Dutch tax rate goes down to 26.9%
On Friday 29 April the Dutch State Secretary of Finance issued a report titled “Working on profit” to the Dutch parliament. This report provides details of the reform of the Dutch corporate income tax system that should take effect as per 1 January 2007.
The most apparent detail of the tax reform is a reduction of the tax rate to 26.9% but the plans also include various other beneficial changes, like a 10% rate on intercompany interest income and the possibility to include foreign subsidiaries in a fiscal unity. The current budgetary restraints of The Netherlands do not permit, however, a major reduction of the tax revenues. The tax cuts will be financed by abolishing some existing allowances thereby broadening the tax base. Hereby the real estate sector will pay the biggest contribution. Depreciation on real estate will be almost abolished. Another measure to finance the tax cuts is a limitation of the possibilities to compensate tax losses.
In brief the tax reform will bring the following changes:
- corporate income tax rate will go down to 26.9%
- tax payers can create a special tax box for intercompany interest which will be taxed at a rate of 10%
- participation exemption will be available for shareholdings of 5% or more in subsidiaries also when that subsidiary is not subject to profit tax or held as a portfolio investment
- foreign subsidiaries resident in the EU can join a Dutch fiscal unity
- depreciation on real estate limited
- companies that have labour costs in excess of EUR 1m will be confronted with a disallowed amount equal to 0.4% of those labour costs
- no tax deduction of liquidation losses on subsidiaries
- no tax deduction on losses from subsidiaries in first five years after acquisition/ incorporation
- participation exemption with respect to passive subsidiaries will be changed to tax credit system
- the participation exemption cannot be applied on participations of less than 5%
- carry back of losses reduced to one year
- carry forward of losses reduced to eight years
- tightening of the rules for double tax relief
You can read more about the contents of the proposaed tax reform in our special newsletter for free by following the link below.
click here for the detailed information about the tax reform
