Crop international newsletter september 2009

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Crop international newsletter september 2009

  1. 1. - 1 - www.crop.nl 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.
  2. 2. - 2 - www.crop.nl 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;
  3. 3. - 3 - www.crop.nl  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
  4. 4. - 4 - www.crop.nl 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.

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