International tax landscape
The government will continue its efforts to combat tax avoidance but is aware of the limits to what can be done unilaterally. For the coming period, the focus will be on international agreements. The Dutch government is committed to the effective implementation of the agreement reached within the Inclusive Framework of the OECD and is making every effort to ensure that the current negotiations regarding the EU Directive on Pillar II are successful (see our tax flash of 16 March 2022). The proposal for this Directive is tabled for adoption during the Ecofin meeting of 17 June 2022.
The Netherlands also generally supports the proposal for the EU Directive laying down rules to prevent the misuse of shell entities for tax purposes (the EU Shell Directive, also referred to as ATAD3) (see our tax flash of 23 December 2021).
Tax law proposals
Tax consolidation regime
The current Dutch tax consolidation regime generally provides for a full tax consolidation. Following EU case law, it had been considered to replace this regime by a group relief or result pooling system. However, the Netherlands will first prioritize other changes of the tax system, among which and in particular the Dutch implementation of the envisaged EU Directive on Pillar II. This means that the replacement of the tax consolidation regime will be postponed.
Entity classification rules
In 2021, the Netherlands proposed to overhaul its tax classification rules for Dutch and foreign entities (such as partnerships) with certain legislative proposals (see our tax flash of 30 March 2021). The state secretary now intends to submit the legislative proposal in the second quarter of 2023 with an envisaged entry into force per 1 January 2024. The changes to the tax classification for Dutch funds for joint accounts (fonds voor gemene rekening or FGR) will not be part of this legislative proposal (see our tax flash of 1 July 2021) but will be evaluated together with the evaluation of the fiscal investment institutions regime (FBI-regime). This will be finalized within the term of this government.
The 30%-ruling offers expatriates a tax-free allowance to cover for extraterritorial expenses, incurred by working for a Dutch employer. The state secretary intends to introduce a maximum basis for the calculation of the tax-free 30%-allowance, being EUR 216,000 for 2022, with a transitional period of three years.
Policy research reports - status
Last year, the Dutch government launched a public consultation regarding six measures countering dividend stripping (see our tax flash of 16 December 2021). The state secretary aims to present the outcome before July 2022.
Taxation of multinationals/CFC
In 2020, the Dutch Advisory Committee on taxation of multinationals presented its advisory report (see our tax flash 16 March 2020). The committee recommended tightening the 'Controlled Foreign Company' (CFC) rules. The state secretary now indicates that when the proposed Pillar II EU Directive will be implemented, there will be no further need to tighten the CFC rules.
In 2021, the Committee on Conduit Companies presented its advisory report to the Dutch government with six fiscal and nine non-fiscal policy options to prevent the abusive use of conduit companies (see our tax flash of 23 November 2021). The state secretary notes that the underlying policy objectives are expected to be met by the proposed EU Shell Directive.
Still in 2022 we can expect the earlier announced reports on the tax burden of multinational enterprises and the improper use of the lower corporate income tax rate. The report on the tax burden of multinationals covers (i) taxes paid by structurally loss-making companies, (ii) limitation of the deduction of certain headquarter / head office expenses and/or royalties, and (iii) differences between tax and commercial profits.
Furthermore, the Dutch fiscal investment institution (FBI) regime and the Dutch exempt investment institution (VBI) regime, including the implications of the potential changes to the FGR classification rules, will be evaluated.
Finally, also the innovation box regime will be evaluated as well as the impact of the conditional withholding tax.
We note that the tax law proposals mentioned above are at this stage merely expressed policy objectives, and that no actual bill of law has been submitted to parliament yet. Once further information on these topics becomes available, we will update you accordingly.
Should you have any questions or comments please contact your trusted advisor at Loyens & Loeff.