Budget Day, September 21, 2021 (Prinsjesdag), the Dutch Ministry of Finance presented its 2022 tax plan. For the bills proposed in this plan to take effect, they must first be approved by Parliament. If approved later this year, many of the proposed measures will take effect on January 1, 2022. This GT Alert describes the key tax measures presented, as well as a number of other proposals that will take effect on January 1, 2022. .

Currently, the Dutch government has custodial status, which means it should limit its work to decisions that are not controversial in the political landscape. As a result, the tax plan is narrower than in previous years, and some (controversial) decisions will be delayed until a new government is in place.

CORPORATION TAX

Tax rates

Dutch corporation tax (CIT) operates a two-tier system. The first tranche currently taxes profits up to € 245,000 at 15%. The second tranche taxes excess profits at the rate of 25%. The first tranche is increased and will apply to taxable profits up to € 395,000 from January 1, 2022.

Adjustment of loss relief for corporate tax purposes

Currently, CIT losses can be carried back for one year and carried forward for six years. From January 1, 2022, corporate tax losses can be carried forward indefinitely. The one-year deferral period will be maintained.

However, a loss can then be set off against the taxable profit for a year only up to the amount of 1 million euros plus 50% of the taxable profit, insofar as it exceeds 1 million euros. This restriction applies to both future and past tax deductions.

These changes will come into force on January 1, 2022 and will then apply to corporate income tax losses for fiscal years beginning on or after January 1, 2013.

This measure was included in the 2021 tax plan.

Deductibility of withholding taxes

From January 1, 2022, compensation for withholding tax (GST) and the gambling tax levied on the prices of the games (withholding at national source) in respect of the CIT will be limited. Entities established in the Netherlands which are liable for corporate tax can fully deduct withholding taxes from the amount of corporate tax due. As a result, entities established in the Netherlands which are at a loss in a year and therefore do not owe a CIT can fully recover any DWT and / or gambling tax withheld in that year. Entities established abroad that are not subject to income tax, but otherwise in a similar (loss) situation to entities established in the Netherlands, do not have this option. They therefore cannot recover the DWT and the gambling tax withheld in the Netherlands via the CIT. This difference in treatment between taxable entities established in the Netherlands and foreign entities that are not subject to Dutch CIT may not be justified in view of a recent court ruling by the Court of Justice of the Union. European (the so-called sofina judgment, number C-575/17).

The proposal specifies that the credit of withholding taxes is limited to the CIT due in a year. Withholding taxes that have not been paid can be carried over to a later year. This proposal would come into force on January 1, 2022.

Address mismatches in the application of the arm’s length principle

In order to eliminate the asymmetries resulting from the application of the Dutch arm’s length principle, it has been proposed that a downward adjustment of profits for tax purposes in accordance with the arm’s length principle could not be taken into account in the Netherlands. Low only insofar as it is compensated by an upward adjustment corresponding to the level of the other (foreign) party which is liable for a CIT. A similar mechanism applies if an asset is acquired from an affiliated entity. If its value is greater than the agreed or imposed transfer price, this higher value can only be capitalized to the extent that a corresponding upward adjustment is involved in a tax on profits at the other party.

The rule will also apply to assets acquired during the five-year period preceding the financial year beginning on or after January 1, 2022, the proposed effective date. In this case, the depreciation made from the 2022 financial year will be calculated as if the new rule was already in force at the time of the acquisition. However, the initial value and previous depreciations are not affected.

Reverse hybrid entities

Following the European anti-tax avoidance directive 2 (ATAD2), the tax liability measure for reverse hybrid entities will be implemented as of January 1, 2022. This tax liability measure will take the form of subjective tax liability for Dutch partnerships and entities incorporated under foreign law which are considered a reverse hybrid entity.

A reverse hybrid entity is a partnership entered into under Dutch law or a partnership established in the Netherlands which is considered transparent for tax purposes in the Netherlands, where at least 50% of the voting rights, capital interest or rights to profits are held by an entity affiliated with that partnership and which is established in a State which considers that the entity is not transparent.

If the entity falls within the scope of the measure, it becomes taxable and must independently calculate its profits and file income tax returns. A withholding obligation may also arise for DWT and withholding tax on interest and royalties.

Environmental investment allowance

As of January 1, 2022, the proposal would increase the support percentages of the environmental investment allocation (Middle-investeringsaftrek, MIA) from 13.5%, 27% and 36% (2021 rate) to 27%, 36% and 45%, respectively.

SALARY TAX

Employee stock options

Currently, the taxation of employee stock options occurs when stock options are exercised, while vested stock often cannot be sold at that time. It is proposed that employees can choose when they will be taxed for employee stock options. If the shares are not yet tradable, the employee can choose to be taxed when they can trade the shares or when the employee exercises the options.

The benefit of the option is taxed no later than five years after the acquisition of the shares (for listed companies) or five years after the IPO of a company. The planned effective date is January 1, 2022.

Professional expenditure regime (werkkostenregeling)

With the work-related expenses scheme, an employer can provide its employees with certain remuneration exempt from payroll tax. Due to COVID-19, the higher fixed exemption that was introduced retroactively in 2020 has been extended.

Fixed exemption

2020

2021

2022

Salary amount ≤ 400,000

3%

3%

3%

Salary> 400,000

1.2%

1.18%

1.18%

Specific exemption for the reimbursement of home office expenses

The proposal would introduce a targeted exemption in the professional expenditure regime for allowances and benefits in kind related to employees working at home. This would allow employers to reimburse their staff tax-free for costs associated with working from home, such as gas, water, lighting and food. This is a lump sum exemption of up to € 2 per day worked at home.

INCOME TAX

Box I

Tax rate

Taxable amount

2021

2022

37.10%

37.07%

> 68.508 €

49.5%

49.5%

Decrease in effective tax deduction

For a large number of tax deductions in box I, the tax deduction will not be deductible from the higher rate of 49.5%, but from a lower rate which is gradually reduced.

Tax deduction

2021

43%

2022

40%

2023

37.05%

This applies, among others:

  • Mortgage interest deduction (hypotheekrenteaftrek);

  • Contractor allowance (ondernemersaftrek);

  • SME profit exemption (MKB-winstvrijstelling);

  • The exemption from the provision of assets regime (terbeschikkingstellingregeling);

  • Personal tax credit (partner’s alimony, health costs, education costs, deductible donations, losses on venture capital investments).

* This GT Alert is limited to non-US matters and laws.

© 2021 Greenberg Traurig, LLP. All rights reserved. Revue nationale de droit, volume XI, number 264


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