Corporate income tax
Tax qualification policy for legal forms Act
The tax qualification process for foreign legal formswas always administered through a decree, but will be replaced by formal legislation known as the tax qualification policy for legal forms Act (in Dutch: "Wet fiscaal kwalificatiebeleid rechtsvormen"). Several substantive alterations are on the horizon, and this new legislation is to take effect from 1 January 2025.
For foreign legal forms that closely resemble Dutch entities, the qualification process will persist using the legal form comparison method. Additionally, two new methods will be introduced for foreign legal forms that are not comparable to Dutch entities: the 'symmetrical method' and the 'fixed method'.
The Act also eliminates the distinction between open (non-transparent) and closed (transparent) limited partnerships. All limited partnerships will be transparent in the future, indirectly addressing the goal of reducing hybrid mismatches in international contexts.
The transition from a non-transparent to a transparent limited partnership is considered a notional transfer and discontinuation. Therefore four transitional measures are put in place: (i) a roll-over facility, (ii) a stock merger facility merger facility, (iii) a roll-over facility in the case of taxable income from the provision of goods, and (iv) a payment deferral.
Please refer to our Tax News article for more information on this topic.
Strengthening the approach to dividend stripping
The term 'dividend stripping' encompasses both fraud (where dividend tax is reclaimed or offset twice) and tax planning (where dividend tax is reclaimed or offset by a party that, from an economic perspective, has no genuine interest in the dividend itself). While fraud is prohibited, the practice of tax planning is considered undesirable.
Hence, measures against dividend stripping are strengthened. Dividend tax allowances (such as set-off, refund, or reduction) already applied solely to dividend recipients who are the true beneficial owners of the dividend. The responsibility for proving this shifts to the dividend recipient. For dividend tax amounts up to EUR 1,000 per year, the burden of proof continues to rest with the tax inspector to maintain efficiency.
Additionally, the registration date in the Dividend Tax Collective Decree (in Dutch: "Verzamelbesluit Dividendbelasting") will be legally established for listed shares. For more detailed information on this topic, please refer to our Tax News article.
Expiration of dividend tax facility regarding repurchase of own shares
As of 2025, the facility in the Dutch dividend withholding tax that applies to the repurchase of own shares by listed companies will expire. The State Secretary of Finance, however, has promised to review this again in the spring of 2024. Please also read our Tax News article.
Pillar Two Implementation
The Minimum Taxation Act 2024, also referred to as Pillar Two, introduces a minimum effective tax rate of 15 per cent per jurisdiction for large international enterprises with annual turnovers exceeding EUR 750 million. Read more on this topic in our Tax News article.
Adjustments to FBI Regime
Starting from 1 January 2025, fiscal investment institutions (FBIs) are no longer allowed to directly invest in Dutch real estate. Unlike the internet consultation said, it remains possible for an FBI to engage in managing a real estate entity connected to the FBI. The so-called financing requirement remains unchanged; the financing with borrowed capital cannot exceed 60 per cent of the book value of the real estate. This rule continues to apply to financing, for example, direct investments in foreign real estate. For other investments, financing with borrowed capital is limited to a maximum of 20 per cent of the book value of those investments.Also, please refer to our Tax News article on this topic for more information.
Revised mutual fund transparency rules
Starting from 1 January 2025, there will be changes in the criteria for a mutual fund to be classified as an independent (non-transparent) mutual fund subject to corporate income tax. A fund qualifies as a mutual fund if it meets the following conditions:
- The fund can be categorized as an investment fund or a collective investment fund in securities, as defined in Article 1:1 of the Financial Supervision Act (Wft), and
- Transferable securities of participation exist within the fund.
A fund that does not meet these qualifications is considered fiscally transparent, and its assets are directly allocated to the investors and subject to personal income tax or corporate income tax.
Conditional withholding tax on dividends*
Following the introduction of the conditional withholding tax on interest and royalties on 1 January 2021, a similar withholding tax on dividends is in effect per 2024.
A conditional (or additional) withholding tax is levied on:
- Dividend payments to low-tax jurisdictions (in this case, jurisdictions with a statutory profit tax of below 9 per cent).
- Dividend payments to jurisdictions which are included in the EU list of non-cooperative countries.
- Dividend payments to hybrid entities and in the event of artificial arrangements which are intended to avoid Dutch withholding tax on dividends (in other words, situations of abuse).
Changes to the minimum capital rules
The minimum capital rules in the corporate income tax sphere (which only applies to banks and insurers) has an unequal effect with regard to the internal treasury activities. To rectify this imbalance, the minimum capital rule has changed. Interest charges on debts to group entities will, under specific conditions, no longer face deduction limitations. Simultaneously, the minimum capital rule percentage has been raised from 9 per cent to 10.6 per cent.
Fiscal Investment Facilities
The Energy Investment Allowance (EIA), the Environmental Investment Allowance (MIA) and the Arbitrary Depreciation of Environmental Investments (Vamil) have been extended by five years to 2029. Without this extension, these measures would cease to apply as of 1 January 2024. In addition, the deduction percentage of the EIA is structurally reduced from 45.5 per cent to 40 per cent.
Amendment to lucrative interest scheme following Dutch Supreme Court ruling
In certain instances the interests of managers in the company in which they work are regarded from a tax perspective as a so-called lucrative interest. A Supreme Court decisioncalled for a change in the law. The evaluation of a lucrative interest considers not only share premiums and informal capital but also takes into account (shareholders') loans that contribute to compensation for work performed. These loans would indeed be factored into the company's share capital for the application of the lucrative interest scheme. This amendment is retroactively effective as of 26 june 2023.
No abolition of corporate tax deduction for donations
The deduction for donations in corporate taxation was to be entirely eliminated, but is maintained after all. In addition, the full amount of a donation made by a corporation to a Public Benefit Organisation (ANBI) will no longer be considered to be a distribution to the substantial interest holder. As such, there is no requirement to withhold dividend tax.
Preventing the splitting of real estate companies for interest deduction
Despite not being part of the Tax Plan, an announced measure for the year 2025 aims to discourage the splitting of companies primarily involved in real estate. When a company is subdivided into several smaller entities, it becomes feasible to augment the deduction of interest under the earnings stripping measure, commonly referred to as the EBITDA measure. This facilitates a more frequent application of the 1 million euro threshold. The proposal suggests a complete exclusion of the 1 million euro threshold for real estate entities engaged in the rental of property to third parties.
