New anti-tax avoidance measures
The first European anti-tax avoidance directive (ATAD1) directive resulted in four measures, which all EU-member states are obliged to implement in their national tax systems by the 1st of January 2019.
The Dutch government has published the legislative proposal for implementing the measures of ATAD1. Hereafter is illustrated the expected implementation of the measures in the Dutch corporate income tax law.
Earnings stripping regulation
The earning stripping regulation is an interest deduction limitation. The proposed regulation determines that interest expenses (after deduction of interest income) above € 1 million will be non-deductible to the extent that they exceed 30% of the EBITDA (earnings before interest, taxes, depreciation and amortization).
The Netherlands will also implement a CFC (controlled foreign company) regulation. It is proposed that this regulation rules that passive types of income would have to be taken into account when computing the taxable income of the Dutch holding company, in case the passive income is not taxed according to Dutch standards. The passive income of the CFC does not have to be taken into account in case the CFC is involved in real economic activities.
Under current Dutch legislation, in case of migration of a company or transfer of an asset to its related permanent establishment an exit tax is levied. The amount of exit tax is to be paid within ten years. Under the new exit tax regulation of ATAD1, the exit tax is required to be paid in annual installments of five years or earlier in case of realization of the underlying profits.
ATAD1 also includes a general anti-abuse rule (GAAR). This rule will not be implemented in Dutch legislation, since the Dutch doctrine of ‘fraus legis’ has the same objective as the proposed GAAR. Therefore, the Dutch ‘fraus legis’ is sufficient to fulfill the obligations of ATAD1 concerning implementing a GAAR.
In case you would like to be informed further concerning the consequences of these anti-abuse rules for your company, our specialists of ABAB International are happy to assist you.