Amendments Dutch Corporate Income Tax Act
The Dutch tax package for 2017 has been publicly announced on September 20th, 2016. If accepted by Dutch parliament the tax package will amend the following sections of the Dutch Corporate Income Tax Act:
- Corporate income tax rate
- Dutch innovation box
- Interest deduction limitation
Corporate income tax rate
Currently the first bracket for the corporate income tax is 20% up to a taxable amount of €200.000. The first bracket will be extended till €250.000 in 2018, €300.000 in 2020 and €350.000 in 2021.
Dutch innovation box
The Netherlands will amend the innovation box to be in compliance with the OECD BEPS project outcomes on the innovation box regime.
The research and development cost made in the Netherlands will be important to determine which part of the profit will be eligible for the Dutch innovation box. Research and development cost consisting of payments to group companies will not qualify for the Dutch innovation box.
Taxpayers with a consolidated group revenue of more then 50 million per year or a consolidated revenue out of intellectual property of more then 7.5 million per year can only apply for the Dutch innovation box with an S&O decree together with a patent for their intangible asset or a exclusive license to use a patent.
Interest deduction limitation
The Dutch tax package feature two amendments to the existing interest deduction limitation rules. The interest deduction limitation for acquisition holdings is amended. Interest deduction is denied for the part which exceeds 60% of the acquisition price. The percentage drops to 25% with 5% per year. This could easily be avoided by transferring the ownership of the acquired company to a group company. Effectively resetting the reduction percentage to 60% again. In the new legislation the reduction percentage will not be reset to 60%.
The second amendment introduces the term cooperating group to the interest deduction limitation rule in case of loans from group companies related to dividend or capital distribution. The term group company is defined as a company in which the taxpayer holds 33% of the shares, the company holds 33% of the shares of the taxpayer or a company in which another holds 33% of the shares and also holds 33% of the shares of the taxpayer. With the amendment interest deduction will also be limited if the taxpayers take out a loan from a company part of a cooperating group. A cooperating group for example could be a group of investors which work together to acquire a company.