September 19, 2018

Following a more than a century’s tradition, on September 18, 2018 the regular events due on the so-called Budget day (also known as Prinsjesdag, or “Prince’s Day”), always held on the third Tuesday in September, took place. On this day the government announces its affirmed tax plan for the coming year in the presence of the King of the Netherlands. Following the Speech of the King from the Throne, the parliamentary year is officially declared opened thereafter.

The Dutch economy is currently on its rise, growing faster than anywhere in Europe, expected to grow by 2,6% next year, which is slightly lower than this year and the year before. 2019 is expected to be the sixth consecutive year of economic growth for the Netherlands.

The government is planning to invest extra funds into education, defense, security and infrastructure.

Hereby we would like to draw your attention to the first insights on the most internationally relevant decisions brought forward yesterday by the current government.

Dividend tax

It was declared that the Netherlands are planning to fully abolish taxation of dividends since 2020.

In April 2018 there already were significant changes introduced in this area, of which we have informed you earlier in one of our news briefs. The Netherlands are no longer withholding dividend tax in case the dividends are being distributed to a company located in jurisdiction possessing a DTT (double tax treaty) with the Netherlands and, most importantly, complying with a number of criteria on substance.

The situation, however, should not change for structures with holding entities located in offshore jurisdictions or low-tax jurisdictions, with dividend withholding tax still being applicable.

In addition to that, it will be introduced with regards to payment of interest and royalties.

Corporate income tax

A widely discussed positive change, that is expected to have a great impact on the development of the Netherlands as an attractive jurisdiction from an international business point of view, is the decision to decrease the corporate income tax rate of 25% on the amounts above the first 200k Euro (taxed at a rate of 20%) within the few coming years in several steps up until 22,24%.

It was predicted though to drop down to 21%, the limited decrease being explained by the cost of dividend tax abolishment to the Dutch budget (estimated as 1.9 billion Euros according to the current insights).

Including of a CFC (controlled foreign companies) rule into domestic legislation

The Secretary of Finance announced earlier that the Netherlands would be willing to implement a CFC rule starting from January 01, 2019, based on the Model suggested by ATAD, with some deviations, with these plans coming into realization now.

The Netherlands are continuously evaluated as a highly attractive jurisdiction for doing business from an international perspective. New decisions to be implemented soon, would strengthen the positions of the country and make it even more welcoming.