The 2020 Dutch Budget And Tax Plan - Key Takeaways For Multinational Enterprises

; posted on
September 19th, 2019

Recently, the Dutch Budget for 2020 was presented, which includes the Tax Plan for 2020. The proposal aims to increase the perceived fairness of the Dutch corporate income tax system, whilst still keeping the Netherlands attractive as a place to do business.

The key proposals for multinational enterprises are the introduction of a conditional withholding tax on interest and royalties, amendments to the Dutch corporate income tax and dividend withholding tax anti-abuse rules, and etc

Dividend WHT exemption

It is proposed to amend the anti-abuse rules to apply the domestic dividend WHT exemption. Currently, meeting specific substance requirements is a safe harbor to determine that the arrangement is not abusive. Following recent EU Court of Justice case law, meeting these substance requirements shall no longer function as a safe harbor, but rather as a presumption of proof for non-abusive arrangements as of 1 January 2020. Even if the substance requirements are met, the Dutch tax inspector can demonstrate that an arrangement is abusive.

Corporate income tax rate

As part of the 2019 Budget Plan, The higher corporation tax rate will be maintained at 25% in 2020 instead of being reduced as originally planned, and will be reduced to 21.7% in 2021 instead of 20.7% (lower corporation tax rate reduction to 15% in 2021 will be maintained).

Conditional withholding tax plan

As of 1 January 2021, a WHT is proposed on interest and royalty payments to group companies that are resident in a jurisdiction with:

  • A statutory tax rate lower than 9%
  • A jurisdiction that is included on the EU list of non-cooperative jurisdictions

Or

  • In certain abusive situations

Under the proposed WHT, accrued, imputed or paid interest and royalties by Dutch resident entities are subject to a WHT equal to the headline CIT rate (21.7% in 2021) irrespective of whether these payments are deductible for CIT purposes.

Anti-abuse rules combat interposing conduit companies in non-low taxed jurisdictions if these intermediate conduit companies do not meet certain substance requirements or in the absence of actual economic activities. As discussed above under the Domestic dividend WHT exemption, the Dutch substance requirements shall become a presumption of proof that an arrangement is not abusive.

Liquidation loss

Under the current liquidation loss regime, a Dutch taxpayer can take a loss into account if it liquidates a (foreign) subsidiary where, roughly speaking, the sacrificed amount (share capital, share premium, and other contributions into the subsidiary) exceeds the liquidation proceeds.

The proposed amendment to the liquidation loss regime will mean that a liquidation loss can only be taken into account if a shareholding threshold is met, the subsidiary being liquidated is a resident for tax purposes of an EU/EEA jurisdiction; and the liquidation is completed within three years.

The expected effective date of this proposal is January 1, 2021.

Source: Dutch Government

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