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Budget Day 2020

Tax plan 2021 video: International tax measures

Monique Pisters Monique Pisters

Each year, on the third Tuesday in September it is Budget Day in the Netherlands. The Dutch government announces its budget and tax plans for the coming period. In this video Monique Pisters will guide you through the most relevant changes for international operating companies.

Video transcript

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Corporate Income Tax Rates

In the tax plan 2021 it has been announced that the upper rate in the corporate income tax act will remain 25%, contrary to the earlier announced reduction. The lower rate will however decrease from 16.5% to 15% in 2021. Furthermore, the bracket for the lower rate will be increased from EUR 200.000 to 245.000 in 2021 and to 395.000 in 2022. Besides, the rate of innovation box regime will be increased from 7% to 9% as earlier announced.

Corona reserve

In line with the previously published Corona Crisis Decree, corporate income taxpayers are permitted to form a reserve in their 2019 corporate income tax return for losses they expect to incur in the financial year 2020, provided these losses are the result of the Corona crisis.

The loss to be taken into account may not exceed the total loss expected for 2020. Likewise, the dotation to the Corona reserve may not exceed the profit realized in 2019 before that reserve was formed. Corona-related losses in 2020 can thus be recognized more rapidly than would be the case under the regular loss carry back rules.

Job related investment discount

A new measure to stimulate companies that make investments in the Netherlands, is the so called job related investment discount. A percentage of investments made by companies can be deducted from the Dutch wage tax payable. The measure is a temporary measure. The Dutch government will propose a long-term measure with a similar objective at a later stage..

Limitation liquidation and cessation losses

On Budget Day, the legislative proposal on the limitation of the liquidation and cessation loss scheme was published. Currently, Dutch companies can – under conditions - fully deduct liquidation and cession losses on participations and permanent establishments. This applies regardless of the residency of the participation or permanent establishment.

The legislative proposal specifies that liquidation and cessation losses exceeding € 5 million will only be deductible when the participation or the permanent establishment is a resident within the EU Or EER. Additionally, the shareholding must exceed 50%. Liquidation losses up to € 5 million will remain fully deductible, regardless where the participation or the permanent establishment is a resident.

Loss compensation

Currently, the carry back period of tax losses is restricted to one year whereas tax losses can be carried forward for a period of six years. ] In the tax plan 2021 it has been announced that the loss compensation rules will be adjusted as per 2022. This plan specifies that starting from 2022, tax losses can be carried forward indefinitely. However, there will be a limit to the amount of losses which can be off set. Based on the plan, tax loss compensation will be depend upon the taxable profit of the year concerned. Profits up to € 1 million can be fully used to set off losses.  In case the taxable profit exceeds €1 million, only 50% of the remaining taxable profit may be used to set off losses.

Adjustment at arm’s length principle – informal capital structures

On the current at arm’s length principle it is possible to take a deduction in the Netherlands with respect to an intercompany transaction, regardless whether the affiliated party will include the corresponding income in its taxable base. This could result in a deduction in the Netherlands, while the other country does not or does not entirely include this income in its taxable base. On budget day it has been announced that the government will address this issue by only allowing a deduction for as far as the corresponding income will be taxed in the other country. A law proposal addressing this is expected around spring time 2021.

Other adjustments

Besides the aforementioned proposals and announcements there are more proposals and changes upcoming, for example:

  • a research on the introduction of a capital deduction in combination with a restriction in the earningsstripping rule;
  • withholding tax on interest and royalty payments to low tax jurisdictions
  • the adjustment of the settlement of withholding taxes with corporate income taxes following the Sofina-judgment;
  • a bill to introduce an (additional) dividend withholding tax for payments to listed low-tax and non-cooperative jurisdictions (in the spring of 2021);
  • research on a potential new group regime will be continued. The decision whether that should result in a legislative proposal will be taken after the elections next year.

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