International Dutch Tax Newsletter October 2012 - CROP Tax Lawyers

1. October 2012
International Dutch Tax News
Highlights: 1. General outlook Netherlands
The times are changing. Due to the effects the
- General outlook Netherlands Netherlands is noticing from the economic crisis and
Budget cuts, elections and the Budget 2013. the developments in the EURO-zone, in April
- Fiscal crisis measures for the immediate budget amendments (cuts) were to be
made.
Budget 2013
Various fiscal measures have been made These are described below. Note however that on
public in order to achieve that the budget September 12, last, elections for the Dutch
deficit remains within the EU-set boundaries: parliament (Lower House) were held, that may still
affect the amendments that five parties agreed upon
· No interest deductibility in case of
in April 2012 (and to a smaller or larger extent were
excessive interest
immediately set aside in the lection programs).
· Personal income tax amendments
· Wage tax amendments As the Budget 2013 is proposed after the elections,
· VAT amendments it may be obvious that the outcome of the elections
· Other tax measures could influence the Budget. In fact the two parties
· Non-fiscal measures discussing the formation of a government have
already made some amendments. Below you
- Emigration/transfer of seat and therefore find the positions as they were announced
st
the National Indus Case in their letter at the 1 of October to the Parliament.
Dutch policy after the “National Grid Indus
BV”-case
2. Fiscal crisis measures for 2013
- Rules for avoidance of double
taxation on dividends Five political parties reached an agreement on 27
April 2012 on the budget cuts to be made for 2013.
A decree was published clarifying issues on
These budget cuts were required to make sure that
dividend withholding tax
the deficit would return in the short term to within the
- Tax Plan 2013 boundaries as set by the EU (3% budget deficit
September 18 the tax plan was made public maximum).
for 2013
- Bill on taxation of rental income In order to achieve this, the following measures are
In the Tax Bill 2013 this new tax is introduced taken.
- Simplified company law per the Corporate income tax: one more interest deducti-
1st of October bility limitation
As per January 1st, 2013, deduction of participation
interest will be reduced in case there is "excess
interest", i.e. if the company's equity is lower than
the value of the participation(s). Some exceptions
are in place.
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2. Under the Dutch domestic law as in place at Paragraph 2 of article 13L describes the method
present, interest expenses are, in principle, used to calculate the non-deductible (or “excessive”)
deductible for corporate income tax purposes. This interest. The excessive interest is defined as the
is also the case where the interest is related to a part of the interest expenses that is proportional to
participation in another (subsidiary) company the ratio of "participation debts" to total debts.
("participation interest"). Participation debt is defined as the amount by which
the purchase price of the participations exceeds the
st
As per the 1 of January, 2013, article 13L of the parent company's equity.
Dutch Corporate Income Tax Act aims to curb the
deduction of "excessive interest expenses" on loans To illustrate how these rules work out, below a
used to finance participations in subsidiaries. clarifying example (amounts are in EUR millions):
– the purchase price of the participation is 40;
A participation is in place when a parent company
– the parent company's equity is 25;
owns at least 5% of the nominal paid-up capital or
its voting rights of a subsidiary. Under the – the parent company's total debt liability is 45;
participation exemption any dividends, interest, – the parent's profits (pre-interest deduction) are
currency gains and capital gains on shares received 60; and
by the parent company from its subsidiary are fully – the total interest expenses are 75.
exempt from corporate income tax.
Under the current rules, the taxable amount would
Before the 2003 decision of the EU Court of Justice
be 60 (profits) -/- 75 (interest) = -15, i.e. a loss.
(here after: ECJ) in the Bosal case (C-168/01), the
Under the proposed article 13L, the profit calculation
Netherlands refused the deduction at the level of the
would proceed as follows:
parent company of interest expenses relating to
The participation debt is equal to 40 (the purchase
subsidiaries abroad, in other Member States.
price) -/- 25 (the parent's equity) = 15.
However interest expenses related to domestic
The interest over this 15 is not deductible. The
subsidiaries were allowed. Due to this EU Court of
interest attributable to the participation debt is
Justice decision this unequal treatment was put to
calculated in the following manner:
an end, resulting that interest expenses related to a
Total interest expenses x (participation debt/total
subsidiary located in any Member State were
debt).
deductible for corporate income tax purposes.
