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Netherlands Planning Slower But Deeper Corporate Tax Cut

by Ulrika Lomas,, Brussels

20 September 2019

On September 17, 2019, Dutch State Secretary for Finance Menno Snel presented the Government's 2020 Tax Plan to the House of Representatives. It includes revised plans for corporate tax cuts.

Under legislation approved in December 2018, the rate of corporate tax on income exceeding EUR200,000 (USD221,000) was due to fall from 25 percent to 22.55 percent in 2020 and to 20.5 percent in 2021. However, under the new proposals, corporate tax above this threshold will remain at 25 percent next year, before falling to 21.7 percent in 2021.

However, the reduced rate of corporate tax on income up to EUR200,000 will fall to 16.5 percent in 2020, and to 16 percent in 2021.

The 2020 Tax Bill also includes new anti-tax avoidance measures, as follows:

  • The currently unlimited deduction against Dutch income for losses incurred from the liquidation of foreign subsidiaries will be restricted to raise an estimated EUR265m in additional tax revenue.
  • The special tax rate for intellectual property income under the innovation box regime will rise from seven to nine percent on January 1, 2021.
  • The discount for corporate tax payments made in full at one time will be abolished on January 1, 2021.

In another anti-tax avoidance measure, the Government will go ahead with previously announced plans to subject interest and royalty payments paid to low-tax jurisdictions to withholding tax at the prevailing corporate tax rate.

The 2020 Tax Plan also includes a proposal to align the rate of value-added tax on supplies of electronic publications with their physical counterparts at nine percent. Under existing rules, e-publications are subject to VAT at 21 percent.

Snel said that most of the tax components of the National Climate Agreement are also included in the 2020 Tax Plan. These include an increase in tax on fossil fuels such as natural gas, but a reduction in tax on electricity. Additionally, businesses will see an increase in the renewable energy surcharge, while households will experience a reduction in this charge. Furthermore, the temporary exemption from vehicle purchase tax for electric vehicles, which was due to expire in 2021, will remain largely in place until 2025, although the tax on private use of electric company cars will gradually increase from four to eight percent.

For personal income taxpayers, the proposal to reduce the number of income tax brackets from four to two (for box 1 income) will be brought forward from 2021 to 2020. According to previous announcements, these two rates will include a basic rate of 37.05 percent and a top rate of 49.5 percent.

Other measures in the Tax Plan include:

  • more generous tax rules for employers providing benefits-in-kind, such as Christmas hampers and gym subscriptions;
  • an increase in the maximum tax-free remuneration payable to volunteers in line with inflation;
  • a gradual reduction in the tax allowance for the self-employed to reduce the difference in tax treatment between employed and self-employed individuals;
  • a EUR1 increase in tax on a packet of 20 cigarettes, which will be in addition to a previously announced rise in excise tax on tobacco;
  • an exemption from the 21 percent insurance premium tax for farmers in order to encourage them to insure crops against the risk of damage caused by extreme weather.

TAGS: individuals | environment | Finance | VAT rates | tax | business | value added tax (VAT) | Netherlands | tax avoidance | interest | energy | commerce | intellectual property | insurance | budget | insurance tax | environmental tax | excise duty | e-commerce | legislation | transfer pricing | tax rates | withholding tax | inflation | Other | Tax | BEPS

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