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September 2009
International Dutch Tax News
Reduced tax rate on group interest of 5%
The European Commission announced that
Dutch plans to apply a reduced rate on income
from intergroup loans (a mandatory “group
interest box”) does not constitute state aid.
Under the application of the group interest box,
interest that will be received from and paid to
group companies will be effectively taxed at a
rate of 5%. The Dutch government intends to
implement a group interest box per January 1,
2010. The detailed plans will be announced
after the summer. We will provide you with
more details in the next edition.
AG rules on the Zwijnenburg case: only
tax avoidance under the Merger Directive
for the taxes named in that particular
Directive
In the case of Zwijnenburg v. the Under
Minister of Finance (C-352/08), the Advocate
General Kokott of the European Court of
Justice (ECJ) issued her opinion on July 16,
2009. The Advocate General opined that the
tax administration could not invoke EC law
against an individual, in order to deny the
benefits of the Merger Directive 90/434/EEC
(the Directive). Such denial is only possible if
it can be based on a domestic provision
which can be interpreted in line with
Community law.
The fact that a taxpayer chooses an option
that is most favorable from a tax perspective
for the realization of a legal business purpose
does not, in itself, constitute tax avoidance or
evasion within the meaning of Art. 11(1) (a) of
the Directive. Thus, the Supreme Court is to
determine if the merger was based on
legitimate business reasons. Moreover, the
AG stated that the interpretation of the scope
of the anti-abuse provision contained in the
Directive should be performed in view of the
context and purpose of the Directive.
The Directive, in particular, seeks to remove
obstacles to cross-border mergers, but the
abuse provision is focused on safeguarding
the financial interests of Member States. For
that reason, the AG takes the position that
the provision only applies with respect to
taxes for which the benefits of the Directive
are granted. The Dutch property transfer tax
is, not within the scope of the Directive,
because it is not levied on the difference
between the real values of the assets and
liabilities transferred and their values for tax
Highlights:
- Introduction of 5% tax rate
As a result of the approval of the EC of the
concept of a group interest box, it is
expected that per January 1, 2010 a tax rate
of 5% on group interest will be introduced.
- Zwijnenburg case
AG rules that tax avoidance can only be
applied in certain cases.
- Exchange of information
More and more agreements are concluded
with countries to exchange information.
- Loophole closed on emigration
Amendments are enacted to avoid tax free
pensions upon emigration.
- Economic stimulus package
Tax measures are announced to stimulate
the economy.
- Tax treaty news
The Netherlands and Burundi have
concluded an investment protection
agreement.
- New inheritance and gift tax
International aspects with regard to the new
inheritance and gift tax are clarified.
- New VAT rules in 2010
As of 2010 new rules will be enacted. We
provide a short summary of the changes.

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purposes, as defined in the Directive.
Therefore, such a general anti-abuse concept
would, according to the AG, undermine the
harmonization brought about by the Directive,
and the legal certainty of taxpayers in respect
of corporate reorganizations. We look forward
to the ECJ decision in this case.
The Dutch Under Minister of Finance’s
exchange of information crusade
Using the increasingly growing pressure on
tax havens to disclose information, the Dutch
Under Minister of Finance has been
increasingly active in order to arrange that
more and more jurisdictions agree on an
exchange of information with the
Netherlands. In that respect, amending
protocols have been concluded (Luxembourg,
Belgium), exchange of information
agreements have been signed (Guernsey,
Anguilla, Turks & Caicos Islands), and
concluding tax treaties and exchange of
information agreements simultaneously (the
Bahamas) has taken place. Also, an
agreement has been concluded with the
Swiss, of which the contents have not yet
been made public.
Bill to amend exit tax provisions on
pension claims and redemption of an
annuity after emigration enacted
The Dutch Ministry of Finance recently
published a Bill to amend the exit tax
provisions on pensions and the redemption of
an annuity after emigration in the Personal
Income Tax Law. The Bill aims at reducing
the outcome of several decisions of the Dutch
Supreme Court, issued 19 June 2009. In
these decisions, the Supreme Court decided
that the exit tax provisions on pensions and
the redemption of an annuity after emigration
were incompatible with tax treaties, which
where signed before the exit tax legislation
became effective (2001), under which only
the state of residence was authorized to tax
pensions and annuities. Under those ´old´
treaties, the Netherlands cannot apply its exit
tax provisions providing for a provisional tax
assessment on the fair market value of the
pension and annuity claims at the time before
emigration.