Using the numbers in the example, 25 ( i.e. 75 x
Because of this Bosal gap, there was a reduction in
(15/45)) of the total interest is excessive. Once the
the tax base due to the interest deduction, but no
threshold of 750,000 EURO is subtracted, this
taxation of any income as a result of the
leaves 24.25 of non-deductible interest expenses.
participation exemption.
Of the total interest expenses, 50.75 (75 -/-24.25) is
fully deductible.
The proposed article 13L aims to prevent erosion of
Under the future regime, the taxable amount
the tax base that occurs through excessive debt
would, therefore, be 60 (profits) -/- 50.75 (interest) =
financing, thereby (somewhat) closing the Bosal
a gain of 9.25!
gap. Article 13L, paragraph (1) states that the
provision covers interest expenses in excess of
The regulations also contain various exceptions.
EUR 750,000 on loans related to participations of
Paragraph 5 ensures that loans used to finance
the parent company.
expansions of operational activities of participations
fall outside the reach of article 13L. This is achieved
As regards interests below EUR 750,000: that
by omitting from the purchase price of the
amount is a safe harbour and all interest remains
participation, the amount attributable to the
deductible (to the extent that any other article that
expansion. Whether or not there is an expansion of
limits the interest deductibility is not applicable). In
operation activities depends on the facts and
paragraph 7 of the article, it is stated that any
circumstances. Production, distribution and sales
income and deductions that are attributable to a
activities are considered operational activities.
foreign permanent establishment for which the in
Investment activity is not.
2011 introduced object exemption applies, are also
outside the scope of the article.
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3. Paragraph 6 of article 13L lists 3 situations in which Wage tax
the exceptions of paragraph 5 of article 13L does
not apply. Generally, these are situations where a At the end of 2012, the tax brackets for the wage tax
"double dip" (i.e. the same interest expense is will not be adjusted for inflation.
deducted twice) is considered to take place, or
where a new acquisition by a group is placed as a There shall be a crisis levy on high incomes.
subsidiary under a profitable Dutch company to take Incomes in 2012 (including bonuses) in excess of
advantage of the interest deduction facility (and no EUR 150,000 will be subject to a one-off withholding
real economic reason for this placement exists). tax of 16% in 2013. The employer is liable for
payment of the tax.
The amendment clarifies that a participation which
is acquired in the context of an expansion of the As regards excessive severance payments,
group activities is, generally, not taken into account employers must withhold tax at a rate of 75%.
for the determination of the participation debts. Currently, this is 30%.
However, such participations are taken into account VAT
in cases where a "double dip" (i.e. the same interest
expense is deducted twice) is considered to take The standard VAT rate is increased from 19% to
place, or where a new acquisition by a group is 21% with effect from 1 October 2012.
placed as a subsidiary under a profitable Dutch
company to take advantage of the interest The VAT rate on theatre and concert tickets will be
deduction facility and no real economic reason for reduced from 19% to 6%.
this placement exists. The amendment clarifies that
the rules where loans laws are taken into account Other taxes
also apply to hybrid loans.
The temporary reduction of the property transfer tax,
Personal income tax from 6% to 2% until 31 June 2012, will be continued
for 36 more months.
For purposes of the mortgage interest deduction, it
will no longer be allowed to contract a non- The bank levy will be doubled from 0.022% to
redeemable mortgage. For new contracts (entered 0.044% short-term liabilities and from 0.011% to
into in 2013 and later),, mortgage interest will only 0.022%, for long-term liabilities.
remain deductible if the mortgage is redeemed
within 30 years. The green tax on polluting energy will be increased.
For 2013, no adjustment of the tax brackets or tax Non-fiscal measures
credits will take place.
From 2013 the pensionable age will be increased to
The Tax Plan 2012 eliminated the continuation reach a pensionable age of 66 by 2018; and 67 by
bonus for employees aged 62 and over, and 2021. In 2013, the new pension age will become 65
replaced it with an employment bonus (with effect years and 1 month.
from 1 January 2013). In the Budget 2013 the
employment bonus will, however, be abolished (i.e.
