Netherlands 2010 Tax Plan Is Good News For Business

by Ulrika Lomas, Tax-News.com, Brussels

21 September 2009

Determined to boost enterprise, the Dutch government has included a series of tax incentives in its 2010 Tax Plan, specifically designed to make enterprise simpler and therefore more attractive to entrepreneurs.

Key tax incentives contained in the government’s 2010 Tax Plan include the following measures:

• In the area of research and development (R&D) the "patents box" scheme will be replaced by an "innovation box" scheme for innovative entrepreneurs. As a result, income derived from R&D will only be taxed at a rate of 5%, and the ceiling for the scheme will be removed.
• In order to enable entrepreneurs to increase their cash flow, they will have the option of offsetting losses incurred in 2009 and 2010 against profits made in the three previous years. The system of accelerated depreciation will continue in 2010.
• The profit exemption for small and medium-size businesses is to be increased by 1.5% to 12%. In addition, entrepreneurs will no longer have to devote a minimum period of time to their business in order to qualify for the measure, enabling individuals to carry on a business alongside salaried employment.
• In a bid to foster business growth, the small-scale investment tax credit (KIA) is to increase by 29%.
• A number of tax incentives designed to benefit directors of a company in which they are also major shareholders (DGAs) are contained in the plan. These initiatives include extending the measure granting exemption from income tax to the transfer of a business by a DGA to a co-entrepreneur and relaxing customary pay arrangements.

The 2010 Tax Plan also includes a number of separate legislative proposals, designed to simplify certain tax rules and reduce the administrative and regulatory burden. The main simplifications are as follows:

• A new work-related costs scheme will be introduced. An exemption of 1.5% of the wage bill for tax purposes is to replace a cumbersome system of numerous tax-free allowances and benefits in kind from employers.
• From 2010, employers will no longer be required to deduct social insurance contributions and healthcare insurance contributions from pay to employees aged under 23 who earn less than the minimum salary. From 2011, this will also apply to the levying of wage withholding tax.
• A standard definition of wages for wage withholding tax, various social insurance contributions and income-related healthcare insurance contributions will be introduced, representing a saving for employers of around EUR380m.

Other measures contained in the government’s Tax Plan include a series of VAT reductions, and measures designed to boost innovation in the car industry, including granting exemption from motor vehicle tax for highly fuel-efficient cars, and increasing the amount deducted from the purchase tax levied on fuel-efficient cars to EUR700.

In a statement, the State Secretary for Finance Jan Kees de Jager welcomed the 2010 Tax Plan and praised the significant tax incentives for entrepreneurs contained in the plan. “Entrepreneurs are the backbone of our economy. They are the engine that powers job creation, productivity and growth. That’s why my proposals are all about making enterprise simpler and more attractive,” he said.

The State Secretary also welcomed the historic step taken by the government to simplify existing tax rules, emphasizing that the “radical simplification of complex rules would yield long-term cost reductions for businesses.”

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