
The Council of State is extremely critical of a bill from GroenLinks to introduce a final levy in dividend tax. The government’s chief adviser speaks of a “radical system change” and calls it “unjustified” to introduce a final tax, as it may be in violation of European regulations or tax treaties with other countries. However, initiator Bart Snels of GroenLinks is sticking to his proposal and submits an amended version of it to the Lower House today.
Snels presented the bill in July to prevent Unilever from moving to the United Kingdom in the short term. The company decided to do so after an earlier plan to move the head office to the Netherlands had failed, partly because the cabinet decided against abolishing dividend tax.
Snels wants to use the law to prevent Unilever from still being able to avoid dividend tax by moving to the United Kingdom. That is why companies that move to a country without dividend tax must be levied a final levy from the Dutch tax authorities. In the case of Unilever, this involves an amount of about 11 billion euros, the company itself calculated.
The British shareholders will vote on Monday
Previously, Unilever warned its shareholders that if the bill passed, the move to London would probably not go through. At the same time, the company is continuing preparations, because Unilever assumes that the bill is in breach of European regulations and the tax treaty between the Netherlands and the United Kingdom. Two weeks ago, almost all investors in the Dutch part of Unilever voted in favor of the merger with the British arm. Next Monday, the shareholders of the British part of Unilever will vote on the plans.
The Council of State shares Unilever’s doubts. Because this is an emergency advice, not all legal issues have been fully investigated. But the government adviser calls the chance that the proposal is legally untenable “so significant” that the introduction of the bill is “unjustified”.
According to Snels, however, the Council of State has drawn incorrect conclusions from his bill. For example, the Board assumes that the final levy will be borne by the company itself, while the charges will be for the shareholders. The criticism that a distinction is made between companies – the earlier proposal assumed a minimum annual turnover of 750 million euros – has also been overcome, according to Snels. Instead, there is an exemption for the final settlement of 50 million euros. This is to prevent smaller companies from being affected by the proposal.
Relocation must be before December 31st
Time is now running out for Unilever. On December 31, the United Kingdom will leave the European Union, which would thwart current plans for relocation. The company must therefore complete the move before then. And Unilever in the UK has yet to pass the Supreme Court to seek approval for the merger – a process that will take at least several weeks.
“The question is whether Unilever can submit a merger proposal there that depends on whether or not a law will be introduced in the Netherlands,” says director Rients Abma of Eumedion, the interest group for large investors. “We put that question to the board during the Dutch shareholders meeting, but there was no clear answer.”
Abma points out that the purpose of the move for Unilever was precisely to simplify the corporate structure. “But if a dividend tax claim remains on the shares in the Dutch branch, you will still have to deal with different shares. That is exactly not the intention. I therefore assume that the move will not go ahead if that tax claim of 11 billion is actually made. ”
Broad support in the House of Representatives
The chance that the bill will be passed remains unabated. In addition to the opposition, coalition parties CDA, D66 and ChristenUnie also showed positive at the announcement in July. Member of Parliament Steven van Weyenberg (D66) says that he still strongly supports the aim of the law. “As far as I am concerned, that is counteracting a leak in the dividend tax and preventing Unilever’s relocation. In the House of Representatives, I will assess the law on job retention in the Netherlands, now and in the future. In addition, it must be tenable within international law to which the Netherlands is committed. ”
Bart Snels is hopeful that the bill will ultimately ensure that Unilever remains in the Netherlands. “With today’s amendments, I am convinced that the bill is legally tenable.” According to Snels, there is talk of “a cat and mouse game” with the multinational about the proposed move to the United Kingdom. “But the question is who is the cat here and who is the mouse.”
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