Dutch Budget To Support Enterprise

by Ulrika Lomas, Tax-News.com, Brussels

18 September 2008

Dutch Finance Minister Wouter Bos presented the government's budget plan to parliament on Tuesday, which contains several measures aimed at promoting entrepreneurship and supporting small businesses.

As was widely expected, the government has decided to cut a planned 1% hike in value-added tax, which would have taken the VAT rate to 20% in 2009, in view of the country's rising inflation and falling economic growth rate.

Instead, Bos announced a number of measures reducing the tax and administrative burden on small companies as the government attempts to lift business confidence.

Under the plan, employers will no longer need to withhold unemployment insurance contributions from their employees' salaries, and the requirement to register all new employees with the Tax and Customs Administration before they start work is to be abolished. The government will also attempt to clarify the system further, for example by redefining in simpler terms what counts as 'salary.'

For small- and medium-sized companies, the lowest corporate tax rate of 20% will apply to the first EUR250,000 of profit. Currently, the lowest rate applies to the first EUR40,000, then a 23% rate applies to profits between EUR40,000 and EUR200,000 and a 25.5% rate applies to profits exceeding EUR200,000.

The VAT reporting burden will also be reduced under a budget proposal which increases the threshold for quarterly VAT returns from EUR7,000 to EUR15,000, meaning that around 50,000 businesses will only need to submit returns four times instead of twelve times per year.

Under other pro-innovation measures announced by Bos: the research and development incentive scheme will be broadened to include innovative ICT projects; business start-ups which have been refused loans by banks will have access to a micro-credit of EUR25,000; and 100 successful businesses will be given the status of 'growth accelerators' granting them an extra five years' support to boost their annual sales to EUR20 million.

In addition, the latest budget builds on environmental measures announced last year. These include: changing the basis of car and motorcycle tax from list price to CO2 emissions; cutting the motor vehicle tax rate for highly fuel-efficient cars; cutting the motor vehicle tax rate for cars running on natural gas; and a new tax exemption for hydrogen.

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