Netherlands - Amendments to 2018 Budget Measures? | KPMG | CA

Netherlands - Amendments to 2018 Budget Measures?

Netherlands - Amendments to 2018 Budget Measures?

The Netherlands’ government announced upcoming changes to withholding taxes.

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This is one of several changes announced October 10, 2017—the government says it intends to reduce corporate income tax rates, further limit the interest deduction limitation rules for corporations and increase the effective Innovation Box tax rate to 7% (from 5%). The measures, which were presented as part of a "coalition agreement" as an indication of the incoming cabinet's priorities, do not replace the measures in the bills included with the Netherlands' 2018 budget that was presented in September. However, some of these measures would result in amendments or additions to those included in the budget bill. These new changes, which were not released with proposed legislation or further explanatory notes, could be introduced as legislative bills in 2018.

The Netherlands' new cabinet is expected to be sworn in during the week of October 23, 2017.

Withholding tax
The new cabinet says it intends to abolish Dutch dividend withholding tax, except in abusive situations, or in the case of distributions to low-tax jurisdictions, starting in 2020. The new cabinet also proposes to introduce a withholding tax on interest and royalties paid to low-tax jurisdictions, expected to take effect as of 2023. These measures are different from those included in the 2018 budget bill, which expand the scope of the dividend withholding exception and extend the dividend withholding obligation to certain co-operatives.

Corporate tax
The announced measures include changes to:

  • Reduce the ordinary corporate income tax rate in stages, to 21% (from 25%) by 2021
  • Reduce the low rate corporate income tax rate in stages, to 16% (from 20%) by 2021
  • Reverse the extension of the low rate corporate tax bracket to €350,000 (tax bracket will revert to €200,000)
  • Further limit the interest deduction for corporations, and introduce a thin capitalization rule for banks and insurers
  • Reduce the loss carry-forward period for corporations to six years (from nine years)
  • Increase the effective tax rate on innovation box profits to 7% (from 5%) as of 2018
  • Repeal the ability of fiscal investment institutions to directly invest in property as of 2020
  • Increase the low VAT rate to 9% (from 6%).

For more information, contact your KPMG adviser.

Information is current to October 17, 2017. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

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