Shareholders in The Magnum Ice Cream Company will not have to pay dividend tax in the Netherlands for the next five years and this guarantee was one of the reasons the brand chose Amsterdam, rather than London, for both its main stock exchange listing and its new head office, the Financieele Dagblad said on Tuesday.

Magnum is due to be formally separated from Unilever next month, with its primary listing in Amsterdam and secondary listings in London and New York.

According to documents filed with the US Securities and Exchange Commission (SEC), the company intends to use a Dutch tax rule that allows payments to shareholders to be treated as tax-free returns of capital rather than taxable dividends, the FD said.

The arrangement mainly benefits Unilever’s British shareholders, who will receive Magnum shares as part of the split. The UK does not levy dividend tax, while the Netherlands does.

Dutch investors can offset the 15% tax through their income tax, but British investors cannot. This difference was decisive in 2020, when Unilever chose London over Rotterdam for its head office.

Under the Dutch scheme, payments that are classed as a return of paid-in capital are not subject to dividend tax. Magnum expects to have sufficient reserves after the split to make these tax-free payments for at least five years.

Other companies, including OCI, Shell, AkzoNobel, TomTom, Van Lanschot Kempen, HAL and Heineken Holding, have used similar arrangements. The practice is legal but has drawn criticism in the Dutch parliament and some tax experts have suggested that in practice such payments often resemble dividends and should therefore be taxed.

The UK tax agency HMRC has also approved the arrangement, describing the planned payments as being made for “bona fide commercial reasons” and not as a form of tax avoidance, according to the SEC filing, the FD said.

Unilever and Magnum said the tax treatment was one of several factors behind the decision to locate in Amsterdam.

Before the scheme can be implemented, Magnum must reduce the nominal value of its shares, a move that still requires formal shareholder approval. The company is due to list on the Amsterdam stock exchange on December 8.