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International Dutch Tax News
Best wishes for 2010!
First of all we would like to wish you all the best for
the year 2010. We hope that the new year will
bring a lot of new opportunities.
Corporate income tax changes
Three important changes to the Corporate Income
Tax Act are in place as of 2010:
1. Amendments to the rules to qualify for the
As could be expected after the consultation
document of June 15, 2009 and the following
comments from interested parties (businesses, tax
advisors, scholars), the participation exemption shall
be amended as of 2010.
The changes to the participation exemption enacted
in 2007 affected participations in low taxed portfolio
investment subsidiaries. To tackle the negative
aspects of the present regulations, which are
considered unclear and difficult to apply in
international structures, the portfolio interest rules
shall be replaced by new rules.
The proposed amendments mainly concern the
introduction of an intention test, a liberalization of
the assets test, and a more practical application of
the subject-to-tax requirement, wherein the latter
two factors will function as safe harbors.
Under the new legislation, the participation
exemption shall not apply when shares in a
subsidiary are held with the intention to treat them
as a portfolio investment. This rule already applied
until 2007, but was abolished when the current law
regarding the low taxed portfolio investment
subsidiary regime was enacted. Also under the
present rules, by way of fiction, participations in
subsidiaries with shareholdings of less than 5% in
other companies and in subsidiaries with group
financing activities are deemed to be held as
As of 2010, if shares in a subsidiary are held as a
portfolio investment (thus failing the intention test),
the participation exemption may still be applicable if
a ‘subject-to-tax test’ or an ‘asset test’ is met. Under
the first test, the subsidiary itself should be subject
to a tax rate of 10% or more. As of 2010, and unlike
under the current rules, a statutory tax rate of 10%,
in principle will suffice. Thus, it shall not be
necessary to recalculate the tax base of all
subsidiaries fully in accordance to Dutch tax law.
However, the subject-to-tax test will not be met
when certain significant differences exist between
the Dutch and the foreign tax regime, resulting in a
lower effective tax rate than 10% (e.g. eroded tax-
Under the present asset test, the assets of the
subsidiary should not directly or indirectly consist to
a large extent (i.e. more than 50%) of low taxed (i.e.
less than 10%) portfolio investments. Under the
- Corporate income tax changes
o Participation exemption
o Loss carry back period extended
o Introduction of innovation box
o Other amendments
- Update on group interest box
and interest deduction rules
The Under-Mister of Finance sent a letter to
parliament in which he provides an update
on the introduction of the group interest box
and on additional interest deduction rules.
- Stricter compliance
New legislation will apply as of 2010 on basis
of which the tax authorities can impose
assessments in much more cases.
- Exchange of information
The Netherlands have concluded an
exchange of information agreement with
Spain and the Netherlands Antilles that will
enter into force in 2010.
- Tax treaty news
A new treaty with Japan has been
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2010 test, taxation at the level of indirect
subsidiaries may also be taken into account,
meaning that portfolio investments that are subject
to sufficient taxation would not affect application of
the participation exemption. This is not the case
under current rules where only taxation at the level
of the subsidiary itself is taken into account.
The new rules are expected to offer much more
transparency and should reduce the administrative
burden that is put upon Dutch companies to
determine the applicability of the participation
exemption. What has not been dealt with and the bill
does not enact is amending the current tax
treatment of hybrid loans.
2. Extension of the loss carry back period
Under the present rules, the loss relief can be
applied 1 years retroactively and 9 years into the
future. In order to help taxpayers improve their cash
flow position, an opportunity is enacted for
taxpayers to request to carry back losses for the
years 2009 and 2010 for three years. The carry
back for years 2 and 3 would be limited to € 10
million, but the carry back for year 1 shall be
If a taxpayer opts for the extended carry back loss
relief, the carry forward shall be limited to six years
instead of nine.
3. Adjustments in the taxation of IPR:
introduction of an innovation box instead of
the patent box
The patent box regime will be renamed the
innovation box regime and the effective tax rate will
be reduced from 10% to 5%. Further, the current
cap shall be abolished. In addition, as announced
earlier, the losses incurred on innovative activities
would be deductible at the normal (high) rate of
4. Other proposed changes
The proposals also extend the accelerated
depreciation facility in place for 2009 to investments
made in 2010, extend the facilities for R&D activities
and amend the tonnage rules for shipping activities.
The legal-form and subject-to-tax requirements for
applying the withholding exemption to profit
distributions to EU-resident parent companies will
be abolished. The withholding exemption will not
apply, however, on distributions to institutions that
are comparable to the Dutch fiscal investment
institution or tax-exempt investment institutions.
