Our predictions for Prinsjesdag (Budget Day)

The third Tuesday of September is traditionally the day the Dutch government announced its (tax) plans for the coming year. Soon, we will know what (tax) policies the Dutch cabinet has in store for 2021. Given current world affairs, we may be in for a surprise or two.

This is what we think we know:

– The corporate income tax bracket of 16,5% and 25% will go down to 15% and 21,7%. This will be controversial, as many voter uphold that people, not companies should be supported in these challenging times. However, so far the government maintains that flourishing companies are in the interest of people. The 15% rate will apply to the first 200K profit per calendar year, the 21,7% to what is more.

– The ‘innovation box’ tax rate of 7% will be raised to a still attractive 9%. The innovation box is a special tax rate meant to stimulate innovation in the Netherlands. Profits which can be related to R&D taking place in the Netherlands can be taxed at this special rated rather than at the normal tax rates discussed above.

 – Dutch companies, mainly Shell, have benefitted enormously, over the years, from the liquidation loss rule. This rule gave companies the opportunity to deduct foreign losses, whereas foreign profits would the same entity would not be taxed in the Netherlands. This rule is meant to stimulate foreign investment of Dutch companies. This rule will not disappear, but conditions regarding timing, location and shareholding percentage will be stricter.

– The limitations on deductibility of certain forms of intercompany interest will be expanded. Based on Dutch Supreme Court case law, this may become the case for so-called ‘perpetual securities’. The maximum of 30% of ebitda deductible interest in the earningsstripping rules may be lowered to 25%.

– Withholding taxes on royalty and interest payments to related entities in low-tax jurisdictions, or in abuse situations, will be introduced. Expected rate is 21,7%.

– Dutch companies now get a slight tax discount for paying their corporate tax upfront in stead of in instalments. This discount will disappear. On the other hand, tax interest will no longer be charged if a company files its corporate income tax return before the 1st of June (for regular book years).

– Companies which received the initial one-off covid hand-out of EUR 4.000, or later covid hand-outs up to EUR 50.000 do not need to include this in their taxable income.

Stay compliant in 2021, too. Reach out for more information.

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