International Newsletter January 2011


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CROP Tax Lawyers -International Tax Newsletter January 2011

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International Newsletter January 2011

  1. 1. January 2011 International Dutch Tax News On December 21, 2010, the tax plan for 2011 was Highlights: approved by Parliament. This tax plan consists of two parts: on the one hand the tax plan and on the - Changes enacted for 2011 other hand the remaining tax measures for 2011. The Dutch parliament approved the tax plan The tax plan contains several themes, the most and other tax measures that are enacted per important ones being: January 1, 2011. We have outlined the headlines of changes. The main changes - Combating tax avoidance via structures; regard: - (Innovative) entrepreneurship; - Combat against tax avoidance - Measures to temporarily support the New legislation has been enacted to combat housing market; tax avoidance through complex and artificial - Environmental and mobility measures. tax structures. - Entrepeneurship Below we shall describe the measures that regard these themes. Several changes have been enacted to enhance the tax climate for entrepeneurs. Combat against tax avoidance via - Temporary support of the structures housing market In order to support the housing market, New legislation has entered into force to combat tax several changes have been enacted. avoidance through complex and artificial tax structures. First measure in this respect is the - Additional legislation measure to combat the trade in companies that Legislation on a range of topics has been have tax losses available that can be used for loss- enacted. We have summarized some of the relief. This measure also is directed against the main changes. situation where a previously profitable empty - Prospects for 2011 company was bought and loss-making activities are During the year 2011 changes may be subsequently shifted to that company. Under the proposed to reform the Dutch tax system. anti-avoidance measures, losses incurred before the acquisition of the company cannot be used to credit against subsequent profits. Also, losses incurred after the acquisition of the company cannot Best wishes for 2011! be credited against profits made before the company was acquired. If the holding in a company First of all we would like to wish you all the best for is changed by 30% or more, losses realized can the year 2011. We hope that 2011 will bring you lots of opportunities. only be compensated if certain requirements are met, based on article 20a CITA. Losses realized Tax plan 2011 during the year in which the interest is substantially changed will be attributed to the preceding or In our September 2010 issue of this newsletter we subsequent book year. already informed you briefly on the headlines of the Budget 2011. In this edition we will provide you with A second measure that is enacted is that the real more details on the legislation that was enacted per estate transfer tax law on the transfer of immovable January 1, 2011. property is amended to combat complex structures aimed at avoiding this transfer tax. When a company is sold and the assets on its balance sheet -1-
  2. 2. consist for at least 50% of immovable property and e.g. literature that one is required to read at least 30% of the assets of value of that company professionally (such as jurisprudence or consists of immovable property situated in the advertisement magazines) can be remunerated or Netherlands, this real estate transfer tax shall be be made available to employees free of wage tax due. Until last year the percentage was 70% and without going at the expense of the 1.4% general only real estate in the Netherlands was taken into forfeit of the total wages. account. Furthermore, in the past certain techniques were used to reduce the percentage of the real Also the arrangement of the accelerated estate on the balance sheet (e.g. funds received depreciation is prolonged. Investments in certain under a loan from a related company in the group). assets to be made in 2011 can be written off in 2 As of 2011 assets that are acquired from related years. companies or persons are to be ignored when determining the percentage of real estate in the Finally, entrepreneurs have got the opportunity to assets on the balance sheet. Taxable basis for this opt for VAT for quarterly returns. This measure was tax remains the fair market value of the real estate provisional but is made structural as of 2011. in the Netherlands. Temporary support of the housing market (Innovative) Entrepreneurship In the first place, the period during which individuals In the first place, the application of the so-called who have purchased a new house, but did not innovation box is widened. Benefits derived from an succeed in selling their old house, can deduct asset starting in the year in which a patent for that mortgage interest for both houses has been asset was requested, and in the year prior to that in extended from 2 to 3 years (i.e. until 1 January which the patent was granted, are also