No changes in the corporate tax rates

The rates and tax brackets in the corporate tax will not change compared to 2023.

Corporate tax rates

Reduction in Energy Investment Allowance (EIA)

The EIA allows a deduction for investments in assets listed on the Energy Investment list. As of January 1, 2024, the deduction percentage of the EIA will be structurally reduced. A reduction of the deduction percentage to 40% is proposed for 2024 (2023: 45.5%). The maximum investment amount remains € 136,000,000.

Abolition of gift deduction for limited liability companies

Currently, a company can deduct gifts to public benefit organizations (known in Dutch as: ANBIs) and Social Interest Advocating Institutions (SBBIs) up to a certain amount. The excess is seen as a distribution to the shareholder. The gift deduction will be abolished at the end of 2023. On the other hand, such gifts will also no longer qualify as distributions to the shareholder.

For clarity: if there are quid pro quos for the payment to the ANBI or SBBI, for example in the context of sponsorship, these amounts may still be deductible.

Qualification policy for foreign legal forms

At present, foreign legal forms are qualified for income and withholding tax purposes through a comparison of such legal form with Dutch legal forms. If there is no comparable Dutch legal form this can result in international mismatches, where one country considers a legal form as transparent for tax purposes, while the Netherlands consider it as non-transparent (or vice versa). A new law will enter into effect on January 1, 2025, that adds two additional methods of qualifying foreign legal forms for taxation purposes. For foreign legal forms residing outside the Netherlands a symmetrical approach will be applied. This approach qualifies foreign legal forms as non-transparent if the foreign legal form is considered as non-transparent in the country of residence. The second method applies for non-comparable foreign legal forms residing in the Netherlands. These will qualify as non-transparent.

Qualification Dutch limited partnerships (CVs)

As of January 1, 2025, all Dutch limited partnerships will be considered as transparent for income and withholding tax purposes. Dutch limited partnerships that are considered non-transparent under current regulations will face an exit tax. To mitigate negative tax impact various tax facilities can be applied.

Please note: reverse hybrid mismatches with limited partnerships will not face an exit tax and will remain non-transparent for Dutch taxation purposes.  

Changes regarding Dutch tax facilities for investment vehicles

The Netherlands has various tax facilities for investment vehicles. Most commonly known are:

• Fund for joint account
  • Known in dutch as: open fonds voor gemene rekening (OFGR)
• Exempt investment institution
  • Known in Dutch as: vrijgestelde beleggingsinstelling (VBI)
• fiscal investment institution
  • Known in Dutch as: fiscale beleggingsinstelling (FBI)

Several changes have been announced for the OFGR, VBI, and FBI. In short, the changes are as follows:

FBI

As of January 1, 2025, FBIs may no longer invest directly in Dutch real estate. It remains possible for FBIs to invest in foreign real estate. Moreover, it remains possible for FBIs to invest in Dutch real estate through Dutch subsidiaries that fall within the scope of Dutch CIT.

VBI

As of January 1, 2025, the VBI regime is limited to entities qualifying as investment institutions and funds for collective investment in securities mentioned in the Financial Supervision Act. Entities that do not qualify can no longer apply the VBI regime.

OFGR

As of January 1, 2025, the qualification for OFGRs aligns with the legal definition of investment funds and funds for collective investment in securities. OFGRs that do not fall within this qualification will face a final settlement of corporate tax. There are various facilities than can be applied to mitigatenegative tax impact.

Minimum capital regulation for banks and insurance companies

This measure proposes an adjustment in the minimum capital rule in corporate tax. The minimum capital rule is a specific interest deduction restriction for banks and insurance companies in the Netherlands. The deduction of interest will be limited insofar as the external capital exceeds 89.4% of the balance sheet total.

Measures against dividend stripping

Companies residing in the Netherlands must withhold dividend tax on distributed dividends. However, there are various situations in which withholding tax is reduced orwaived, for example due to tax treaties. To avoid specific abuse (dividend stripping) of these facilities two measures are proposed:

• establishing a registration date that shows who is entitled to offset, refund, or reduction of dividend tax;
• a change in the burden of proof, which improves the position of the Dutch Tax and Customs Administration.

Amendment to the Excessive borrowing bill

Since January 1, 2023, the Excessive Borrowing Act limits the ability to borrow from one's own company. In short, if a director-major shareholder borrows more than € 700,000 from their own company, the excess is taxed as a deemed dividend. This led to an undesirable outcome in the situation where taxpayers borrow excessively from a new, foreign-based company after emigration from the Netherlands. These undesirable consequences are undone through this repair.

Please note that the effects of the Excessive borrowing bill differ in cross-border situations depending on the applicable tax treaty.

