Dutch students in Singapore - Association of Dutch Businessmen

Know your tax
Upcoming changes in Dutch tax law?
By Pieter de Ridder and Nicolien Luijsterburg / Loyens & Loeff, tax advisers, Singapore
In a recent article published in Dutch tax literature 1 ,
three Dutch professors made recommendations to
improve the structure of the Dutch 1969 Corporate
Income Tax Act (“CITA”) and the Dutch investment
climate. The article was published in a weekly tax
law journal and the recommendations were made
in the form of a ‘legislative proposal’, discussing
the different new articles of a bill that would be
required to amend the CITA and related laws.
Publication of the article attracted a great
deal of attention from the national media to the
content of the recommendations, which give the
impression that the recommendations are being
supported by the Dutch Ministry of Finance (the
“Ministry”).
The recommendations do not have the same
implications as a formal legislative proposal
or a draft bill. Besides, it is not yet even clear
whether the Ministry will support any of these
recommendations. Nevertheless, for those
interested, please be informed about the main
aspects of the mentioned recommendations.
The recommendations made can be summarized
as follows:
• ‘Defiscalisation’ of group related interest,
which implies no taxation on interest received
from group entities and no deductibility of
interest paid to group entities.
• Renewed implementation of
restrictions on deductibility
of interest (and costs) on
liabilities to third parties
to the extent that these
liabilities are connected
with participations in
related entities. This
restriction of deductibility
of interest will only apply
in the case of a shortage
of equity (which exists,
basically, if the average
equity of the taxpayer is
less than the average value
of the participations it has
in related entities).
• Simplification of the rules
for the participation
exemption. The exemption
will, in principle, apply
to participations of at
least 5%; the rules for low
taxed passive subsidiaries
(as introduced in 2007,
resulting in a credit instead of an exemption)
will be abolished.
• Reduction of the general corporate income tax
rate from 25.5% to 20%.
• Abolition of the Dutch Dividend Tax Act 1965
(based on which, currently, 15% dividend
withholding tax is levied).
If the Ministry is to support any of the
aforementioned recommendations we shall
certainly keep you informed.
1
Weekblad voor fiscaal recht dated 28 August 2008,
page 891 et seq.
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Vol.18 • No. 9 • November 2008