not enter into effect). 3. Bill on implementation of National
Grid Indus case
For certain investments in Box 3 (fictitious yield on
estate) the credits and exemptions are changed as On 15 May 2012, the Dutch State Secretary for
follows: Finance submitted a Bill to Parliament on the
deferral of the payment of exit taxes. This Bill
– the tax credit available for so-called "green"
implements the outcomes of the National Grid
investments will remain 0.7% in 2013; and
Indus (Case C-371/10), in which the ECJ held that
– the credits and exemptions for social the Dutch exit tax provisions for companies were
investments and investments in venture disproportionate because they provided for the
capital will be abolished with effect from 1 immediate recovery at the time of transfer of tax on
January 2013. unrealized capital gains relating to assets of a
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4. company transferring its place of effective 4. Rules for avoidance of double
management to another Member State, without taxation on dividends under tax
granting the option of a tax deferral. treaties
The Bill is expected to become effective on 1 In July a decree was published on the implementing
January 2013, with retroactive effect to 29 rules for avoidance of double taxation on dividends
November 2011 and grants taxpayers emigrating to under tax treaties. This decree applies retroactively
an EU or EEA Member State the following three to dividends paid on or after 1 January 2012.
options: to pay the exit tax due at the time of
emigration, to request a tax deferral until the In the decree the term dividends is explained by
moment that the capital gains on assets are realized making a distinction between portfolio and
or to pay the exit tax due in 10 equal annual participation dividends. For portfolio dividends the
installments. withholding tax rate under tax treaties is generally
15%, but sometimes 10%. For qualifying dividends
A deferral of the payment or a payment in 10 equal
annual installments will only be granted if the the withholding tax rates are 0%, 5% or 10% and a
taxpayer provides a guarantee such as a bank minimum participation is required, varying from 5%
guarantee or a mortgage on property. In addition, to 50%.
interest will become due for the deferral of the
payment. The decree clarifies that under tax treaties with EU
Member States a request for a refund of withholding
tax must always be made within 5 years, also if the
Also, emigrating companies have to meet various
treaty mentions another period. Furthermore, the
administrative obligations and to submit on an
annual basis a balance sheet and profit and loss Decree provides that the 5 years period also applies
if the treaty does not specify the period for claiming
account. In addition, the taxpayer annually has to
provide sufficient data to determine if and to which a refund.
extent the tax deferral must be terminated. Further
clarifications of those obligations will be specified by
5. Tax Plan for 2013 presented to
a future decree.
parliament
The deferral will immediately be terminated if one of
The Tax Plan for 2013 was made available to the
the following situations occurs:
Lower House of parliament by the Minister of
– the taxpayer is no longer a resident of or
Finance on 18 September 2012.
established in an EU or EEA Member State;
– the taxpayer no longer meets the administrative Although the plans are still to be discussed in
obligations; Parliament and can be amended, we provide a brief
– the taxpayer no longer provides a security; or overview below. In a later stage we shall inform you
about the amendments that shall be enacted.
– the capital gains would have been taxed if the
taxpayer would have been liable to tax in the
Already it was indicated that the tax-free travel costs
Netherlands.
(inclusive of the possibility to use a company car
Comparing the Bill to previous policy decrees, the free of wage tax) will remain in place and that that
application is expanded to mergers and split-ups. proposal of the 5 parties as agreed upon in April
2012 shall not be enacted, in exchange for this the
The Bill may still be questioned, as it still contains
insurance tax shall be increased from 6 to 21%.
the guarantee requirement. It is a question whether
such requirement is in line with the Lasteyrie du Corporate income tax
Saillant (Case C-9/02). In that case, the ECJ
decided that the French exit tax on a substantial Besides the introduction of the article 13L, article
shareholding owned by individuals was incompatible
10D, containing the thin capitalization rules, will be
with the freedom of establishment because it was abolished. This abolishment is motivated with the
only possible to obtain a tax deferral if a fiscal reasoning that the regime has become superfluous
representative was appointed and a guarantee for due to existing specific restrictions of the interest
the tax due was provided. deduction possibilities and the introduced restriction
of the interest deductibility for participations.
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5. The fiscal unity regime is clarified due to the Various modifications are also proposed with
introduction of a more flexible limited liability respect to the education reduction, including:
company regime (see also below).
- the introduction of the requirement that an
On 1 October 2012, a more flexible regime for a education program has to last a minimum
limited liability company (BV) will become effective. number of hours, which will vary per type
This new regime allows to issue shares without of education;
voting rights. For the application of the group - the reduction can be claimed at once
taxation (fiscal unity) regime, the parent company instead as currently per quarter; and the
must be the legal and economic owner of 95% of reduction for starters granted during the
the shares of the subsidiary. The tax plan clarifies first 3 years will be reduced from 60% to
that the ownership must represent at least 95% of 50%.
the statutory voting rights in order that shares
without voting rights will entitle to apply the fiscal The maximum reduction per employer will remain
unity regime. EUR 14 million.
