On Tuesday September 21, 2021, the Dutch Secretaries of State for Finance published the 2022 Tax Plan and associated tax legislative proposals. This news flash deals with the proposals that we consider to be the most relevant for (international) companies.
Dutch withholding tax credit on dividends (Sofina)
In principle, the Dutch corporate tax rules provide for a full credit of the Dutch withholding tax on dividends. Dutch taxpayers can credit the full withholding tax on Dutch dividends withheld to their account against their Dutch corporate income tax. If the withholding tax exceeds the Dutch corporation tax payable, which is the case when the taxpayer is in a loss situation, the Dutch withholding tax on dividends will be effectively refunded.
Such redemption procedures are not available to foreign shareholders with regard to the Dutch withholding tax on dividends paid to such shareholders. This different treatment may not be in accordance with EU law (CJEC Sofina C-575/17).
At present, a decree is in place and is issued by the Dutch Secretaries of State for Finance setting out the conditions for non-resident shareholders to also be eligible for a refund of the Dutch withholding tax on dividends in a similar situation in order to eliminate this different treatment. With the introduction of this decree last year, an extension of the possibilities for reimbursement has been offered while the measures proposed in the 2022 tax plan will limit the possibilities for (full) reimbursement.
Based on the main rule of the proposed measures, a credit or refund of Dutch withholding tax on dividends will be maximized to the amount of Dutch corporation tax due in that financial year. If the Dutch corporation tax payable for the year in question is less, or zero in the event of a loss, than the amount of tax withheld on the dividends, the excess cannot be credited. Any non-creditable withholding tax on dividends can be carried forward indefinitely to future years to be deducted from a future Dutch corporation tax. It is proposed that this measure will take effect on January 1, 2022.
Increased percentages of AIM
In the 2022 tax bill, it is proposed to increase the percentages of the environmental investment allowance (MIA) to 27%, 36% and 45% (the 2021 percentages are: 13.5%; 27%; and 36% respectively). It is proposed that the increased MIA percentages take effect from January 1, 2022.
Detention of repair and loss of funding
In the covering letter of the tax invoices, it is announced that the consequences of a recent decision of the Dutch Supreme Court (HR 11 June 2021, BNB 2021/116) will be remedied. This Dutch Supreme Court ruling allows companies to offset alleged holding and funding losses with the profitable activities of a newly incorporated subsidiary which is included in the same tax unit for Dutch corporate tax purposes. This repair will be included in a letter of amendment to the legislative proposal ‘Maatregelen 2022 tax emergency‘.
ATAD II – reverse hybrid mismatch rules
With effect from January 1, 2020, ATAD II is implemented in Dutch tax legislation containing measures to combat tax benefits resulting from hybrid asymmetries. The Netherlands opted to postpone the application of the “reverse hybrid device rules” until January 1, 2022. As expected, a legislative proposal containing the reverse hybrid device rules was published at the same time as tax plan 2022. Based on the reverse hybrid asymmetry rules, Dutch entities considered to be fiscally transparent for Dutch tax purposes may become subject in the Netherlands to Dutch corporation tax, withholding Dutch withholding tax on dividends and conditional 2021 withholding tax.
The entities that will come within the scope of the rules on reverse hybrid arrangements will generally be partnerships that are considered fiscally transparent for tax purposes in the jurisdiction in which they are incorporated or established and are considered opaque for tax purposes. in the jurisdiction in which an affiliate participating in that entity is established. A well-known example of such an entity is the Dutch limited partnership (CV) in a structure known as CV / BV.
Based on the main rule of the proposed measures, these partnerships (tax transparent) may become subject in the Netherlands to Dutch corporation tax, Dutch withholding tax on dividends and withholding tax. at source conditional from 2021. To the extent that the profits of the reverse hybrid entity are distributed directly to the participants in a jurisdiction which considers that this entity is fiscally transparent, a deduction option will be provided so that this part of the profits of the he reverse hybrid entity is not effectively taxed in the Netherlands (subject to conditions). This measure is proposed to take effect on January 1, 2022.
