1. February 2012
International Dutch Tax News
CORPORATE TAXATION
Highlights:
Restriction of the interest deduction for
take-over holdings
- Restriction of interest deduction
in case of a take-over As of 2012, the Dutch Corporate Income Tax Act
Interest on excessive debt financed contains a provision to limit the deduction of
acquisitions no longer deductible. excessive interest expenses incurred by Dutch
- Change in treatment of losses of companies to finance the acquisition of a Dutch
subsidiary. Whereas initially a ratio between equity
permanent establishments and debt (including loans from non-related third
Changes have been enacted with regard to parties) was considered to be the measure to
the treatment of results of p.e.; losses can no determine how much interest should be tax-
longer be offset. deductible, this was amended during parliamentary
- Substantial interest treatment proceedings in the sense that the excessive debt
financing is determined by means of the purchase
limited to abuse situations price and the takeover debt.
Foreign entities owning shares in Dutch
companies only taxable in cases of abuse. No excessive debt financing is recognized if the
- Dividend withholding tax for take-over debt in the year of takeover is not more
than 60% of the purchase price. After the first year,
cooperatives
this percentage will be reduced with 5% per year to
Situations of abuse with cooperatives are
ultimately 25%.
combated.
- 30% regulation amended Non-deductible interest can be carried forward to
Several restrictions are made to the 30% future years. The new rules restricting the deduction
regulation of excessive interest for takeover holdings will only
- Procedural measures apply to cases where the fiscal unity between the
acquiring company and the acquired company is
We outline several changes.
formed (or if the fiscal group already exists, an
- Tax treaty news expansion was made) after November 15, 2011 (the
o New and amended treaties date the amendment was introduced in the Bill).
o Dutch Sandwich back in business?
- Other Goodwill paid to acquire the shares of the subsidiary
Dutch policy after the “National Grid Indus and equity attributable to participations will be
BV”-case.
eliminated after the tax consolidation and,
consequently, will reduce the tax equity. However,
the government is considering to allow a phased-
During the last quarter of 2011 Dutch MP‟s have write off of the goodwill within a period of 10 years.
been busy to discuss the Tax plans for 2012.
Finally, December 21, 2011 these plans were For the SME‟s the law shall have little or no effects,
approved by the Parliament and have become as this measure only starts if the interest expenses
enacted as per the 1st of 2012. amount to more than € 1 million per year.
Below we shall describe several issues that we
consider worthwhile to read about for persons
working in the international tax environment.
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2. Exemption of profits of foreign permanent tax) and the substantial interest is not part of the
establishments (hereafter: “ PE’s”) business assets of the members of the cooperative.
Until 2012, the Netherlands used a system for the Withholding taxes
calculation of the profits of a PE, under which profits
of a foreign PE were exempt, but losses were Cooperatives are in principle not subjected to Dutch
deductible from the profits of the Dutch company. dividend withholding tax. However, as of 2012,
These losses were to be recaptured with future dividend distributions by cooperatives will become
profits. Under this system, in case of foreign losses subject to dividend withholding tax in abuse cases.
this could offer liquidity benefits.
There will be no withholding tax if the membership
During the current economic situation, these liquidity rights belong to the business assets of the member
benefits were used more and more, e.g. by concerned, unless profits made before the
introducing short-term accelerated amortization interposing of the cooperative are distributed.
schemes, which was one of the measures taken to
combat the effects of the economic crisis. This Also to pension funds in third countries a refund of
however has changed as of 2012. As of that year, a dividend withholding tax will be granted. Such
full exemption of foreign PEs results is introduced, pension fund is considered to be a an exempt
which means that losses of a foreign PE will no foreign entity if the following cumulative conditions
longer be deductible in the Netherlands. The only are met. In the first place a tax treaty must exist with
exception regards final liquidation losses. the third country providing for exchange of
information and secondly, the dividends are paid on
Additionally, the "subject to tax" requirement is a portfolio participation of less than 5%.
