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Dutch Government To Cut SME Corporate Tax In 2008

by Ulrika Lomas, Tax-News.com, Brussels

19 September 2007


The Dutch government's Tax Plan for 2008 will cut corporate tax for small- and medium-sized business, but will increase taxes on environmentally harmful products and activities, Finance Minister Jan Kees de Jager has announced.

De Jager says that his proposals aim to achieve three over-arching objectives: encouraging entrepreneurship, simplifying tax and regulations, and "greening" the Dutch tax system.

From January 1, 2008, SMEs will pay a lower rate of corporate income tax while running a business will become more fiscally attractive generally, de Jager claimed. Under his proposals, the 20% lowest rate of corporate tax will apply to the first EUR40,000 of income, up from EUR25,000, and the second bracket will be extended from EUR60,000 to EUR200,000, with the tax rate lowered by 0.5% to 23%.

De Jager revealed that it will also become easier to start a new business out of an existing business without tax consequences. Currently this is only possible if the business closure was prompted by government intervention. But under the new plan, this will also apply if entrepreneurs start a new business of their own accord.

Under other improvements to the tax system, the salary of a director and principle shareholder (DGA) as the only employee of his private limited company (BV) will no longer be subject to wage tax, and DGA salaries will only need to be accounted for in an income tax return. Also, the Promotion of Research and Development Act has been further simplified and streamlined, he added.

However, the Tax Plan 2008 will make it more difficult for persons acquiring shares in legal entities, limited companies and associations to evade the payment of transfer tax by setting up specific tax constructions. When shares are acquired in entities where the property mainly consists of real estate, transfer tax liability is currently avoided by issuing different types of shares. By determining an interest in such an institution from an economic rather than a legal perspective, transfer tax evasion can be prevented, de Jager explained.

The Finance Minister also said that the the Tax Plan 2008 marks "a significant step forwards in greening the Dutch tax system".

"Together with trade and industry and the public, the cabinet aims to take transparent measures that better reflect the environmental effects of products in consumer prices," the Minister stated.

Measures to achieve this goal include: the introduction of a tax on flight tickets; a tax on packaging materials; higher charges on polluting and uneconomical cars, and more breaks for environmentally friendly and economical cars; and and an increase in excise duties on environmentally unfriendly fuels.


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