Details of corporate tax reform published
The ministry of finance released the final text of the proposals to change the Dutch corporate income tax. This definitive text is now accepted by the cabinet and will be further discussed in parliament. The reform should take effect as from 1 January 2007.
The proposals are further developed on certain points. These modifications of the plans should clarify that the proposals constitute a structural reform of the corporation tax and should not be seen as mere teasers by which the Netherlands intend to withdraw profits from other countries.
The latest news is that the corporation tax rate will be reduced to 25.5%. Profits up to 25,000 euro will be then charged at 20% and the part of the profits between 25,000 and 60,000 euro becomes taxed at 23.5%. For companies engaged in R&D activities the profit derived from patents and other industrial properties will effectively be taxed at a rate of 10 %. The effective tax rate on intercompany interest income (the interest box) will be 5%.
Also for entrepreneurs who do not work through a limited liability company there is good news: these entrepreneurs will benefit from a profit exemption of 10 per cent. For example, an entrepreneur realising a profit of 30,000 euro will only pay tax on 27,000 euro.
The loss carry forward period will be limited to nine years and this new limitation will apply to losses that are incurred in the year 2002 or later years. Losses from 2002 or earlier years can be offset against profits until the year 2011.
Many of the elements of the reform were announced earlier. The final plans contain, however, some surprises like a complete redrafting of the rules regarding the deductibility of intra-group interest, extended depreciation periods of some business assets (including goodwill) and mandatory valuation of work in progress on a percentage of completion basis.
You can read more about the contents of the proposed tax reform in our newsletter of the month May 2006. You can receive this newsletter for free by following the link below.
click here to receive detailed information about the tax reform
