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Proposed changes to Dutch corporate income tax, including the group interest box

Netherlands

The Dutch State Secretary of Finance has sent a much delayed letter to Dutch Parliament on the intended changes to the treatment of interest. As expected he announced that he will not yet submit a proposal to Parliament.. The group interest box would have been a beneficial and innovative regime for group financing activities of multinationals. Our Netherlands member, VMW Taxand, discuss in detail the intended changes and how these will affect multinationals.

The Dutch State Secretary of Finance also announced that he intends to (re)introduce a specific anti-abuse measure with regard to interest deduction in acquisition structures. What was unexpected is the fact that he announced he is considering changing the rules on the treatment of foreign permanent establishements. The proposed changes will at the earliest be introduced as of 1 January 2011 and may be changed before being approved by Dutch Parliament. Taxand Netherlands' latest newsletter investigates the following in more depth and how these changes will affect corporates.

  • Group interest box
  • Interest deductions
  • Treatment of permanent establishments

Taxand's Take


The group interest box would have been a beneficial and innovative regime for group financing activities of multinationals. Unfortunately the regime has a number of disadvantages and will not (yet) be introduced. Existing group financing regimes in, for example, Belgium, Switzerland and Luxembourg will become even more attractive for Dutch and foreign multinationals. The current Dutch system however does allow for a number of specific planning structures such as hybrid loans which in specific circumstances can be as benefitical or even more beneficial than regimes in the aforementioned countries.

The proposed restriction on interest deductions can have a significant impact on current and future acquisition structures. Unfortunately details are not yet available for example grandfathering rules for existing structures.

The proposed change to the treatment of permanent establishments is a surprise and its impact not yet clear. The letter from the Dutch State Secretary of Finance does not provide much detail. In future months this proposed measure will be discussed much more.

The proposed measures will at the earliest be introduced as of 1 January 2011 but will be further discussed and changes are to be expected. The conclusions of the commission currently studying more thorough changes to the Dutch corporate income tax system will also need to be considered.

Your Taxand contact for further queries is:
Marc Sanders
T. +31 20 757 09 05
E. marc.sanders@vmwtaxand.nl

Download VMW Taxand's latest newsletter on the proposed changes to Dutch corporate income tax:

Taxand's Take Author