Corporation tax measures 2018

The Dutch corporation tax rate is to undergo incremental reduction over a three-year term, to 19 and 24.3 percent in 2019 and to 17.5 and 23.9 percent in 2020, and on to 16 percent for earnings of up to two hundred thousand euros (as the lower rate) compared with 22.25 percent for earnings from two hundred thousand euros upwards (as the higher rate, for which an ultimate level of 21 percent had been suggested in the coalition agreement) by 2021.

The revision of the applicable corporation and income tax rates has necessitated the rates for tax-neutral reversal being tweaked as well. The rate reduction will likewise affect any intangible asset that is retroactively shown to lack innovation box eligibility.

Set-off of tax losses in a corporation tax sphere

Set-off of tax losses is currently available in a corporation tax sphere against earnings for the previous financial year and earnings to be realised over the next nine years. Corporate tax loss carry forward is to be curtailed to six years for losses incurred in 2019 and subsequent years. The original nine-year term is to continue to apply to losses relating to the years to 2018 inclusive.

Depreciation of buildings to be curbed

Depreciation of proprietarily used buildings for corporation tax purposes is currently permissible for up to 50 percent of the property’s municipally appraised value or “WOZ value” (this being the value for the purposes of the Valuation of Immovable Property Act of the Netherlands). From 2019 onwards depreciation will be permissible only for properties whose book value exceeds 100% of their WOZ value, causing the distinction between proprietarily used and let properties to lapse.

REITs

From 2020 onwards it will no longer be permissible for REITs (which in Dutch are – somewhat amusingly – known as “FBIs”) to engage in direct investment in Dutch-based property, for reasons which have everything to do with the abolition by 2020 of the dividend tax. In practice it is either securities or property that REITs invest in. The ban on direct investment by REITs in Dutch-based property is being introduced in connection with the principle that the right to charge tax on the property accrues to the country within which the property is situated. The lack of such a ban would leave the door wide open to untaxed investments being made in Dutch-based property by foreign investors. REITs will still be able to make direct investments in non-Dutch-based property. If they wish indirectly to invest in Dutch-based property, they can do so using a subsidiary company that is liable for tax at the regular rates as a go-between.

Interest deduction restrictions

The Bill on the Implementation of the EU’s First Anti Tax Avoidance Directive (ATAD 1), which was presented in conjunction with the new tax budget, provides for a generic interest deduction restriction. This has necessitated the cancellation of certain interest deduction restrictions of a particular nature, to wit those applying to excess participation interest, excess acquisition interest and holding company loss set-off. The specific interest deduction restriction aimed against profit shifting is to be upheld, however. The new measure has been designed to rein in the deductibility of the interest balance to 30 percent of the gross operating profit, and is aimed at dissuading businesses from funding their own operations using excessive borrowings for overwhelmingly tax-driven reasons.

Anti-abuse clause

Any interest the generic deduction restriction has ruled out for deduction during a particular year may without limitation be deferred to a subsequent year, when it may belatedly be deducted. An anti-abuse clause is to be introduced in this respect, to the effect that any change of participating interest in excess of 30 percent will in principle render any interest not (yet) having been deducted ineligible for deduction along the lines of the above.

Relatable articles:

• Parliamentary year 2018-2019 kicks off
• Payroll tax measures 2018
• Dividend tax measures 2018
• Value-added tax measures 2018

Dutch version: Maatregelen vennootschapsbelasting 2018