covered 2013). under the rules of the innovation box. Please note that still a request is required by the taxpayer, at the In the second place, the VAT rate that is applicable latest when submitting the corporate income tax on labor used in the renovation of houses that are return. older than 2 years has been reduced from 19% (the general rate) to the reduced rate of 6%. This Secondly, a wage tax credit can be obtained for temporary measure applies from October 1, 2010 R&D activities. In 2011 an employer can reduce its until July 1, 2011. For the determination of the VAT wage tax payments by 46% up to an amount of rate in that situation, the decisive element is € 220,000. The excess can be reduced by 16% up whether the taxable event takes place during that to a maximum amount of € 11 million. period as set out above. Further, the corporate income tax rate has been Thirdly, the period of time during which the real reduced to 25% (until 2011, 25.5%) for profits estate transfer tax exemption is in place in case a exceeding € 200,000. Two tax rates exist, one tax house is sold twice in a short period of time, is rate of 20% on the first € 200,000 in profits: this rate prolonged to one year. Previously, this period of remains unchanged. Secondly, a tax rate of 25% time during which the real estate transfer tax on the over the excess. sale of a house is only reduced to a surplus over the previous purchase price, was only 6 months. Note Also, the loss relief facility of 3 years carry back - that this is a measure that is only in place during which is only a provisional measure – remains also 2011 and shall be abolished again in 2012. in place during 2011. Note however that when this facility is used the period of time available for carry Finally, the arrangement under which individuals forward is reduced with 3 years. have a right to deduct mortgage interest, is prolonged. Under the present rules, the right to As of January 1, 2011 a new regulation is in place deduct the mortgage interest is only in place for a with respect to costs that an employer can period of time up to a maximum of 2 years. This remunerate tax-free to its employees. The basic right remains in place until the end of 2012. idea is that an employer can remunerate his employees tax free on the basis of a 1.4% general forfeit of the total wages. In the budget proceedings, several amendments have been made, under which -2-
  3. 3. Under the Dutch income tax law, there is a Environmental and mobility measures possibility for taxpayers with substantially fluctuating income to request that this income derived during a As of March 1, 2011 the excises duty on cigarettes period of 3 subsequent years is averaged, which and tobacco will be raised. The increase of the duty mitigates the progressive effect of the tax rates. This for the widest sold category of cigarettes amounts to averaging results in an equal attribution of one third € 11.68 per 1,000 cigarettes (i.e. € 0.26 per pack) of the income to each of the three years. If the and € 4.93 per kilogram of tobacco. difference between the paid tax and the recalculated tax exceeds € 545, the difference will – upon The planned phasing out of the luxury tax on motor request by the taxpayer - be paid back to the vehicles has been suspended. However, the taxpayer. To bring the Dutch legislation in line with beneficial measures promoting the sale and use of EU-legislation, an amendment is introduced that cars with a low CO2-emission will also be in place in provides that the facility also will apply to non- 2011. residents who derived almost their entire income Tax plan 2011: additional legislations (i.e. 90% or more) in the Netherlands, but who did not opt to be taxed as a resident taxpayer for the 3 Besides the tax plan, various other bits of legislation years. have been amended. This is provided for in additional legislation. In the past an exemption for investments in certain small and medium companies was introduced in As regards the corporate income tax, the taxable Box III. Because of comments made by the period for non-resident taxpayers, that have an European Commission, some amendments are accounting year that deviates from the calendar applied to this incentive. The main change is that year, can link to the accounting year (as it can for the incentive is only applicable with respect to resident taxpayers). Until 2011, for non-residents, issued shares, which may not be listed on a regular corporate income tax is due on the profits in the stock exchange with the exception of the NYSE, calendar year and not the accounting year of the Alternext or similar exchanges for such companies. company). The tax credit of 1.3% (heffingskorting) for The individual income tax has been amended to investments in the public interest, investments in enable the tax administration to issue tax returns to green funds, and social-ethical investments, will be the tax payers that already contain certain types of reduced gradually over a period of time of 4 years. income (including items relating to Box II income) on In 2014 the tax credit amounts to nil. the basis of the