abolished that applied to profits derived from a
foreign PE established in a country with which the PERSONAL TAXATION
Netherlands has no tax treaty. Only for passive PE‟s
this requirement will remain in place. The 30% regulation
The exemption will not apply to currency gains Major amendments have been made to the 30%
resulting from the determination of the profit of the regulation. Dutch wage tax law contains a general
foreign PE. With respect to currency gains derived provision exempting actual extraterritorial expenses
from a foreign PE, it may be noted that tax can be of temporary employment of employees abroad.
avoided by filing a request to apply a functional Also, to increase the highly skilled labor migration to
currency. the Netherlands, this regulation applies upon
approval after request to inward migration of highly
skilled employees with specific knowledge and
Taxation of substantial interest in Dutch
experience. The regulation arranges that Dutch
company or cooperative owned by a foreign
employers of employees who have a 30% ruling can
entity
reimburse 30% of the taxable base of the
employee's wages as a tax free reimbursement for
Foreign entities owning a substantial interest of at extraterritorial expenses. Until 1 January 2012, a
least 5% in a Dutch company or cooperative are 30% tax ruling was granted for a maximum of 10
subject to Dutch corporate income tax unless that years.
interest is part of their business property.
As the rule was also used by persons for whom it
This position is not taken for the majority of cases. was not intended and – although this was not stated
Only in situations of abuse, meaning that the publicly – because of the sentiments this regulation
structure can be considered to aim at the avoidance causes to Dutch „regular‟ employee and the need to
of income tax or dividend withholding tax, the above increase the revenues, several restrictions to the
described position would apply. During applicability of the 30% regulation have been
parliamentary proceedings the following example enacted from 1 January 2012 onwards.
was provided of abuse. It described a situation
where a substantial interest in a cooperative is First change is that the maximum duration of the
involved. There is abuse if the cooperative was only regulation is reduced to 8 years. Secondly, the
used to avoid dividend withholding tax (in principle requirement of specific knowledge and experience
the cooperative is not liable to dividend withholding is translated into an income requirement. The
minimum salary threshold for highly skilled migrants
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3. of 30 and over shall amount in 2012 to € 35,000 The interest, which is currently calculated from 1
(gross per annum, exclusive of the 30% tax-free January following the tax year, is starting 2012
remuneration). For individuals holding a Masters calculated from 1 July following the tax year.
degree, and who have not reached the age of 30,
the minimum salary requirement is € 26,605 (gross After a request for a provisional or final assessment,
per annum, exclusive of the 30% tax-free
this assessment must be made within 8 weeks. The
remuneration). An exemption from the minimum
salary requirement is introduced for scientific reasonable period for issuing a provisional
activities. Master degree students and Graduates assessment after filing a tax return will be set at 13
below thirty, will be deemed as having been hired weeks.
from abroad. The time they require for their thesis in
the Netherlands is not taken into account for a TAX TREATY NEWS
reduction of the maximum time the 30% regulation
may be applied. New or amended tax treaties
Several tax treaties during the last quarter of 2011
In the third place, periods of living and working in
entered into force:
the Netherlands during the last 10 years were
- Hong Kong (October 24, 2011)
deducted from the maximum period of time of 10
- Switzerland (November 9, 2011)
years. From 2012 onwards, work and stay in the
- Barbados (amending protocol, November
Netherlands for the last 25 years will be taken into
13, 2011)
account. This restriction shall only be in place for
- Panama (December 1, 2011)
30% regulations issued after 2011.
