Egyptian billionaire Nassef Sawiris does not opt ​​for a controversial tax structure

This article was last updated on May 21, 2024

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Egyptian billionaire does not opt ​​for a controversial tax structure

Egyptian billionaire Nassef Sawiris does not opt ​​for a much-discussed tax structure in the Netherlands. He is the largest shareholder of the Dutch fertilizer manufacturer OCI.

OCI sold a large stake in industry peer Fertiglobe in December. That raised more than 3 billion euros. As a result, there was a lot of money in the company’s reserves. The company wanted to pay out 2.7 billion of this to shareholders.

NRC reported last month that OCI had devised a trick to give that amount to shareholders tax-free. The Netherlands would therefore miss out on hundreds of millions in dividend tax. On Thursday, the House of Representatives was updated about the construction and its desirability.

How does the construction of OCI work?

By quickly amending the articles of association twice, the company increased the value of its shares by 2.7 billion for a few minutes last month. To then reduce the value again by the same amount. This way, the company can take money from its reserves and distribute it to shareholders.

As a shareholder, you do not have to pay tax on such a capital distribution. If that money had been paid out as profit, the tax authorities would charge a dividend tax of 15 percent. Dutch shareholders will get this back, but this does not apply to foreign shareholders.

Sawiris is the main shareholder. As the son of the company’s founder and CEO, he owns approximately 39 percent of the company. This entitles him to more than 1 billion euros in benefits.

If he were to have that paid out as capital, he could collect that money tax-free. The tax authorities will then miss out on 150 million euros in dividend tax.

Remarkably, Sawiris does not choose that. He has indicated that he would prefer to receive normal dividends, a company spokesperson said. It is not clear whether he has another way to avoid dividend tax or actually voluntarily chooses to pay 150 million euros to the treasury.

He has not yet formally made the choice. Shareholders can only indicate sixty days after last month’s double amendment to the articles of association whether they want to receive the money as a capital distribution or as a dividend.