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Dutch Tax Plan for 2020 Approved — Orbitax Tax News & Alerts

The Dutch Ministry of Finance has announced that the Senate (upper house of parliament) approved the 2020 Tax Plan on 17 December 2019. As provided in an overview of the Major Tax Changes in 2020, some of the key changes from 1 January 2020 include:

  • A two-bracket individual income tax system for Box 1 income (employment and certain other income) is introduced for individuals subject to state social security contributions, including the following brackets/rates:
    • up to EUR 68,507 - 37.35%
    • over EUR 68,507 - 49.50%
  • The individual income tax rate for Box 2 income (income from a substantial interest) is increased to 26.25%;
  • The lower corporate tax rate on profits up to EUR 200,000 is reduced to 16.5%, while the upper rate for profits above EUR 200,000 is maintained at 25%;
  • The hybrid mismatch measures of ATAD2 are implemented to address double deduction and deduction without inclusion mismatches by denying a deduction or requiring an inclusion, depending on the type of mismatch;
  • An interest deduction limitation is introduced for banks and insurers (the so-called minimum capital rules), which limits the deduction of interest on loans received to the extent that the loan capital exceeds 92% of the balance sheet total;
  • The small business scheme for VAT is amended, including that small taxpayers with annual turnover of up to EUR 20,000 may opt to be exempt from charging VAT and from VAT administrative obligations, but are disallowed from deducting input VAT (the scheme may be used by both natural and legal persons); and
  • The VAT rate is reduced to 9% for electronically delivered books (e-books), newspapers, and magazines, as well as for downloadable audiobooks, sheet music, educational resources, and paid access to websites of newspapers, magazines, and other journalistic platforms.

Further to the above, the overview also includes that with effect from 1 January 2021, conditional withholding tax will be applied on interest and royalty payments to low-tax jurisdictions and in abusive situations, but only applies for payments in a group context. The withholding rate will be the general corporate rate. Although not mentioned in the overview, the rate is to be reduced to 21.7% in 2021 (lower rate reduced to 15.0%).

Lastly, the Senate has also reportedly approved the legislation for the implementation of Council Directive (EU) 2018/822 of 25 May 2018 (DAC6) on reportable cross-border tax planning arrangements. This includes that from 1 July 2020, intermediaries such as tax advisers, accountants, and financial institutions will be obliged to report cross-border arrangements that can be used to avoid tax. Taxpayers may also need to report in cases where there is no intermediary, or an intermediary is unable to report. An initial disclosure is also required by 31 August 2020 in respect of reportable arrangements during the period 25 June 2018 to 30 June 2020.

Additional details of the approved measures will be published once available.