- Oman (December 29, 2011)
- Japan (December 29, 2011)
Also, rulings reaching 5 years of appliance after 1
January 2012 will be assessed again on the basis of Dutch sandwich back in business again?
the new criteria. Changing employers in the
meantime will not change this. Press releases issued have indicated that the Dutch
government and the authorities of Curaçao and
Finally and probably the most important change is Aruba have reached agreement over a new bilateral
that a territorial restriction to the applicability of the tax regulation. These new regulations are expected
regulation is enacted: anyone living within a 150 km to be effective as of January 1, 2013.
radius from the Dutch (land) border will cease to
qualify as 'having being hired from abroad'. Under these proposals, a 15% dividend withholding
tax is agreed upon if the national legislation
As a consequence, employees who live in Belgium, provides such instrument. At present, Curaçao does
western Germany, parts of Northern France and not impose dividend withholding tax on dividend
Luxemburg will be excluded from the benefit. The distributions. The Netherlands impose an 8.3%
underminister of Finance declared that the 150-km dividend withholding tax.
rule does not apply to the UK, as there is no direct
border between the UK and the Netherlands. Exception to the 15% taxation is a 0% rate for
dividends held by active companies. For these
companies, also a limitation-on-benefits clause shall
PROCEDURAL MEASURES
be inserted in the Regulation. Up to now the text of
this clause is not known. There shall be a minimum-
Double punishment in tax cases is as of January interest requirement of 25%. As to the “active”
1, 2012 possible: the tax authorities may impose a requirement also no guidelines have been issued.
criminal penalty after a an administrative penalty As a transitory measure, there shall be a 5%
was imposed previously. This is only possible if new dividend withholding tax as of 2013 up to 2020 of
facts occur. 5% for not-active holding companies residing in
Curaçao and holding at least 25% of the shares of a
The taxpayer must pay interest if an assessment is Dutch subsidiary.
submitted late due to an act or omission by the
taxpayer. In case the taxpayer submits a tax return Another (tax) measure that has been agreed upon is
in which he requests for a tax refund, and that that the country of emigration may levy inheritance
assessment is imposed accordingly, interest shall and gift tax for a period of up to 5 years after
be payable to the taxpayer. emigration, but has to grant a credit for any such
taxes levied by the country of immigration. Up to
now under the Tax Regulation for the Kingdom, the
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4. former state of residence can only levy inheritance may request security, e.g. a bank guarantee, for the
tax within one year after emigration and no gift tax. delay.
Exchange of information will take place in We wonder whether such a request for issuance of
accordance with international standards. In addition, security to a tax payer can be validly made after the
De Lasteyrie du Saillant-case, where the court ruled
Curaçao is considering to implement automatic
that security is not required in case of a transfer of
exchange of information under the Savings the seat of residence to another EU-state. We see a
Directive. parallel with the case where a corporate entity
transfers its effective management to another EU
OTHER state. We expect - in case the policy, as it is laid out
in the December 20 regulation, remains effective -
Dutch policy after the “National Grid Indus BV” case law on this matter and monitor developments
case regarding the transfer of the seat of a in this respect.
Dutch legal entity
In the above mentioned case, on November 29, For information please contact:
2011, the EU Court of Justice ruled on the question
if and - if yes - under what conditions the Marco Visser or Frans Tempel
Netherlands may tax any gains made in case of a T: +31 33 495 25 00 T: +31 33 463 57 27
transfer of the board, and thus the transfer of the E: visser@crop.nl E: ftempel@crop.nl
place of the company‟s effective management.
In this judgment the Court issued a ruling on Disclaimer: CROP registeraccountants and CROP belastingadviseurs
makes no representation nor gives any warranty (either express or
questions asked by the Amsterdam court of appeal implied) as to the completeness or accuracy of this publication. CROP
that a country is permitted to tax such gains. registeraccountants and CROP belastingadviseurs is not liable for the
information in this publication or consequences of the use of this
publication. CROP registeraccountants and CROP belastingadviseurs will
The EU Court ruled that in principle the exit-country not be liable for any direct or consequential damages arising from the use
of the information contained in this publication.
is entitled to tax such gains. However, the Court
also ruled that it would be acceptable if there is a
regulation in place under which a taxpayer can opt
for a delay of payment. The Netherlands at that
point in time did not have such regulation in place.
December 20, 2011 the underminister of Finance
issued the new Dutch policy guidelines as regards
this situation. In this new policy it is possible to opt
for a delay of payment until the moment any hidden
profit gain is realized. However, the tax authorities
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