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LOWTAX
ONSHORE
NETHERLANDS
INFORMATION: LOW-TAX AND INCENTIVE REGIMES
Although
the Netherlands has a sophisticated tax
system with high tax rates some aspects
of its fiscal system are extremely attractive
and make it the ideal location in which
to base international trading operations.
Attractive fiscal incentives are further
enhanced by a complex network of double
taxation treaties (few of which contain
any anti avoidance provisions) and by the
existence of a procedure of advance tax
rulings whereby the tax authorities who
are autonomous and approachable can at short
notice specify the fiscal consequences of
certain business structures provided that
material financial interests are involved
and the propositions are reasonable.
The
Dutch government announced in 2004 that
it would cut the country's corporate tax
rate to 31.5% in 2006 from 34.5%.
Presenting
the last budget prior to the election on
November 22, 2006, Holland's long-serving
Finance Minister Gerrit Zalm stated that
the government would continue to cut the
rate of corporate income tax, which fell
to 25.5% in 2007 from 29.1%. This represents
a 5% cut in corporate tax since 2005.
In
anticipation of confirmation of the Marks
& Spencer ruling on cross-border loss relief
by the European Court of Justice, the government
proposed to allow relief for losses incurred
in other EU Member States. In addition,
participation rules would be relaxed by
eliminating the nonportfolio and "subject
to tax" requirements. For "passive" participations,
a "sufficient" tax rate test (possibly 10%)
would be introduced.
Ruling
in December 2005, the ECJ stated that companies
could offset losses incurred by foreign
subsidiaries as long as there was no "real
possibility" that these could be absorbed
at the local level at the time the claim
was made.
According
to the ruling, M&S could therefore claim
tax relief for losses outside its home market,
with the proviso that loss-making subsidiaries
were unable to claim tax relief in their
country of establishment.
The
Dutch government included a series of tax
incentives in its 2010 Tax Plan, specifically
designed to make enterprise simpler and
therefore more attractive to entrepreneurs.
Key tax incentives
contained in the government’s 2010
Tax Plan include the following measures:
In the area of
research and development (R&D) the
"patents box" scheme will be
replaced by an "innovation box"
scheme for innovative entrepreneurs. As
a result, income derived from R&D
will only be taxed at a rate of 5%, and
the ceiling for the scheme will be removed.
In order to enable
entrepreneurs to increase their cash flow,
they will have the option of offsetting
losses incurred in 2009 and 2010 against
profits made in the three previous years.
The system of accelerated depreciation
will continue in 2010.
The profit exemption
for small and medium-size businesses is
to be increased by 1.5% to 12%. In addition,
entrepreneurs will no longer have to devote
a minimum period of time to their business
in order to qualify for the measure, enabling
individuals to carry on a business alongside
salaried employment.
In a bid to foster
business growth, the small-scale investment
tax credit (KIA) is to increase by 29%.
A number of tax
incentives designed to benefit directors
of a company in which they are also major
shareholders (DGAs) are contained in the
plan. These initiatives include extending
the measure granting exemption from income
tax to the transfer of a business by a
DGA to a co-entrepreneur and relaxing
customary pay arrangements.
The 2010 Tax Plan
also includes a number of separate legislative
proposals, designed to simplify certain
tax rules and reduce the administrative
and regulatory burden. The main simplifications
are as follows:
A new work-related
costs scheme will be introduced. An exemption
of 1.5% of the wage bill for tax purposes
is to replace a cumbersome system of numerous
tax-free allowances and benefits in kind
from employers.
From 2010, employers
will no longer be required to deduct social
insurance contributions and healthcare
insurance contributions from pay to employees
aged under 23 who earn less than the minimum
salary. From 2011, this will also apply
to the levying of wage withholding tax.
A standard definition
of wages for wage withholding tax, various
social insurance contributions and income-related
healthcare insurance contributions will
be introduced, representing a saving for
employers of around EUR380m.
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