Amendments regarding the qualification of legal entities

22 October 2021

The Tax Plan 2022 includes a number of changes regarding the qualification of legal entities. We list them for you.

Portrait of Daniël van Meijgaarden
Written by:
Daniël van Meijgaarden Senior tax advisor
qualification of legal entities

Bill on qualification of foreign legal forms comes later

The bill qualifying foreign legal forms aims to counteract differences in qualification in international situations. These differences can ensure that certain income is taxed twice or not at all.

The legal forms that are most affected by this are the Dutch non-transparent limited partnership and foreign entities that are not comparable to one of the Dutch legal forms. Since there were many comments on this bill, it was decided to submit it separately from Prinsjesdag. An explanation follows.

Adjustment of tax policy qualification legal forms

The Netherlands has a number of transparent legal forms, such as certain limited partnerships (CV) and certain mutual funds. The underlying participants in transparent legal forms are directly taxed.

Other countries may take a different qualification into account, and consider the Dutch legal form to be independently taxable (and therefore non-transparent).

As a result of these qualification differences, the Netherlands may regard an entity as not subject to independent tax while the other country does. This leads to hybrid mismatches. As a result, a benefit may remain untaxed or an expense item may result in a double deduction.

This undesirable consequence will soon be eliminated by an amendment to the law on open limited partnerships.

  • Open limited partnerships that are normally subject to corporate tax are now considered transparent. As a result, it is no longer the open limited partnerships themselves, but the underlying participants who are involved in the taxation, because the profit or income derived by means the open limited partnership is allocated to those participants.
  • For open limited partnerships that are currently still subject to corporate income tax, there may be a transitional arrangement, in the event that the open partnership could qualify as a reverse hybrid entity.
  • Foreign legal forms are also viewed differently. At present, the comparison is often with Dutch legal forms. Soon there will be new regulations for the qualification of foreign legal forms for corporate tax purposes.

It is possible that the rules for investment funds will also be adjusted later. Just as the fiscal regime for the fiscal investment institution (fbi) and the exempted investment institution (vbi) will also be looked after for possible amendment.

Would you like to know more?

Would you like to know more about the changes regarding legal forms? Our tax advisors would be happy to assist you. Please contact Daniël van Meijgaarden, senior tax advisor, on telephone number +31 165531348 or send Daniël an e-mail.

View all tax changes from the 2022 Tax Plan

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