Crack-down on tax avoidance, tax evasion

The Upper House’s Standing Committee for Finance has submitted questions to the State Secretary for Finance concerning his crack-down on tax avoidance and tax evasion.

ATAD1, the first European Anti Tax Avoidance Directive, demands from EU Member States that these should implement measures aimed against the erosion of the tax base in a corporation tax sphere. The Dutch Cabinet has chosen to go with the curtailment of tax relief for companies with surplus borrowings, as a measure aimed at aligning the debt-equity treatment in a corporation tax sphere. The current (lack of a cap on) interest tax relief is acting as an incentive for funding business operations using borrowed capital. The Cabinet intends as a counter-measure not to exempt group company funding arrangements. It has opted against a distinction being introduced between third-party borrowings and group company borrowings where funding arrangements are concerned. The measure takes effect as soon as the outstanding amount in interest exceeds € 1 million on balance. No exemption owing to non-retroactivity is to apply to pre-existing loans.

The introduction of the above generic interest relief curtailment is to enable the abolition of several existing interest relief restrictions of a specific nature including, in any event, the deductibility restriction for excessive acquisition interest. The relevant acquisition holding company clause is to be repealed with effect from the first of January 2019. The Tax Plan for 2019 is to elaborate on the other interest relief restrictions that are scheduled to be abolished. It had already been agreed in the context of the coalition agreement that the interest relief restriction aimed at counteracting profit shifting should be upheld.

Dutch version: Aanpak van belastingontwijking en -ontduiking