Business succession facility

There are various amendments to the business succession facility in the Netherlands. This facility allows a (partly) succession tax exempt for business transfers under specific circumstances. Under the new regulations a full tax exemption can be applied for business transfer up to € 1,500,000. Any remaining transfer above that amount will be exempt for 70%.

Moreover, certain assets no longer qualify for the application of the business succession facility (e.g. non-business related real estate). Furthermore, the conditions for the application of the business succession facility are amended.

Income tax on substantial share interests

The Netherlands taxes its residents on income from a so-called substantial interest. This is usually an equity interest of 5% or higher. Income derived from these shares through dividend payments and capital gains is currently taxed at a flat rate of 26.9%. As of January 1, 2024, the tax rate will be split into two tax brackets. Income up to € 67,000 will be taxed at 24.5%. Income derived above that amount will be taxed at 31%.

Other developments

In addition to the changes from the Tax Plan 2024, there are several developments in the international domain. The main developments listed:

Minimum Tax 2024 (Pillar 2)

On May 30, 2023, the Minimum Tax 2024 proposal was submitted. This proposal implements the EU Pillar 2 directive and creates a new tax levy for companies belonging to a group with a turnover of € 750 million or more. This new tax assures that profits of entities that are part of such groups will be taxed against a minimum tax rate of 15%. It does so through the following three measures:

• Qualified Domestic Minimum Top-up Tax (QDMTT)
  • The Netherlands levies tax on companies based in the Netherlands which are effectively taxed less than 15% with Dutch corporate income tax.
• Income Inclusion Rule (IIR)
  • The Netherlands levies tax on profits of foreign subsidiaries of Dutch companies if those profits are effectively taxed less than 15% with corporate income tax.
• Under-Taxed Profit rule (UTPR)
  • The Netherlands levies a tax on profits of parent companies of Dutch entities residing in foreign countries, if those parent companies are not effectively taxed with at least 15% corporate income tax. This prevents the avoidance of additional levies by establishing the parent company in a country that does not have an income inclusion rule.

Assuming that the proposal is adopted, the Minimum Tax Act 2024 will come into effect on January 1, 2024.

Directive proposal DAC8

DAC 8 is a European directive proposal mainly aimed at service providers on the crypto market. The proposal requires service providers to collect information about clients, and report transactions of clients residing or established in the EU. The directive proposal shows significant similarities with the earlier Crypto Directive MiCa. This improves transparency about crypto transactions in Europe. Furthermore, the proposal extends the automatic exchange of information to cross-border rulings of wealthy individuals.

The intended entry into force of DAC8 in the national law and regulations of member states is January 1, 2026.

ATAD 3: Tackling flow-through companies

ATAD 3 is a European directive proposal aimed at combating tax abuse through flow-through companies. Under the directive proposal, benefits from European legislation and tax treaties are no longer granted to qualifying flow-through companies. A company qualifies as a flow-through company if it:

• has received at least 75% passive qualifying income in the two previous tax years (e.g. interest, royalties, dividends);
• conducts cross-border activities;
• outsourced the management of daily activities and decision-making on important functions in the two previous tax years.

Please note: companies that qualify under the abovementioned criteria that have sufficient substance and companies that do not lead to a tax advantage are exempt from being flow-through companies.

This directive proposal is still under consideration. It is unclear whether the directive proposal will be adopted or when the directive proposal will come into effect.

Pillar 1

Progress has been made regarding Pillar 1. This is a proposal within the OECD/G20 to revise international corporate income tax. This proposal introduces new rules for the allocation of taxing rights between countries where multinational companies are active. This also grants taxing rights to market jurisdictions where the company does not have a physical presence, only customers. The OECD has finally announced that more concrete direction will be given to the Pillar 1 proposal at the end of 2023.

FASTER: Refund of withholding taxes

The European directive proposal FASTER aims to reduce trade barriers in the form of withholding taxes for European investments. Under the directive proposal, the administrative procedures for tax refunds and repayments are standardized. Under the FASTER system, member states have two options:

1. withholding the correct tax rate on dividend and interest payments; or
2. repayment of unjustly withheld tax within fifty days.

Member states can choose which option to apply. For the time being, FASTER is in the initial proposal phase. If the proposal is adopted, it is expected to come into effect on January 1, 2027.

Implementation VAT Small Business Scheme Directive

A bill is submitted that implements the VAT Small Business Scheme directive from 2020. This bill allows small entrepreneurs to apply small business schemes in other member states. The small business scheme is a VAT exemption for smaller enterprises that do not exceed a certain turnover. This means that they do not have to charge VAT and can’t deduct VAT. This bill will come into effect on January 1, 2025.

Tax treaty developments

Want to know more?

Would you like to know more about the Dutch developments in international taxation? Call Nick Goossens, tax advisor, at +31 (0)13 591 5128 or send Nick an e-mail.