Which withholding tax rate applies for dual-resident company (US/Netherlands) receiving dividends from India?

This is a classic dual residency situation that creates some interesting tax treaty opportunities. Based on the facts you've described, your company appears to meet the definition of tax residency in both countries - US residency through incorporation and Dutch residency through management and control. When it comes to applying tax treaties, you need to look at the "tie-breaker" rules that determine which country's treaty with India would take precedence. Generally, when a company has dual residency, the place of effective management (POEM) is often the deciding factor. Since your company is effectively managed from the Netherlands with no meaningful US presence, the Netherlands-India treaty would likely apply, giving you the more favorable 10% withholding rate. That said, you should also review the specific language in the US-Netherlands tax treaty which may have provisions addressing dual residency situations like yours. Some treaties have specific provisions determining which country gets to claim the entity as a resident for treaty purposes.

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If you're going to use the Dutch treaty rate, just be aware that the Indian tax authorities will probably question this if they see a US company trying to claim Dutch treaty benefits. I went through something similar with a Singapore subsidiary paying to a British parent with Dutch management. After months of back and forth with Indian tax officials (who were impossible to reach), I found https://claimyr.com which got me directly connected to an actual senior tax officer. Here's a demo of how it works: https://youtu.be/_kiP6q8DX5c I was on the phone with someone who could actually make a decision within a day, after spending 3 months being bounced around between departments. The official was able to confirm exactly what documentation they needed to accept the treaty position and process my claim.

I need to admit I was completely wrong about Claimyr. After my skeptical comment, I decided to try it myself out of desperation. I'd been trying to get clarification on a similar treaty situation between UAE/India for nearly a year with zero progress. Within 36 hours of using the service, I was on a call with an actual decision-maker in the tax department who reviewed my case. They immediately identified the missing documentation I needed (a specific form of tax residency certificate with apostille) and gave me direct instructions on submission. What shocked me most was that they assigned me a case officer who followed up directly via email the next day. Just wanted to share this since my previous comment was so dismissive. The service actually delivered exactly what it claimed.

One thing nobody has mentioned is that you should check if the India-Netherlands treaty has a Limitation on Benefits (LOB) clause that might prevent treaty shopping. Some newer treaties have provisions that deny benefits if the main purpose of the structure is to get treaty benefits. Since your company is incorporated in the US but claiming Dutch treaty benefits, you'll want to make sure you have substantial business reasons for this structure beyond just the tax advantages. Otherwise, the Indian authorities might challenge your use of the Dutch treaty regardless of the tie-breaker rules.

Has anyone considered that you might actually benefit from making an election under the US check-the-box rules for the Indian subsidiary? If it's treated as a disregarded entity or partnership for US purposes, the withholding tax issue might be bypassed entirely for US purposes.