The current taxation of the remuneration received A director-substantial shareholder who has his
for statutory activities of members of a board of own pension company may reduce his pension if
directors or commissioners will be extended to the assets of the company at the pension date
remuneration for actual management activities or are less than 75% of the pension obligation
management services. The ability to exercise these included in the balance sheet. The reduction is,
taxing rights may be restricted by a tax treaty. however, only allowed if the shortage results
from investment or business losses.
Individual income tax
The reduction facility will, under a transitional
From 2013, capital insurances related to an owner- regime until 31 December 2015, also apply to
occupied dwelling will no longer be exempt. pensions which are already being paid on 1
January 2013.
Resident and non-resident taxpayers who are not
subject to social security will become entitled to a The regulation for education costs will be
payment of the social security part of the general simplified and include education and examination
levy rebate, if the following cumulative conditions fees, Ph.D. costs and costs for the required
are met: their income is too low to fully credit their learning and safety tools. Computer costs will no
general levy rebate with the income tax due and the longer be deductible.
tax due on their spouse's income is at least equal to
the amount of the paid-out levy rebate Packaging tax
Property transfer tax The packaging tax will be abolished. For
products exported after 31 December 2012, but
The Budget contains the measure on the extension before 1 April 2013, the tax will still be refunded
of the exemption from property transfer tax in the until 1 April 2013.
case of a subsequent transfer of a property.
Coal tax
Anti-avoidance measures
A coal tax of EUR 13.73 (to be indexed) per
The tax plan contains several anti-avoidance 1,000 KG will be introduced for electricity
measures, including: a 150% penalty in case of produced by coal.
fraud with subsidies, such as the childcare and
rental subsidy. Tax on passenger cars and motorcycles
Wage tax The reduction for used cars will become equal to
a fixed percentage of the catalogue vale (i.e. the
The reduction for R&D activities will be reduced advised sales price).
from 42% to 38% and be calculated over a
maximum amount of EUR 200,000. The reduction
on the excess wage will remain 14%.
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6. 6. Bill on taxation of rental income the shareholders meeting. If it is intended to
presented to parliament distribute dividends, the managing director is
required to perform tests to ensure that the
In the Tax Plan for 2013, a Bill on the taxation of company in the future can -after the dividend has
rental income is included. Rental income from been distributed- continue to meet its payment
housing in the regulated sector will become obligations. If he does not perform such test or
subject to a special levy of 0.0014% of the value the test shows that the dividends in principle
of the houses. The rate will be increased to cannot be distributed, he will become severally
0.231% in 2014. The rate comes up to an liable for any shortages of funds. Also, the
average levy of EUR 2 in 2013 and of EUR 356 shareholder can be obliged to repay the
in 2014 per home. distributed dividend.
The new levy will apply to both residents as well Note that such repayment does not mean that
as non-residents deriving rental income in the any dividend withholding tax that was paid to the
Netherlands. However, it does not apply to Dutch tax authorities shall be repaid by the Dutch
landlords who do rent out less than 10 houses, tax authorities.
also it does not apply to rental income derived
from non-social housing. Currently, these are
houses with a minimum monthly rent of
EUR 664,66 (this figure is to be adjusted
annually).
7. Bill to simplify limited liability For information please contact:
company legislation gazette
Marco Visser or Arjan van Oosten
T: +31 33 463 57 27 T: +31 33 463 57 27
The Bill to simplify the limited liability company E: visser@crop.nl E: avoosten@crop.nl
and the related implementation law was gazetted
in the Official Gazette of 5 July 2012. The Bills is
effective from 1 October 2012. 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
In it, the Dutch company law is simplified. The registeraccountants and CROP belastingadviseurs is not liable for the
information in this publication or consequences of the use of this
obligatory minimum share capital of 18,000 EUR publication. CROP registeraccountants and CROP belastingadviseurs will
is not any longer required. It is possible to have not be liable for any direct or consequential damages arising from the use
of the information contained in this publication.
shares that do not have the capacity to vote in
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