Budget Day

On 21 September 2010, Budget Day in the Netherlands, the Dutch Government presented the 2011 Tax Package. Below you will find a summary of the most important proposals. They still have to be approved by the parliament and it is expected that most proposals will be effective as of 1 January 2011.

Corporate income tax

• the corporate income tax rate for profits exceeding € 200,000.- will be reduced from 25.5% to 25%;
• for taxable profits less than € 200,000.-, a rate of 20% remains applicable.

Extension of loss carry back period
For the fiscal years 2009 and 2010 it is possible to opt for an extension of the loss carry back period. This means that a taxpayer liable to Dutch corporate income tax can opt for an extension of the loss carry back period from one year to three years. If a taxpayer opts for this extension the loss carry forward period will be limited from nine years to six years. The Government proposed that the extension of the loss carry back period will also be valid for the fiscal year 2011.

Innovation Box - more opportunities to apply
Under the Innovation Box rules an effective rate of 5% is levied on income (including gains) from assets for which a patent has been granted or for which an official "Research & Development Statement" has been granted. The Innovation Box also applies to software.

The current situation is that if a patent is granted in a later year than the year of patent application a taxpayer can start opting for the innovation box in the year that the patent is granted.

For the Innovation Box it is now proposed to also take into account the advantages realized in previous years before the patent was granted. It relates to benefits under an asset obtained after application of the patent until the year preceding the year of granting of the patent.

Loss compensation
A leak in the anti-abuse provision of Article 20a of the Corporation Tax Act on trade in shelf companies with a deductible loss is repaired.

It relates to situations where a loss is sustained in the period of the year prior to the transfer of the shares which loss is set off against future profits being earned in the same year or in subsequent years. The adjustment leads to the situation that the sustained loss realized in the period of the year prior to the date of the transfer of shares can not be set off against profits realized in the same year after the date of transfer of the shares or subsequent years. Instead, the loss is determined as if it were a loss for one year, which can only be set off against profits prior to the date of the share transfer.

New office in Brussels

To offer our clients a better service and to enlarge the facilities towards our clients, we are proud to announce that we have opened a new office in Brussels, at the following address:

Corporate Services Belgium
Buro & Design Center, 1st floor, office 124
Esplanade Heysel 1, PB 94
1020 BRUSSELS
Belgium
Tel.: +32 2/478.98.53
Fax: +32 2/478.98.39

Our services in Brussels are the same as our services of our Antwerp office:

• Incorporation of entities;
• Domiciliation and management;
• Corporate Housekeeping;
• Legal and tax services;
• Administration, Financial and Accounting services;
• Liquidation and restructuring services.

Our Brussels office can also provide you with office space of 9m². These offices are fully furnished, and equipped with ICT-network. For more information I refer to the website which can be found at: www.csbelgium.com

Relaxation of the participation exemption

As of 1 January 2010, the Dutch participation exemption applies to shareholdings of 5% or more ("participations") which are not held as portfolio investments (the "Intention test"). The decisive criterion for this test is the intention with which the participation is held. This test was also applicable prior to the year 2007. The Intention test is considered to be met if the taxpayer's objective is to obtain a return on its investment that exceeds a return that may be expected from regular portfolio asset management. If the participation is held with mixed intentions, the predominant intention is decisive.

If the Intention test is not met and the participation is (deemed) to be held as a portfolio investment, the Dutch participation exemption may still apply if the participation can be considered a qualifying portfolio investment participation. A qualifying portfolio investment participation is a participation that meets either the (slightly amended) "Subject-to-tax test" or the "Asset test".

New tax treaty with Hong Kong

On 22 March 2010, the Netherlands and Hong Kong signed a tax treaty for the avoidance of double taxation and prevention of tax evasion. The Netherlands is now one of the few countries that has concluded a tax treaty with Hong Kong. The treaty still needs to be ratified both in the Netherlands and in Hong Kong before it can enter into force. The treaty will probably be effective as of 1 January 2011.

The most important measures are:

• A withholding tax rate of 0% (currently 15%) will apply to dividends received by qualifying companies holding at least 10% of the share capital of the paying company. The 0% rate will also apply to dividends received by banks and insurance companies, pension funds, headquarter companies and certain other qualifying entities. A withholding tax rate of 10% will apply to other dividends. Hong Kong does not levy withholding tax on dividends.
• No source taxation will apply to interest payments. Neither Hong Kong nor the Netherlands levy withholding tax on interest based on domestic legislation.
  
• Hong Kong has agreed to limit its withholding tax on royalties to 3%. The Netherlands does not levy withholding tax on outbound royalty payments.
  
• The gain from transfer of shares in a company (other than in a company deriving more than 50% of its asset value directly or indirectly from immovable property) will be taxable only in the resident jurisdiction of the transferor.

New tax treaty with Japan

On 25 August 2010, the Netherlands and Japan signed a new tax treaty. The treaty still must be ratified both in the Netherlands and in Japan before it can enter into force. It is expected that the treaty will enter into force on 1 January 2012. The treaty includes the following:

• A withholding tax rate of 0% (currently 5%) will apply to dividends received by a company that owns at least 50% of the share capital of the paying company. A withholding tax rate of 5% will apply to dividends received by a company that owns at least 10% of the share capital of the paying company. If the receiving company owns less than 10% of the share capital of the paying company the applicable withholding tax rate is 10% (currently 15%).
  
• A withholding tax rate on interest of 10%, but 0%, amongst others, for financial institutions.
  
• No withholding tax on royalties (currently 10%).

Reformation of the Dutch Kingdom

Currently The Kingdom of the Netherlands consists of the countries the Netherlands, the Netherlands Antilles and Aruba. As per 10 October 2010 the Netherlands Antilles, which consists of five island territories in the Caribbean Sea (Curaçao, Bonaire, Sint Maarten, Saba and Sint Eustatius), will be dissolved.

Upon dissolution of the Netherlands Antilles the three island territories Bonaire, Sint Eustatius and Saba (the so called BES-islands) will become part of the Netherlands as extraordinary overseas municipalities. Curaçao and Sint Maarten will both become autonomous countries in the Dutch Kingdom. As from 10 October 2010 the Dutch kingdom will consist of the following four countries: the Netherlands, Aruba, Curaçao and Sint Maarten.