Dutch Report On Reforming Tax Rules For Multinationals Published
Ulrika Lomas, Tax-News.com, Brussels
01 May, 2020
On April 15, 2020, a government-commissioned report on the taxation of multinationals was submitted to the State Secretary of Finance recommending various changes to make the Dutch tax system fairer while maintaining the jurisdiction's tax competitiveness.
The report was commissioned at the request of the lower house of parliament, the House of Representatives, and carried out by the Advisory Committee on the Taxation of Multinationals. The Advisory Committee's brief was to investigate ways in which the Dutch corporate tax base can be strengthened, and international tax mismatches eliminated, while not compromising the jurisdiction's attractiveness as a location for corporate headquarters.
The report's recommendations, which the committee estimates will raise EUR600m (USD652m) in additional tax revenue, are grouped into three categories, referred to as basic, additional, and compensatory measures, as follows:
Limit the offsetting of losses from previous years to a maximum of 50 percent of taxable profit above EUR1m (USD1.1m), in combination with an unlimited loss carry forward period.
Limit the deduction of shareholder costs to a maximum percentage of taxable profit.
Investigate whether the deduction of royalties should be limited to a maximum percentage of taxable profit.
Limit the deduction of interest and shareholder costs (and possibly royalties) jointly up to a maximum percentage of taxable profit.
Make the existing CFC rules more effective.
Eliminate the arm's length principle where its application leads to a decrease in taxable profit in the Netherlands, provided there is no corresponding upward adjustment in the other jurisdiction.
Limit intra-group transfers of assets from foreign to Dutch related entities in cases where there has been insufficient taxation in the foreign jurisdiction.
Strengthen the earning stripping rules by reducing the deductibility of interest from 30 percent to 25 percent of EBITDA.
Limit the deduction of interest used to finance participations in foreign entities.
Extend the scope of the interest deduction limitation when equity is converted to debt to royalty and rental payments.
Limit the deductibility of all types of intra-group payments received in a low-tax jurisdiction.
Extend the existing CFC measure to cover active as well as passive income.
Introduce non-conditional withholding taxes on interest and royalties.
Introduce a national digital services tax.
Introduce tax measures to encourage companies to increase wages and employment.
Reduce the corporate tax rate.
Allow costs associated with the buying and selling of a participating interest to be deducted.
Reduce the preferential tax rate under the innovation box regime.
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