The following Dutch tax changes as per January 1, 2025, are the most relevant for US MNEs:
Changes to Dutch earnings stripping rules: The current Dutch earnings stripping rule limits the deductibility of net interest expenses to the higher of (i) 20% of the fiscal EBITDA and (ii) EUR 1 million. The percentage under (i) will be increased from 20% to 25%. This is positive news for Dutch subs of US MNEs with debt obligations as it potentially increases the amount of interest that can be deducted for Dutch tax purposes. On the other hand, the EUR 1 million threshold mentioned under (ii) will no longer apply for real estate investment companies in order to combat certain abusive situations.
Incorporation of Pillar Two (𝐏𝟐) Administrative Guidance: The OECD Administrative Guidance regarding P2 (the 𝐆𝐮𝐢𝐝𝐚𝐧𝐜𝐞) that was released after the Dutch legislative implementation of the P2 rules (the Dutch Minimum Tax Act; 𝐌𝐓𝐀) does not directly affect the MTA, unless it concerns merely a clarification. However, certain elements of the Guidance have now been incorporated in the MTA. Those changes include the Guidance on the P2 treatment of new categories of tax credits, the substance-based income exclusion and hybrid arbitrage arrangements entered into after December 15, 2022.
P2 levy is sufficient for Dutch subject-to-tax rules: The 2025 tax plans provide helpful clarifications on the interaction between the P2 rules and certain subject-to-tax tests (𝐒𝐓𝐓𝐬) in Dutch tax law by clarifying that a “tax on profits” for that purpose includes certain top-up taxes levied under P2. This applies among others to the STT that serves as an exception to an interest deduction limitation rule (article 10a) and to the STT that is one of the possible tests to qualify for the participation exemption.
Dutch entity classification rules: New Dutch entity tax classification rules were adopted last year and will become effective January 1, 2025. Under these rules, Dutch limited partnerships (CVs) and their foreign equivalents (e.g., Delaware LPs) will generally be classified as transparent for Dutch tax purposes (subject to certain exceptions). The new entity classification will reduce the number of hybrid mismatches in an international context and will increase the attractiveness of the Netherlands as a jurisdiction for international joint venture vehicles. The classification of a Delaware LLC does not change and, hence, it continues to be treated as opaque for Dutch tax purposes.
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