Proposed Corporate income tax rates 2009 and 2010

Anticipated upcoming tax reform

On December 15, 2008, the Dutch Secretary of State for Finance sent a letter to the Dutch Second Chamber of Parliament that addresses inter alia various issues related to the treatment of intra-group interest. Furthermore, the letter contains possible reforms to the Dutch corporate income taxation system.

The primary focus lies on the (partial or complete) so-called "de-fiscalisation" of intra-group interest income and expenses. De-fiscalisation means that intra-group interest income will (partially) be exempt and intra-group interest expenses will be (partially) non-deductible.

If steps are indeed taken towards de-fiscalisation of intra-group interest, this will have major consequences for the treatment of leveraged buy-outs, whereby companies are acquired using borrowed funds. It may however also give rise to interesting tax planning opportunities via the Netherlands, for instance, for multi-national corporations considering an integrated global (financing) structure.

A proposal for amending the Corporate Income Tax Act in respect of the above is expected to be submitted in the first half of 2009.
We will keep you updated in this respect.

Sale of cash box companies

Contrary to what some parties expected the Dutch dividend withholding tax will most likely not be effected by the aforementioned anticipated Dutch tax reform.
One of the consequences may be that it can still be more favourable for shareholders to exit from their Dutch company by way of a sale as a cash box company to a trust company or to a bank rather than by distributing dividends or by way of dissolution of their Dutch company.
FTC Trust has been one of the few Dutch trust companies that has recently been granted a favourable tax ruling for the fiscal treatment of the acquisition of cash box companies albeit Dutch or foreign.

This means that we can offer very competitive discounts on the acquisition of cash box companies while having ruled the tax consequences of such acquisition.
It would be our pleasure to discuss this with you more in detail so you are most welcome to contact your regular contact person at FTC Trust for more information.

Renewed favourable tax treaty with South Africa

Effective January 1, 2009 a favourable renewed double tax treaty between South Africa and the Netherlands has entered into force by virtue of which inter alia:

• Dividend withholding tax rates apply of 5% if the shareholding is at least 10% (shareholding threshold under the old treaty was 25%);
• Dividend withholding tax rates apply of 10% if the shareholding is at least 10%; (former rate was 15%);
• No withholding tax is levied on interest payments (used to be 10% withholding tax under the old treaty).

EU Court ruling on cross border fiscal unity

Under certain conditions it is possible for a Dutch company to apply for a cross border fiscal unity. However, if the parent company and the granddaughter company are located in the Netherlands but the intermediary holding company is not located in the Netherlands, Dutch tax legislation does not grant the possibility of a fiscal unity amongst these three companies.
The EU Court recently ruled in a similar case relating to the French tax legislation that, if the intermediary holding company is located in another EU-member state, this may create an unauthorised limitation to the freedom of location within the EU.

Unless an EU-member state has proportionate justifications for such limitation (e.g. the possibility of double loss compensation in both EU-member states) the member states are compelled to allow a cross border fiscal unity in situations as described above.

One of the positive consequences of this EU Court ruling is that it further enhances the possibilities of tax planning via the Netherlands.