Netherlands State Secretary De Jager and Finance Minister Bos have announced plans to amend legislation regarding the tax treatment of corporate group interest.
The ministers have said that they will present legislation to the Lower House of Parliament after conducting an investigation into possible amendments. The investigation will focus on the possibility of making group interest non-deductible for the debtor and non-taxable for the creditor. If this system is not feasible the government will look at the option of reducing the effective tax rate for both interest payments and receipts on group loans and cap deductions on participation-related borrowing.
The Dutch government's proposals follow a study by the Netherlands Bureau for Economic Policy: it showed that such a move would increase state prosperity. The study shows that amending the group interest system would help break a trend which currently encourages the use of borrowed capital. The government also said that the move would decrease the taxation on companies and make the Netherlands a more attractive jurisdiction for companies to establish tax offices and operations in.
"The tax burden will become less for many companies. And it is attractive for internationally operating companies to keep or establish their treasury functions in the Netherlands,” noted the statement. The government has also said any additional revenue generated from the any possible change would be channelled into reducing the corporation tax rate.
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