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    Dutch coalition agreement: Overview of significant tax measures for businesses and (foreign) investors

    On October 10, 2017, the Dutch coalition agreement was published. This coalition agreement proposes significant tax measures for business and (foreign) investors. Van Doorne hereby provides you with an extensive overview.

    Dutch corporate income tax rate in stages lowered to 16% and 21%

    • The Dutch corporate income tax ("CIT") rate will per 2019 be lowered in three steps to 16% for taxable profits up to € 200,000 and 21% for any excess: - 2019: 19% for taxable profits up to € 200,000; 24% for the excess. - 2020: 17.5% for taxable profits up to € 200,000; 22.5% for the excess. - 2021: 16% for taxable profits up to € 200,000; 21% for the excess.
    • The earlier announced expansion of the first CIT bracket - from € 200,000 to € 350,000 - will not be implemented. This means that also in 2018 the first CIT bracket will end at € 200,000 with an applicable CIT rate of 20%.

    Dutch dividend withholding tax is largely abolished

    • The dividend withholding tax will be largely abolished.
    • Exceptions are made for dividend payments in "abusive" situations and when dividends are paid to so-called "low tax jurisdictions".
    • The coalition agreement does not elaborate on which situations will be considered "abusive", but it is likely that the recently introduced Principal Purpose Test for Dutch companies and holding cooperatives will be maintained. This means that a situation is deemed "abusive" if: - The shares / membership rights of companies or holding cooperatives established in the Netherlands are held with the main purpose, or one of the main purposes, to avoid dividend withholding tax in another jurisdiction (subjective test) to be avoided; and - An artificial structure or transaction is used or executed (objective test).
    • "Low tax jurisdictions" are expected to be defined as jurisdictions that have an effective profit tax rate of less than 10%.
    • The expected date of implementation is 1 January 2019.

    Introduction of a withholding tax on interest and royalty payments to 'low tax jurisdictions'

    • A withholding tax on interest and royalty payments to 'low tax jurisdictions' will be introduced.
    • The expected date of implementation is 1 January 2023.

    More clarity about introducing EU earnings stripping rule

    • As a consequence of the earnings stripping rule that is included in the EU's Anti Tax Avoidance Directive ("ATAD"), interest payments will not be deductible if the balance of payable and received (both group and third party) interest is higher than 30% of the taxpayer's EBITDA.
    • The earnings stripping rule will only apply insofar interest costs exceed € 1 million.
    • In conjunction with the introduction of the earnings stripping rule, some (still undefined) interest deductibility limitations will be abolished. Article 10a CITA will be maintained.
    • The expected date of implementation is 1 January 2019.

    New interest deduction limitation (minimum capital requirement) for banks and insurers

    • A thin cap rule is introduced for banks and insurers insofar the total balance sheet is financed with more than 92% debt. 
    • The expected date of implementation is 1 January 2020.

    Use of CIT carry forward losses limited to six years

    • The current regime in the Dutch CITA, that facilitates that CIT losses may be offset against taxable profits of the following nine years, will be tightened. Carry forward of CIT losses will be limited to six years.
    • The expected date of implementation is 1 January 2019.

    Effective CIT rate of the innovation box increased

    • The effective CIT rate for profits allocated to the Dutch innovation box is increased from 5% to 7%. • The expected date of implementation is 1 January 2018.