By Jian-Cheng Ku, Tim Mulder, & Xander Stubenrouch, DLA Piper, Amsterdam
On September 15, the Dutch government published its tax legislative proposals for 2021. For multinational enterprises, the most relevant proposals are an amendment of the corporate income tax rates, a reduction of the effective tax rate for the innovation box, an increase in substance requirements for financial services entities, and an increase in the general real estate transfer tax rate.
Corporate income tax rates
The corporate income tax rates and the threshold of the lower and upper rates will be changed, as shown in the table below.
|
Year |
Lower rate and threshold |
Upper rate and threshold |
|
2020 |
16.5% for taxable profits up to EUR 200,000 |
25% for taxable profits in excess of EUR 200,000 |
|
2021 |
15% for taxable profits up to EUR 245,000 |
25% for taxable profits in excess of EUR 245,000 |
|
2022 |
15% for taxable profits up to EUR 395,000 |
25% for taxable profits in excess of EUR 395,000 |
The proposed reduction of the upper corporate income tax rate from 25% to 21.7% has been withdrawn, for now.
Effective tax rate for the innovation box
The innovation box allows taxpayers to reduce their effective corporate income tax rate on profits related to certain R&D activities. The reduced corporate income tax rate is intended to stimulate innovation in the Netherlands.
The Dutch government has proposed to increase the effective tax rate of the innovation box regime from 7% to 9%.
Substance requirements for financial services entities
The substance requirements for financial services entities will be aligned with the substance requirements that already serve as a presumption of proof in the Dutch dividend withholding tax and the Dutch corporate income tax.
Financial service entities are entities of which 70% or more of the activity consists of interest, royalty, rent, or lease payments from and to group companies.
Under the increased substance requirements, financial services entities that are resident in the Netherlands for Dutch tax purposes should have an office space available for at least 24 months and have a relevant wage sum of at least EUR 100,000.
The wage sum of EUR 100,00 must represent the remuneration for the performance of the activities of the financial services entity.
The consequence of not increasing the substance requirements is, inter alia, the triggering of spontaneous exchange of information by the Dutch tax authorities to local tax jurisdictions, resulting in potential audits and denial of tax treaty benefits.
General real estate transfer tax rate
As of January 1, 2021, the general rate of the real estate transfer tax will be increased from 6% to 8%.
This increased tax rate will apply to all commercial properties and will be extended to residential properties that are not used as a personal dwelling (e.g., buy-to-let properties).
Other proposals that were adopted last year that will also enter into force as of January 1, 2021, are the amendment of the liquidation and discontinuation loss regime and the conditional withholding tax on interest and royalties.
For a detailed description of these legislative measures, we refer to our 2020 Dutch tax plan.
Additional (anticipated) measures relevant to MNEs
In addition to the above, there are a couple of anticipated changes relevant to multinational enterprises that do business in the Netherlands.
First, the Dutch government postponed the implementation of the new European VAT regulations regarding e-commerce until July 1, 2021.
Second, the Dutch government has announced that it will propose a limitation on the utilization of tax losses that have not yet been utilized.
Third, the opposition party has proposed a conditional exit tax for Dutch dividend withholding tax purposes.
Fourth, the Dutch government will propose introducing job-related investment relief to stimulate investment in the Netherlands.
Lastly, the Dutch government has announced that it will propose the abolishment of informal capital structures (i.e., structures where the Netherlands grants a step-up, but there is no corresponding adjustment in the other jurisdiction) as of 2022.
Our comments
The 2021 Dutch tax plan is the final tax plan of the current government since new elections will take place on March 21, 2021.
The tax proposals are, in our view, based on three objectives: assisting companies dealing with liquidity issues as a result of COVID-19, maintaining an attractive investment climate for companies, and ensuring that companies pay their fair share of taxes.
The tax legislative proposals do not contain any big surprises given the government has always been transparent about the upcoming changes. The Dutch government has always been open about the initiatives it intended to propose as part of the 2021 Dutch tax plan.
It is interesting to note that, contrary to rumors, the 2020 Dutch tax plan did not introduce a conditional exit tax in the Dutch dividend withholding tax or add other measures proposed in the Dutch Report on Taxation of Multinationals.
These measures may require more review from a legislative and European tax law point of view and may be postponed until after the Dutch elections.
Jian-Cheng Ku
Jian-Cheng Ku advises on international tax law and transfer pricing with a particular focus on international tax planning, M&A and private equity transactions, corporate reorganisations, and planning and design of transfer pricing policies.
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Jian-Cheng Ku
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Tim Mulder
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Xander Stubenrouch
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