information that was already available to the tax authorities (e.g. wages and As regards the dividend withholding tax, the rules wage tax or bank account positions and dividend on dividend notes are modernized. An electronic withholding tax paid). note is now accepted. No note is required when no dividend tax was withheld in accordance with a tax The tax rate in the first bracket of personal income treaty, or when the recipient of the dividends has an tax and wages tax is per January 1, 2011 reduced interest of at least 5% in the distributing company as to 1.85%. As regards 2012, the percentage is set out under Box II of the income tax. already set at 2.00%. This reduction of the rate in the first tax bracket of individual income tax is The VAT rules for travel agents are amended. VAT combined with a higher levy rebate for individuals is due as of April 1, 2012 on the profit margin earning business profits or employment income to realized in the state in which the travel agent is a maintain the purchasing power of the individuals at resident. The profit margin equals the selling price current levels. of the trip, less the cost for goods and services obtained by the travel agent. Any VAT on goods and The incentive for monuments has been expanded. services obtained by the travel agent will not be When the monument is no longer the main taken into account as input VAT. Accordingly, the residence of an individual, under certain long-standing practice giving a special treatment to circumstances, expenditure related to such travel agents under the Decree of March 22, 1971 monument may be deductible. will be terminated as of April 1, 2012. -3-
  4. 4. The VAT rate for performing arts, art, pieces of art, possible revision of Dutch tax law. Amendments are collector items and antiques will as of July 1, 2011 not intended. Instead, it is aimed at modernization. be increased from 6% to 19%. The main subjects to be dealt with in that respect – and also most likely to be dealt with in the letter – are the following. The insurance premium tax rate will be increased from 7.5% to 9.7% as of March 1, 2011. This is a In the first place, the tax treatment of private temporary increase and as per 2015 the rate shall dwellings and more in particular a possible limitation be decreased again to 9.5%. in mortgage interest deductibility. The inheritance tax is amended in relation to changes made to the definition of "partner" in the Secondly, several topics in the corporate income tax general taxes Act under the Fiscal Simplification Act spheres are to be reconsidered, such as broadening 2010. The amendments that are proposed aim at the tax basis and the difference in treatment maintaining the current situation, and neutralizing between equity and loans. the changes to the definition of "partner" in the General Taxes Act. Further, an investigation into the (im-)possibility to enact a flat tax rate, the abolition of several minor The exemption of gift tax due by members of the taxes, variation in the taxation of a car (e.g. taxation royal family will be restricted. The exemption applies per kilometer or more/less taxation on fuel) and the only to gifts made by members of the royal family in introduction of one facility for entrepreneurs. their official capacity. All together, quite some developments are taking Under the energy tax, reduced rates are applied for place or shall possibly start taking place in 2011. the use of natural gas for the growth of agricultural CROP tax advisors is also in 2011 in place to assist products under glass. In the case where no natural you in dealing with these Dutch tax developments gas is available, the reduced rates shall apply to and matters. We look forward working with you on mineral oils. The approval by the European these matters. Commission expires on December 31, 2010. Although the request for an extension has been filed, it is uncertain whether the requested extension will be granted. Therefore, the reduced rates will no For information please contact: longer be applicable from a date to be determined Marco Visser or Frans Tempel by a Royal Decree. T: +31 33 495 25 00 T: +31 33 463 57 27 E: E: Changes are made to the tax collection Act of 1990: the interest that a taxpayer either receives (in case of having paid too much tax) or pays (in case Disclaimer: CROP registeraccountants and CROP belastingadviseurs makes no representation nor gives any warranty (either express or of having paid too little) varies. Interest receivable implied) as to the completeness or accuracy of this publication. CROP registeraccountants and CROP belastingadviseurs is not liable for the by the taxpayer is 1.5% less than the interest information in this publication or consequences of the use of this payable. publication. CROP registeraccountants and CROP belastingadviseurs will not be liable for any direct or consequential damages arising from the use of the information contained in this publication. Prospects The under minister of finance has indicated during parliamentary proceedings that before April 2011, a letter shall be sent to Parliament regarding a -4-