The Netherlands – the 2011 Budget Proposal – proposed corporate tax changes

After the proposed tax changes have been approved by Dutch Parliament, they will generally enter into force on 1 January 2011.

The key focus of the 2011 tax measures is on incentives for entrepreneurship and innovation. This translates into a number of measures to encourage entrepreneurship, which include

The Budget Proposal also provides for additional measures against fraud and tax avoidance, which include measures against trade in tax loss companies (corporate tax),  more stringent conditions for the exemptions from the real estate transfer tax, and increased statutory powers for the exchange information on savings accounts and other banking details with countries outside the EU.

Less relevant for the international tax practice, are a variety of proposed changes of the Dutch income tax act, car taxes, VAT, etc, which will therefore not be further dealt with here.  

1. Reduction corporate income tax rate

The corporate income tax rate for profits exceeding € 200,000 will be reduced from 25.5% (2010) to 25% (2011). The rate for the first € 200,000 of profit will remain 20%.

For tax years which deviate from the calendar year, the new rate applies to tax years starting on or after 1 January 2011.

2. Extension statutory loss carry-back period

Upon request of the tax payer the (normal) one year loss carry-back term can be extended to three years. This now applies to losses incurred in 2009, 2010 and 2011.  

If a tax payer opts for this extended carry-back term, the statutory term for the carry forward of these losses will be reduced from the (normal) nine years to six years.

3. Quarterly VAT return

Tax payers can opt to file their VAT return (and pay their VAT due) once a quarter instead of once a month.

4. Extension of the accelerated depreciation facility

Certain qualifying investments, which include investments in real estate, intangible assets, and business assets, can be freely depreciated in the year of investment up to a maximum of 50% of the amount of the investment.

5. Expansion wage cost facility for Research  & Development

In 2009 the Dutch Government introduced a tax incentive which aimed to reduce the payroll tax and social security contributions due on account of qualifying Research and Development work.

For 2011, a deduction of 46% (currently 50%) applies for the first € 220,000 (also the current threshold) of R&D-related payroll costs, with a 16% (currently 18%) deduction for R&D-payroll costs above € 220,000. The maximum rebate per taxpayer will be € 11,000,000 (currently € 14,000,000). For 2012 a deduction of 45% will apply to R&D costs up to € 150,000, and 14% for any excess. The maximum rebate per taxpayer in 2012 will be € 8,500,000.

6. Expansion Innovation Box  

The “Innovation Box” provides for a 5% tax rate for income from qualifying patents and Research and Development activities.

Under the current law, the income arising in the period that a patent was applied for but not yet granted is in essence not eligible for the 5% rate. Under the new law this will change in the sense that also income arising in the period before a patent is granted but the application for a patent is pending can qualify for the Innovation Box.

7. Relaxation requirement dividend statement (dividend withholding tax)

The current law requires that a dividend statement must be issued when a Dutch company distributes dividends. It is proposed to accept a dividend statement in digital form which can be electronically transmitted or made available through a website. 

Furthermore, no dividend statement has to be provided if  

1. the party entitled to the dividend has a substantial interest in the company which distributes the dividend;
2. dividend withholding tax is not withheld because an exemption is provided by the law (which includes the exemption for qualifying EU parent companies on       the basis of the EU Parent Subsidiary Directive) or by tax treaties

8. Abolishment obligatory representative for insurance tax for non-residents

Under the current law, foreign insurance companies (or other entities which are subject to the Dutch Insurance Tax) can be obliged to appoint a representative in The Netherlands which is charged with the filing and remittance of Insurance Tax. It is proposed to abolish this obligation.