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15 October 2018 Dutch Government maintains dividend withholding tax, funds used to reinforce attractiveness of Dutch business climate The Dutch Government announced on 5 October 2018 that it was reconsidering certain measures included in the 2019 Budget Proposals1 to increase the attractiveness of the Dutch business and investment climate. On 15 October 2018, the Dutch Government officially announced the repeal of the previously announced elimination of the dividend withholding tax. At the same time, they announced additional measures, such as a further reduction of the corporate income tax (CIT) rate and measures to facilitate innovation, to further strengthen the business and investment climate in the Netherlands. The Government also announced its plans to revisit and defer the previously announced conditional dividend withholding tax. The current 15% dividend withholding tax on dividend distributions (including its broad exemptions, often effectively only imposed on individual shareholders or corporate shareholders holding an interest of less than 5%) shall be maintained. At the same time the announced conditional dividend withholding tax on distributions (and in certain cases capital gains) to related companies that are tax resident in a jurisdiction with a low-tax rate or a jurisdiction listed on the European Union (EU) Blacklist will be revisited and deferred. As of 2020, the headline statutory CIT rate shall be gradually reduced from 25% to 20.5% in 2021 (instead to the previously announced 22.25%). As of 2019, the CIT rate for the first €200,000 profits shall be gradually reduced from 20% to 15% in 2021 (instead of the previously announced 16%). The EU Court of Justice ruled that certain elements of the Dutch fiscal unity regime are not compatible with EU law. Draft legislation with retroactive effect until 25 October 2017 has been proposed that disregards the fiscal unity with respect to certain rules.2 To partially mitigate the impact, the retroactive effect shall be limited until 1 January 2018 (i.e., for most taxpayers no impact with respect to the 2017 corporate income tax return). For fiscal years starting on or after 1 January 2019, real estate used by the taxpayer itself can only be depreciated up to the value of the real estate in accordance with the Real Estate Appraisal Act (WOZ-value). To partially mitigate the effect of this measure for taxpayers that recently acquired Dutch real estate, a three-year grandfathering period will be introduced for real estate acquired prior to 1 January 2019 that is depreciated for less than three years. The period during which a tax-free allowance (30% facility) may be granted for extraterritorial expenses incurred by incoming employees/expatriates is shortened from eight to five years. To mitigate the impact for existing cases, a grandfathering rule is proposed if expatriates, as a result of the shortened period, would no longer be able to benefit from the 30% facility as of 2019 or 2020. Draft legislation is expected to be published on 26 October 2018. The above proposals are subject to review and discussions by the Dutch Parliament. As such, they are still subject to further possible amendments. The Dutch Government is aiming to have these proposals as part of the voting on the 2019 Budget Proposals scheduled for 15 November 2018. 1. See EY Global Tax Alert, The Netherlands publishes 2019 Budget Proposals, dated 18 September 2018. 2. See EY Global Tax Alert, Dutch Government publishes draft legislation amending fiscal unity regime to be in line with EU freedom of establishment, dated 8 June 2018. Ernst & Young Belastingadviseurs LLP, International Tax Services, Amsterdam
Ernst & Young Belastingadviseurs LLP, International Tax Services, Rotterdam
Ernst & Young LLP, Netherlands Tax Desk, New York
Ernst & Young LLP, Netherlands Tax Desk, Chicago
Ernst & Young LLP, Netherlands Tax Desk, San Jose/San Francisco
Ernst & Young LLP, Netherlands Tax Desk, Beijing
Ernst & Young LLP, Netherlands Tax Desk, Hong Kong
Ernst & Young LLP, Netherlands Tax Desk, London
Document ID: 2018-6204 |