Transfer pricing mismatch
Under the proposed new rules on transfer pricing mismatches, the arm’s length principle will not be applied if it results in a downward adjustment in taxable profit in the Netherlands and there is no upward adjustment corresponding to the level of the affiliated entity.
The legislative proposal also addresses transfer pricing asymmetries associated with the transfer of an asset between affiliated entities. A taxpayer who acquires an asset from an affiliated entity may under the proposed measure no longer depreciate that asset for Dutch tax purposes on the basis of fair market value, but the Dutch taxpayer is required to take into account the Lower agreed consideration for depreciation purposes to the extent that this lower consideration, instead of the higher fair market value, is also taken into account at the seller level (i.e.
For situations in which a taxpayer acquired a business asset from an affiliated entity between July 1, 2019 and before January 1, 2022 that can still be depreciated during a fiscal year beginning on or after January 1, 2022, a new limit amortization is offered (subject to conditions).
The objective of the measures is to neutralize transfer pricing asymmetries and to avoid situations of double non-taxation (i.e. deductions without direct debit or double deductions). The proposed measure is expected to enter into force on January 1, 2022.
Under current legislation, the grant or acquisition of stock option rights is not subject to Dutch payroll tax. A taxable event for Dutch payroll tax purposes occurs for the first time when stock option rights are actually exercised or sold. The taxable value to be taken into account for Dutch payroll tax purposes is equal to the difference (or “spread”) between the fair market value of the shares acquired at the date of exercise, or the consideration received for the sale options, and the exercise price to be paid for the acquisition of said shares. However, this taxable moment has led to cash flow problems in the event that this payroll tax is borne by the option holder, since the exercise of the options does not have the effect that the (former) option holder receives sums enabling him to compensate the employer for the payroll tax due at the time of the exercise of a stock option right. This is especially true if the (former) option holder also does not have the opportunity to sell the resulting shares. These cash flow issues made it less attractive to use stock option rights as a salary.
With the measure included in the 2022 Tax Plan, as a general principle, the time of taxation is shifted from the time of exercise of options to the time when the shares obtained during the exercise of option rights on shares become negotiable. At that time, part of the shares can be sold if necessary to obtain funds to pay the tax due. However, since cash flow problems do not apply in all cases, the legislative proposal also provides for an electoral system for the employee. Under conditions and at the choice of the employee, the taxable moment remains the moment of the exercise, as is currently the case. The main advancement of this earlier draw-off time is that any increase in the value of the underlying shares between the time of exercise and the time those shares become tradable is not included in the assessed value for tax purposes. Dutch payroll tax.
Other changes in payroll tax
The Dutch law on payroll tax provides for specific exemptions. If an allowance falls within the scope of a specific exemption, the value of this allowance must not be deducted from the discretionary (fixed) amount that an employer can grant tax-free to its employees (subject to conditions). In response to changes in Covid-19 in terms of teleworking, a proposal to introduce a specific exemption for teleworking is included in the 2022 Tax Plan. In accordance with this proposal, an amount of 2 euros may be made available to the employee tax free per day that the employee works from home.
The 2022 tax plan also includes a proposal to increase the discretionary amount (in Dutch: vrije ruimte) for the calendar year 2021. The discretionary amount applicable for the calendar year 2021 will be, contrary to the current Article 31a (3) of the Dutch Law on Payroll Tax, calculated as 3% of – in short – the payroll up to and including 400,000 euros plus 1.18% of the salary balance. The proposed provision will apply retroactively from January 1, 2021.
Energy tax changes
The 2022 Tax Plan also includes a proposal that the supply of electricity to an energy storage facility is not treated as a taxable supply for energy tax purposes (subject to conditions). This prevents the energy tax from being levied twice in the chain. Under current legislation, the energy tax can be levied twice: (i) once when supplying the energy storage facility and (ii) a second time when electricity ( after storage) is supplied from this energy storage facility to a user. If the 2022 Tax Plan proposal is implemented, the first supply should – under certain conditions – not be considered as a taxable event within the meaning of the energy tax.
Over the next few months, the 2022 tax plan will be discussed in both chambers of the Dutch parliament. This means that the proposed measures are subject to change. We will keep you informed of any relevant changes.