4 minutes read
Per relevant topic, the Working Group identifies the main challenges and, subsequently, presents various potential solutions, including their budgetary impact. A large chapter is dedicated to the business climate in the Netherlands from which the following conclusions for multinational groups can be derived:
- It is important to preserve the attractiveness of the Dutch business climate. Taxation is a significant factor in this regard. Tax policy should to the extent possible be neutral, stable and predictable.
- Tax avoidance should going forward mainly be addressed in an international context. Only if this is not feasible, domestic measures should be considered.
- To the extent the Netherlands has implemented EU anti-tax avoidance measures stricter than necessary, the Working Group suggests reassessing choices made in the past.
The Working Group presents – among others – the following tax policy measures:
- A uniform statutory corporate income tax rate in line with the average European rate in order to create a level playing field within Europe. They suggest a rate of 24%.
Currently the Netherlands has a base rate of 19% for the first EUR 200,000 in taxable income and a headline rate of 25.8% for the excess. The recommended policy measure would abolish the base rate and move to a uniform rate of 24%. - Introduction of Pillar Two proof refundable tax credit for technology companies.
In line with other countries, the Working Group suggests introducing a refundable tax credit meeting the conditions of a so-called Qualified Refundable Tax Credit as introduced in the Pillar Two rules. This should be achieved by combining current tax incentives like the Environmental Investment Deduction and the Energy Investment Deduction into a simpler refundable tax credit that is not dependent on the profitability of a company. Under the Pillar Two rules, Qualified Refundable Tax Credits have a less distorting impact (on the effective tax rate) compared to other tax credits. - Expanding depreciation possibilities for buildings in own use
Tax depreciation on buildings is currently not possible below 100% of the annually determined value based on the Valuation of Immovable Property Act. The policy measure would loosen this limitation and reduce the floor to 50% of such value for buildings in own use. The floor of 100% would remain in place for buildings used mainly for leasing to unrelated parties. - Narrowing tax base bank levy
The tax base of the Dutch bank levy is currently determined on the debt position as reflected in the consolidated commercial accounts. This may lead to double bank levy taxation if and to the extent foreign branches and foreign subsidiaries are also confronted with a bank levy locally. To improve the Dutch business climate for internationally operating banks and to create a level playing field for such banks, this policy measure recommends to narrow the tax base to the Dutch debt position as determined for Dutch corporate income tax purposes. A step further would be to also exclude group debts that have been taken up to serve foreign activities. - Harmonisation expat regime
Currently, the so-called 30%-ruling offers expats a tax-free notional allowance for extraterritorial expenses incurred for working in the Netherlands for a Dutch withholding agent/employer. As of 2024, various elements of the 30%-ruling were watered down. The Working Group acknowledges the importance of this instrument for the business climate of innovative companies. Therefore, it encourages the harmonisation of the expat regime at EU level and to refrain from unilaterally limiting the 30%-ruling. - Adjustments to the ATAD earnings stripping rule
The Dutch earnings stripping rule currently limits the deduction of net borrowing costs to the highest of (i) 20% of the tax EBITDA or (ii) EUR 1 million. The Working Group presents two potential adjustments. It suggests bringing the Dutch earnings stripping rule more in line with the implementation of the EU Anti-tax avoidance directive (ATAD) in other EU Member States by increasing the EBITDA cap from 20% to 25%. Further, it proposes to equalise the treatment of equity and debt for tax purposes by virtue of lowering the threshold from EUR 1 million to EUR 0.5 million. - Abolishment safe harbour rules conduit companies
Interest and royalties received and on-paid within the group by Dutch conduit companies are excluded from the Dutch taxable base if the conduit company does not incur real risk with respect to the conduit activities. This inter alia means that foreign withholding taxes are not creditable against Dutch corporate income tax due. The Dutch tax code contains a safe harbour based on which conduit companies are deemed to incur a real risk if their equity equals at least i) 1% of the outstanding loans or ii) EUR 2 million. The policy measure suggests abolishing this safe harbour and moving to an open norm in line with the Dutch transfer pricing decree of July 2022. This would entail that a company must have sufficient control and financial capacity to manage its risks in order to be allowed to credit withholding taxes and to account for the received and on-paid interest or royalties in its Dutch taxable base. - Introduction of share option plan for start-ups and scale-ups
The Working Group recommends introducing a special tax credit facility for wage tax purposes which should increase the attractiveness of stock options as a form of remuneration for employers and employees of start-ups and scale-ups. Subject to certain conditions, benefits derived from such stock options should be taxed moderately. - Tax loss compensation
As from 2022, losses can be carried forward indefinitely and carried back for one year. Annual loss compensation is limited to EUR 1 million of taxable profit increased with 50% of taxable profit in excess of EUR 1 million. As multiple political parties included a restriction of loss compensation in their election programs in 2023, the Working Group looked into a possible policy measure. The report refers to limiting loss compensation to 30% of taxable profit in excess of the EUR 1 million threshold, to abolishing loss carry back and to limiting loss carry forward to six years. However, in the report the Working Group states that this measure would have a negative economic impact and it criticizes this potential measure for various reasons. - Innovation box regime
The innovation box currently reduces the effective corporate income tax rate on qualifying benefits from 25.8% to 9%. Based on a recent evaluation, the innovation box generally stimulates the Dutch business climate while it encourages innovation to a lesser extent. According to the Working Group it could be considered to increase the rate in the innovation box slightly or to limit the benefits per user. Such measures would however have a negative impact on the Dutch business climate.
Final remarks
We welcome the tone of voice of this Working Group and the increased attention for a sound business climate. We would expect that in the process of forming a new Dutch government some of the presented tax measures will become part of a new coalition agreement as we have also seen in the past. We will keep you posted on new developments in this regard.
Should you have any queries, please contact your trusted adviser at Loyens & Loeff.
