From the Netherlands: Coalition Agreement Dutch Cabinet to Improve Dutch Investment Climate
On October 10, 2017, the coalition parties of the expected cabinet of the new Dutch government (Cabinet) published their coalition agreement which codifies their most important goals and objectives. In the Dutch coalition agreement the Cabinet intends to improve the Dutch investment climate for (foreign) investors and corporations by abolishing the dividend withholding tax, reducing the difference in fiscal treatment of equity-funded investments and debt funding, investing in measures that improve our innovative strength, and by supporting corporations that have sound business reasons for establishing a business in the Netherlands.
Abolishment of the Dutch Dividend Withholding Tax
The main tax incentive to attract foreign investors and corporations to the Netherlands is the abolishment of the Dutch dividend withholding tax, most likely from January 1, 2020. In abusive situations and in the event of dividend distributions to low-tax countries, dividends will remain to be subject to Dutch dividend withholding tax at a rate of 15%.The abolishment of the Dutch dividend withholding tax aims to encourage equity financing over debt capital financing, which is reinforced by the announcement of the introduction of a withholding tax on interest and royalty payments made to low-tax jurisdictions with an aim to discourage companies establishing in the Netherlands without sound business reasons.
Other Relevant Tax Measures
- Corporate income tax rates will be reduced from 2019 to 2021 from the current 20% (first bracket) and 25% (second bracket) to 16% (first bracket) and 21% (second bracket).
- An earnings stripping measure will be implemented following the Dutch approval of the EU Anti-Tax Avoidance Directive.The coalition parties have further proposed to abolish some of the existing Dutch interest limitation rules, except for a specific anti-base erosion provision with the aim to simplify the Dutch interest deduction limitation rules.
- The loss carry forward period is reduced from nine years to a maximum of six years.
- The term of the so-called 30% ruling regime for extraterritorial employees will be reduced from eight to five years.
The coalition agreement does not include any legislation proposals but is expected in the near future.