Budget Day in the Netherlands

18 September 2019

Please be informed 17 September was Budget Day in the Netherlands. Please find below a brief summary of the most important fiscal changes for 2020; By the end this week we will inform you in more detail.

Portraitphoto of Vincent Wanningen
Written by:
Vincent Wanningen Senior tax advisor
Budget Day in the Netherlands

Changes for entities

Corporate income tax rates
The rate for 2020 will be 16,5% for the first € 200.000 of profit (2021: 15%), above € 200.000 remains the rate 25% (2021: 21,7%). The (effective) innovation box rate will be 9% as per 2021.

Limitation liquidation losses on subs
It will be made more difficult to deduct a loss upon liquidation of a subsidiary under the Duct participation exemption (solely losses on 25% shareholding in EU/ EER based subs).

Excessive loans from own entity
Loans (except for main home mortgage loans) granted to substantial shareholders (private shareholding 5% or more) above € 500.000 will be considered a deemed dividend distribution. 

Definition of permanent establishment and representative
The definition in the Dutch law will change to the OECD’s BEPS action 7 definition in order to tackle avoidance of a PE/PR.

Withholding tax on interest and royalty’s
Anti-abuse measures will be introduced for payments of interest and royalty’s to low-taxed (less than 9%) countries or non- cooperative countries on information exchange, as well as in structures set up for the main purpose of tax avoidance.

Change of substance
The substance criteria safe haven for the dividend withholding exemption (and interest and royalty’s in 2021) will be changed in a way that even if the recipient of the payment has sufficient substance, the tax authorities can still deny the withholding exemption in case of abuse.

Minimum capital for banks and insurance companies
A minimum capital is required for equal treatment between equity and debts; a leverage ratio will be introduced.

VAT simplification rules on international trade
So-called “quick fixes” will be introduced to simplify intra community transactions. Also the rules on call of stock will be simplified.  

As per 2021, VAT on distant selling will change since the thresholds will vanish. The one stop shop will introduced, enabling payment of foreign VAT due via the Dutch tax authorities. 

As per 2021, changes for e-commerce and online platforms will be introduced by making the platform subject to VAT.

Changes for individuals

Box 1 
Box 1 taxes income from labor or pension incomes. 
There will be an accelerated introduction of the two-bracket system, as the current rates in the second and third bracket will be constricted as from 1 January 2020. 
First bracket:  Income up to € 68.507: 37,35%,
Second bracket: Income above € 68.507:  49,5%

Box 2
Income from dividends or profits made on the sale of shares under the substantial shareholding regime (minimum of 5% shareholding in private) are taxed in box 2.  The box 2 rate will be increased to 26,25% in 2020 (2021: 26,9%).

Box 3
Box 3 taxes income from savings and investments at a deemed income. This system has been under discussion for years, mainly due to the low interest rate on savings but the relative high deemed income. The government has indicated that it will work out a box 3-system based on actual income. The intention is to submit a bill before the summer of 2020. This new system will be profitable for tax payers with savings, but disadvantageous for tax payers with other investments, especially when this other investments are financed with debts.

Read more about the changes of Budget Day:

As from 2020, simplified rules for call-off stock
As from 2021, foreign VAT on distance sales
As from 2021, modifications in e-commerce and online platforms
Changes for private individuals
As from 2020, VAT simplification schemes for international trade in goods: quick-fixes 
Conditional withholding tax on interest and royalties 
Modification of the role of substance requirements
Introduction of minimum capital for banks and insurers 
Adjustment of definition of permanent establishment and permanent representative 
Excessive borrowing from your own private limited company  
Limitation of the liquidation loss scheme
Corporation tax rates 

Would you like to get more information about Budget Day? Our specialist will gladly assist you!

Email Vincent
Portraitphoto of Vincent Wanningen
Senior tax advisor