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Netherlands Announces Tax Plan

The Dutch Government has announced that it is to take steps to simplify aspects of the tax regime and the administration of taxes.

Under the new tax plan, announced by the Finance Ministry on September 20, small- and medium-sized businesses and most individuals will receive a tax cut, certain tax procedures will be simplified, and the Dutch dividend tax regime will also be amended. However, the Government also intends to continue tackling tax avoidance and evasion.

According to the plan, companies will benefit from an extension of the 20 percent lower corporate tax bracket, although no further detail was provided in the announcement. The lower rate currently applies to annual income up to €200,000 ($223,500), with the excess taxable at the main rate of 25 percent.

The proposed dividend tax changes are designed to align the dividend tax treatment of holding cooperatives, which are frequently used in international holding company structures, with that of private companies (BVs) and public companies (NVs).

Under existing rules, holding cooperatives are generally not subject to dividend tax in the Netherlands, unlike BVs and NVs. The Government intends to abolish this difference but at the same time exempt distributions from dividend tax in cases where shareholders in a holding cooperative, BV or NV, reside in a jurisdiction with a tax treaty with the Netherlands, subject to a minimum five percent holding threshold. These changes are expected to be introduced on January 1, 2018.

With regards to personal income tax, the Ministry said that "the elderly and the young, one- and two-income households, families and single persons will on the whole be better off in 2017."

The Government also wants to standardize repayment arrangements for those owing back taxes to "end the confusing practice of making different kinds of payment arrangements with people who owe money to the Tax and Customs Administration."

In a letter to the Dutch parliament, State Secretary for Finance Eric Wiebes said that the Government "intends to ensure the Netherlands remains an attractive business location in the future."

"Every Tax Plan has to put forward new proposals to make the system simpler," said Wiebes. "It's a must. We have to make the system more straightforward."

However, the Finance Ministry said that under the plan, the Government "will continue to vigorously tackle tax avoidance."

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