common and/or cumulative preferred financing shares does
not satisfy one or more of the tests set forth in the limitation
on benefits provisions of Article 26 of the Treaty.
The Depositary for the ADSs has entered into a special
arrangement with the Dutch tax authorities, which may be
amended from time to time, regarding the application of the
Treaty to dividends paid to holders of ADSs. Under such
arrangement, the Depositary has agreed to provide a single
tax form to us indicating the number of ADSs owned by
residents of the U.S. entitled to an exemption from, or
reduction of, Dutch withholding tax under the Treaty. In
case of dividends paid by the Depositary by wire transfer or
similar method to a bank, broker or depositary (such as The
Depositary Trust Company), the Depositary will withhold
25% of any dividends payable and such bank, broker or
depositary may claim on behalf of its client a refund of such
taxes from the Depositary in the form of a supplemental
dividend check. An exempt organization that is resident in
the U.S. and is entitled to a full exemption from Dutch
withholding tax under Article 36 of the Treaty cannot use
the special arrangement described in this paragraph.
Accordingly, Dutch withholding tax will be imposed on
dividends payable to such a holder at a rate of 25% and
such holder may claim the benefits of the Treaty by filing a
form IB95 U.S.A. directly with the Dutch tax authorities.
The Depositary will provide to holders of ADSs, prior to each
dividend payment, a notice setting forth the procedures for
obtaining a reduced rate of, or exemption from, Dutch
withholding tax.
According to an anti-dividend stripping provision, no
exemption from, reduction of, or refund of, Dutch dividend
withholding tax will be granted if the recipient of a dividend
paid by us is not considered the beneficial owner of such
dividend. Such recipient is not considered the beneficial
owner if such recipient paid a consideration (in cash or in
kind) to an other party in connection with the dividend and
such payment forms part of a sequence of transactions (as
defined below), and further it is likely that (i) such other
party, an individual or a company (other than the holder of
the dividend coupon) benefited, in whole or in part, directly
or indirectly, from the dividend and such other party,
individual or company would not, or to a lesser extent be
entitled to an exemption from, reduction of, or refund of,
Dutch dividend withholding tax than the recipient of the
dividend, and (ii) such other party, individual or company,
directly or indirectly, retains or acquires a position in the
ADSs, common and/or cumulative preferred financing shares
that is comparable with his/her or its position in similar
ADSs, common and/or cumulative preferred financing shares
that he/she or it had before the sequence of transactions
began. The term "sequence of transactions" as used herein
includes the sole acquisition of one or more dividend
coupons and the establishment of short-term rights of
enjoyment on ADSs, common and/or cumulative preferred
financing shares, while the transferor retains the ownership
of the ADSs, common and/or cumulative preferred financing
shares.
Under certain circumstances, a transfer to the Dutch tax
authorities of the full amount of withholding tax withheld
will not be required with respect to dividend distributions
out of dividends received from our qualifying foreign
affiliates. The amount not required to be transferred to the
Dutch tax authorities amounts to 3% of the gross amount of
any dividend paid on the ADSs and/or common shares,
which is subject to Dutch withholding tax, but cannot
exceed 3% of the gross dividends received from our
qualifying foreign affiliates during the calendar year until
the withholding date and the two previous calendar years,
excluding distributions that have been taken into account
in respect of the determination of a previous reduction of
withholding tax to be transferred. This reduction is not paid
out to holders of ADSs, common shares and/or preferred
financing shares, but remains with us instead. The
classification of this reduction for foreign tax purposes
is not clear.
Taxes on income and capital gains
A holder of ADSs, common and/or cumulative preferred
financing shares will not be subject to any Dutch taxes on
income or capital gains in respect of dividends distributed
by us or in respect of any gain realized on the disposal of
ADSs and/or common and/or cumulative preferred financing
shares (other than the withholding tax described above),
provided that: (i) such holder is neither resident nor deemed
to be a resident nor opting to be taxed as a resident of the
Netherlands; (ii) such holder does not have an enterprise or
an interest in an enterprise that is, in whole or in part,
carried on through a permanent establishment or a
permanent representative in the Netherlands and to which
enterprise or part of an enterprise, as the case may be, the
ADSs, common and/or cumulative preferred financing shares
are attributable; (iii) such holder is not deemed to have a
Dutch enterprise (werkzaamheid) to which enterprise the
ADSs, common and/or cumulative preferred financing shares
are attributable; (iv) such holder is not an individual
performing other activities in the Netherlands in respect of
the ADSs and/or common and/or cumulative preferred
financing shares, including activities which are beyond the
scope of normal active portfolio investment activities; and
AHOLD ANNUAL REPORT 2005 229