The Bill provides that the Netherlands will no
longer tax the fair market value of the pension
or annuity claim at the time of emigration. If a
pension claim based on an employment or a
former employment is redeemed, the
previously exempted pension claims resulting
from employer contributions, and the
deducted pension premiums paid by the
employer, will be taxed to maximum the fair
market value of the claim. With respect to
annuities, at the time of redemption of an
annuity, the amount of the deducted
premiums will be taxed to a maximum
amount of the fair market value of the claim.
These new provisions are effective as of 29
June 2009 to prevent tax-driven emigration
followed by a redemption of a pension claim
or an annuity.
According to Dutch scholars, it still remains
questionable whether these new provisions
would comply with the good faith that is in
place between States as regards ´old´ tax
treaties. We will keep you updated on any
case law.
Bill on fiscal stimulus package and other
fiscal measures enacted
As of July 1, the economic stimulus package
(containing also other tax measures) has
been enacted. Unless enacted otherwise, it is
intended that all measures apply from 1 July
2009. The package contains the following tax
measures:
 application of energy savings deduction to
energy savings in rented dwellings.
Contrary to what earlier was intended, this
measure will apply from 1 June 2009 and
not from 1 April 2009. The budgetary
savings from this postponement will be
used to subsidize double glazing;
 a retroactive reduction of the corporate
income tax rate for profits between
EUR 40,000 and EUR 200,000 (so-called
profits of small and medium-sized
companies) to 20% for the years 2009 and
2010; prior to this legislation, the rate for
such taxable profit was 23.5%;
 an increase of the penalty for non-
declaration of savings and investment
income (Box 3 income) to a maximum of
300% of the additional tax due;

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 restriction of the tax amnesty, implying
that a fine is payable on the additional tax
levied, to 2 years after the filing of the tax
return in which the income had not yet
been reported; and
 application of the reduced VAT rate of 6%
to isolation works.
Agreement between Netherlands and
Burundi to enter into force
The investment protection agreement
between the Netherlands and Burundi, signed
on 24 May 2007, has entered into force on 1
August 2009. The IPA is effective for at least
15 years and can be extended for periods of
10 years. With respect to the Kingdom of the
Netherlands, the agreement also applies to
Aruba and the Netherlands Antilles, effective
from this same date.
New Inheritance and Gift Tax Bill
international aspects clarified
Currently, a Bill is pending of the new
Inheritance and Gift Tax Act. The Under
Minister of Finance published an explanatory
Memorandum on the international aspects of
the new Inheritance and Gift Tax Bill. The
document focuses on imposition principles
and avoidance of double taxation.
The imposition principles are firstly the OECD
Model Convention on inheritance and gift tax.
The OECD Model Convention recognizes the
residence of the deceased or donor and the
situs of assets as principles to base a taxing
right on. The situs principle prevails over the
residence principle. The OECD Model
Convention does not accept the nationality
principle. This principle, however, is
mentioned in the Commentary to the
Convention e.g. as a possibility to extend the
taxing rights in respect of a deceased or
donor for a certain period after emigration.
The current Inheritance and Gift Tax Act
bases the taxing right on the residence (of the
deceased or donor), the situs, and the
nationality principles. Under the nationality
principle a deceased person is deemed to be
a resident of the Netherlands if he dies within
10 years after his emigration. Also, a donor
is deemed to be a resident of the Netherlands
with respect to gifts made within 1 year after
emigration.
The new Bill maintains the residence and
nationality principles. The situs principle
concerning immovable property or permanent
establishments located in the Netherlands is
abolished because the tax revenues are
minor and complex amendments would be
required to make it compatible with EU law,
European case law and the proposal to
introduce a partnership with legal personality.
As a result, the 90% rule under which non-
residents can opt to be deemed to be a
resident of the Netherlands if at least 90% of
the inherited or donated property consists of
Dutch real estate will be obsolete. It therefore
will be abolished.
Accordingly, individuals who are not resident
in the Netherlands and do not have the Dutch
nationality are, except for the first year after
emigration, no longer subject to inheritance or
gift tax with respect to a second dwelling, a
holiday home, real estate, a business, or
shares in a real estate company.
As regard the avoidance of double taxation,
under the (only 7, compare this to the number
of income tax treaties) Dutch inheritance tax
treaties, the situs principle prevails over the
residence principle. For the avoidance of
double taxation, the credit method is used.
