Dutch Tax Regime 2010
In this newsflash we summarise some of the Dutch tax advantages that are being proposed. In a consultative document the Dutch Ministry of Finance recently published several tax proposals likely to be introduced as from 2010. The reforms will improve the attractiveness of The Netherlands as a tax efficient jurisdiction, especially for group financing activities. As several proposals to change the Dutch Corporate Income Tax Act are still in parliament, we note below the highlights.
Group interest box
One of the expected changes is the introduction of a compulsory group interest box. Recently the European Commission approved the plan to apply a 5 percent tax on received and paid intra-group interest. All interest received from group companies will be taxed at an effective tax rate as low as 5 percent. The group interest expenses will then be deductible at an effective tax rate of 5%. Furthermore the new interest box will include currency gains and losses on loans to and from group companies.
A separate limitation of the deductibility of intra group and external interest
Another change that was introduced is the proposal for a separate limitation of the deductibility of intra group and external interest, whilst abolishing complex rules that currently apply. In the legislative proposal several alternative regulations are recommended. We will update you on this topic upon publication of the final legislative proposal.
Relaxation of participation exemption
As announced by the Dutch government on Budget Day on September 15th, the participation exemption will further be relaxed by providing more comfort to tax payers in respect of the application of the participation exemption for foreign subsidiaries. It is proposed to partly return to the pre-2007 rules, meaning that the participation exemption is applicable as long as the participation is not held as a portfolio investment.
Currently the participation exemption applies to 5% shareholdings,
unless the participation is considered a low-taxed portfolio investment
(passive). In case of a passive portfolio investment participation, a
credit system applies instead of the full participation exemption. A
subsidiary is not considered a passive portfolio investment if the
subsidiary’s aggregated assets consist of 50% or more of “good assets”.
Generally speaking “good assets” are assets that are used in the direct
subsidiary’s active business or in lower tier subsidiaries’ active
businesses. “Bad assets” are assets that generate passive income such
as interest, royalties and rental income.Under the new 2010 tax package it is proposed that the participation exemption also applies for subsidiaries that are held for other purposes than passive investment. The new decisive criteria for the participation exemption will be the active involvement and the intent of the Dutch parent company or central group management. If there is active involvement in the central management of the group regarding the corporate strategies of the subsidiary and its (sub-) subsidiaries, then the participation exemption will apply.
All in all we hope to tell you more about the developments in this area in our next FTC newsflash.
A new financial penalty regime
Until
recently it was only possible to fine the company with administrative
penalties. On 1 July 2009 a significant change entered into force by
changing the Dutch General Administrative Law Act. A new legal basis
was introduced which makes it possible to fine also co-principals such
as tax lawyers, in-house tax counsel and for that matter trust
companies. The new legislation also states that offences can be
committed by natural persons and legal entities. For us as a trust
company this means that we can be penalised in a much broader
perspective.
This is one of the reasons that FTC
Trust has a strict client acceptance procedure which is personally
handled by an in-house compliance officer. As a trust company we always
strive to limit the risks as much as possible without losing sight of
the commercial perspective.
 |
 |
|
If you wish to receive more information on these subjects please contact your contact person at FTC Trust |
 |
