On 15 September 2020, the Dutch Budget for 2021 was presented, which includes the Tax Plan for 2021. Key points of the Tax Plan include the following, which are to generally apply from 1 January 2021, subject to approval:
Further to the above, the government is also planning to tighten interest deduction limitation rules, which includes the amendment of the interest deduction limitation rules for related party financing provided in Article 10a of the CTA with the addition of a provision to address cases where a positive result on a related party debt (e.g., a positive foreign exchange result) would provide an exemption from Dutch tax. This provides that to the extent the positive result on a related party debt exceeds the amount of interest expenses on that specific loan, such positive result is excluded from Article 10a and is therefore added to the taxable basis.
In addition to the Tax Plan, a bill has also been submitted to limit the liquidation and termination loss facility in respect of business activities outside the Netherlands. This includes that the facility will be amended from 2021 to provide that losses exceeding EUR 5 million will only be deductible if concerning a qualifying interest in an EU/EEA resident entity/establishment and the liquidation is completed within three years of ceasing activity.
Lastly, the conditional withholding tax on interest and royalties that has already been approved will be introduced from 1 January 2021. The withholding tax rate is equal to the higher corporate income tax rate of 25% and applies on payments to related parties in specified jurisdictions with a corporate tax rate of less than 9% and to countries listed by the EU as non-cooperative.
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