With respect to foreign situs property, the
maximum credit is equal to the Dutch tax
attributed to the foreign situs property. In
case of dual residence, the residence
determination based on the residence
provision of the treaty or the Tax Regulation
for the Netherlands Kingdom is decisive. If an
individual based on that provision is resident
in another country, the Netherlands only
applies the situs principle.
Cases of double taxation based on different
qualification (e.g. one state classifies shares in
real estate as situs property whereas other
states classify those as non-situs property) are
solved by means of a mutual agreement
procedure. Under the Dutch unilateral method
for the avoidance of double taxation, as laid
down in the Decree on the avoidance of double
taxation 2001, the credit method is used for the
avoidance of double taxation. Furthermore, the
residence principle of another country prevails

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over the extended residence principle upon
emigration. If the credit method cannot be
applied the foreign inheritance and gift tax
under certain conditions can be deducted as a
debt from the inheritance or gift.
New VAT rules in 2010
As of 2010 new VAT-rules will apply regarding
the place where services are rendered and the
possibility to refund VAT in other EU-countries.
Also a listing for services is introduced.
Additional minor changes will occur in 2011,
2013 and 2015. These changes also create
new (administrative) obligations.
At present, the main rule as regards the place
of rendering services is where the supplier of
the service is established for VAT-purposes,
with an extensive list of exceptions.
Starting 2010, in business-to-business-
relations (B2B-services) the main rule will be
that VAT is levied in the country of the
purchaser. If this purchaser has a full right to
deduct the VAT charged to him, no VAT has to
be paid. Companies that render services which
are (partially) exempt from VAT (without a right
to deduct VAT) will on balance have to pay
VAT in the country where they are established
(reverse charge mechanism). Also under the
new rules, there is a list with exceptions to the
main rule (place of the recipient of the service),
such as e.g. real estate, transport of persons
or rental of a means of transport.
The current main rule for services to
consumers (B2C-services) is that the service is
taxed with VAT in the country where the
supplier of the service is established for VAT-
purposes. This rule for B2C-services remains
valid in 2010. However also under the new
legislation, a lot of exceptions to this main rule
exist. Some of the most important exceptions
are services regarding real estate, transport of
persons or activities with regard to moveable
properties.
Since 1993 businesses are obliged to file a
listing for the goods they sell in other
countries of the EU. A similar obligation will
exist as from 2010 for B2B-services for which
the main rule applies. Businesses that render
such services, will have to report a listing to the
tax authorities periodically. These services
must be broken down by value per VAT
number for each single service purchaser.
Normally a listing for services has to be filed
each month with the Dutch tax authorities. It
may be requested however to file on a
quarterly basis.
For the listing of the supply of goods, starting
2010 a monthly listing is required unless in the
respective quarter and the four preceding
quarters the amount of delivery of goods has
not exceeded € 100,000. In that case a
quarterly listing is sufficient. We recommend to
request a quarterly listing if it is not expected
that the supplies of goods exceed the amount
of € 100,000 in a quarter. As soon as the
amount of € 100,000 is exceeded in a quarter,
a listing has to be filed each month including
the months in the current quarter which already
expired.
Starting 2010 the reclaim of VAT paid in other
EU-countries will be simplified. Currently a
request has to be filed in each EU-country. As
from 2010 a Dutch business can reclaim the
VAT paid in other countries with the Dutch tax
authorities. This request can be filed through
the internet. The Dutch tax authorities will
subsequently forward the request to the tax
authorities of the country where the VAT has
been paid. The new procedure also applies
with regard to 2009 when the request is filed in
2010.
Obviously, the VAT number as well as the
determination of the place of rendering
services/supplying goods are essential for any
organization that is involved in the international
supply of goods or rendering of services, either
as provider or customer. Thus, awareness is
essential for the upcoming changes!
For information please contact:
Marco Visser or Frans Tempel
T: +31 33 495 25 00 T: +31 33 463 57 27
E: visser@crop.nl E: ftempel@crop.nl
Disclaimer: CROP registeraccountants and CROP belastingadviseurs
makes no representation nor gives any warranty ( either express or
implied) as to the completeness or accuracy of this publication. CROP
registeraccountants and CROP belastingadviseurs is not liable for the
information in this publication or consequences of the use of this
publication. CROP register accountants and CROP belastingadviseurs will
not be liable for any direct or consequenti al damages arising from the use
of the information contained in this publication.