Dutch Tax Package To Improve Business Environment

by Ulrika Lomas, Tax-News.com, Brussels

11 May 2005

The Dutch State Secretary for Finance, Joop Wijn has placed proposals before Parliament which would reduce corporation tax and make other improvements in order to attract new businesses to the Netherlands.

Says the minister: “If the Netherlands can consistently earn a place on investors’ shortlists, this can only be good for the growth potential of our economy”. As from 1st January, 2007, the starting rate of corporation tax will be lowered to 20% on the first €41,000 of profit, compared with the current 27%, and the headline rate of corporation tax will be reduced from 31.5% to 26.9%. Owners of small and medium-sized enterprises will benefit from an exemption of at least 5% of their profits.

The proposals also include a proposal to reduce the tax rate for profits derived from intercompany financing and treasury activities to 10%, and confirm the already announced abolition of the capital duty of 0.55% on the issue of share capital.

In anticipation of confirmation of the Marks & Spencer ruling on cross-border loss relief by the European Court of Justice, the government proposes to allow relief for losses incurred in other EU Member States. In addition, participation rules will be relaxed by eliminating the nonportfolio and "subject to tax" requirements. For "passive" participations, a "sufficient" tax rate test (possibly 10%) would be introduced.

The total package is however designed to be revenue-neutral, and the give-aways will be financed inter alia by reducing the carryback of losses from three years to one year, by limiting carryforwards, by abolishing the temporary deduction for losses on newly acquired participations, and by capping the depreciation of real estate to the extent the book value of a property is below the fair market value.

Recommended