Letter of December 5, 2009: proposed
measures relating to interest deductibility
and the group interest box following the
After issuance of the consultation document on the
modernization of the Dutch corporate income tax,
comments were made. Whereas the proposal
regarding the participation exemption shall be
effective as of 2010, no measures shall become
effective as regards the interest deductibility and the
group interest box.
On December 5, last, Under-Minister of Finance De
Jager sent a letter to the Lower House, outlining the
current status of both elements.
The Under-Minister argues that the effects of the
mandatory group interest box requires further
investigation. This will be carried out by a study
group established by the Ministry of Finance.
The Under-Minister stated in the letter that the
proposals for reparation of the implications of the
Bosal judgment and possible earnings stripping-
regulations are withdrawn. Both of these elements
will be subject of study for the study group.
The Under-Minister shall, however, take measures
against the use of acquisition holding companies,
where an acquisition holding company and a Dutch
target company form a fiscal unity. The measure will
affect interest deductibility both on intra-group loans
and external loans related to an acquisition of a
The Under-Minister is proposing that losses from
permanent establishments are no longer deductible
from the world-wide profit. This issue is a completely
new issue, which was not dealt with in the
consultation document. Losses on the cessation of
a foreign business would remain deductible. As
regards this matter and the acquisition by a holding
company, the Under-Minister is planning to present
new policies and/or /legislation in the spring of 2010.
The statutory conditions under which the tax
inspector may impose additional assessments or
revise a decision will be significantly revised in favor
of the tax authorities. From 2010 onwards, the tax
inspector can impose an additional assessment if an
imposed tax assessment contains an error of which
a taxpayer could reasonably be expected to have
been aware. How the error came about is irrelevant.
Also, VAT refunds that were by mistake granted
pursuant to a taxpayer’s or withholding agent’s
request will also be subject to the imposition of
additional assessments. Late payment interest on
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inheritance tax owed will begin at eight months from
the death of the deceased. No late payment interest
will be imposed with respect to gift tax.
The (default) penalty for failing to file a personal
income, corporate income, gift, or inheritance tax
return, or filing a late or incomplete return for those
taxes, is quadrupled. From now on, a default
penalty will also be imposed in the event that
personal income, corporate income, gift, or
inheritance tax is not, not entirely or late paid.
Failing to meet a substantial number of tax
obligations, including filing a timely request for a tax
return form or granting access to business
premises, will also result in the imposition of a
default penalty. Currently, failing to satisfy those
obligations is still a criminal offense.
From 2010 onwards, the maximum default penalties
will be indexed only once every five years. Thus, for
the next five years, these penalties are fixed at a
maximum of € 4,920.
Exchange of information agreement
between Netherlands in respect of
Netherlands Antilles and Spain enters into
force in 2010
The exchange of information agreement on tax
matters between the Netherlands in respect of the
Netherlands Antilles and Spain, signed on 10 June
2008, shall enter into force on 27 January 2010.
Note, however, that the provisions of the agreement
shall have effect for any taxable period of time that
could still be investigated at the moment of the
information request according to the laws of the
In this respect, the Netherlands Antilles’s legislation
establishes that if, on the basis of new information,
a previous assessment proves to be insufficient, the
tax inspector may issue an additional assessment
within 5 years (10 years in case of fraud) and 15
years in respect of taxable income from foreign
sources. Spain however has got a statute of
limitations of 4 years.
Announcement of a new tax treaty with
On December 18, 2009, the Dutch Ministry of
Finance announced that it has entered into an
agreement with the Japanese tax authorities on the
text of a new tax treaty. One of the features of the
new treaty is that it provides an exemption from
dividend withholding tax for qualifying dividends
distributed by a resident of one of the treaty
countries to a resident of the other treaty country.
The current treaty imposes a tax treaty rate of 5%
on qualifying dividends.
The exemption may be applied if a resident of one
of the treaty countries has held at least a 50%
participation in a company based in the other treaty
country. A rate of 5% applies to participations of
10% to 50%. For lower/other participations a rate of
10% shall apply.
No changes have been made to the interest
withholding tax rate (0% for financial institutions and
10% for others).
Royalty withholding shall be reduced from 10% in
the present treaty to nil under the new treaty.
It is expected that the new treaty shall be concluded
mid-2010, after which it is planned to become
effective as of 2011.
For information please contact:
Marco Visser or Frans Tempel
T: +31 33 495 25 00 T: +31 33 463 57 27
E: email@example.com E: firstname.lastname@example.org
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