In accordance with long-standing practice, 17 September 2019 marked the annual Dutch Budget Day (also known as or “Prince’s Day”). On this third Tuesday of September, the new operating year of the Dutch government was initiated. The Dutch Minister of Finance, Mr. Wiebe Hoekstra, offered his National Budget Plan for the year 2020 to the Members of Parliament.
Changes in the corporate income tax regime
In 2020, the high rate for corporate income tax will, contrary to earlier plans, stay the same. From 2021, the high rate will decrease, but by lesser amount than was previously envisaged. With the proceeds of this measure the Dutch Government aims to reduce costs for ordinary citizens.
For profits up to and including € 200.00 in 2019, the corporate income tax rate will be 19%, 16.5% in 2020 and 15% in 2021. The rates for profits amounts exceeding that threshold will be 25% in 2019 and 2020, and 21.7% in 2021.
Next, from 1 January 2020, for corporate income tax, no tax-interest will be charged when the enterpriser filed its application before the first day of the sixth month after the period over which tax will levied.
In addition the Government announced to take the following three measures for corporate income tax, which will be included in its Tax Plan for 2021.
1. Increase innovation-box tariff
Companies making profits with certain innovative activities have to pay less corporate income tax. The “rate” of this new innovation is now 7% whereas it will increase to 9% from 1 January 2021.
2. Liquidation- and discontinuance losses less deductible
Companies can make losses when a business activity abroad or a subsidiary ceases its operations. Nowadays they are allowed in many circumstances to deduct these losses from the profit they make in the Netherlands. This so-called liquidation- and discontinuance losses arrangement will be adjusted. The possibilities for companies to deduct these losses will be restricted.
3. No discount for one-off payments
Under certain conditions, companies can now receive a discount if they pay their entire amount of corporate income tax at once. This discount will disappear from 1 January 2021.
Companies making profits with certain innovative activities have to pay less corporate income tax. The “rate” of this new innovation is now 7% whereas it will increase to 9% from 1 January 2021.
Companies can make losses when a business activity abroad or a subsidiary ceases its operations. Nowadays they are allowed in many circumstances to deduct these losses from the profit they make in the Netherlands. This so-called liquidation- and discontinuance losses arrangement will be adjusted. The possibilities for companies to deduct these losses will be restricted.
Under certain conditions, companies can now receive a discount if they pay their entire amount of corporate income tax at once. This discount will disappear from 1 January 2021.
Companies making profits with certain innovative activities have to pay less corporate income tax. The “rate” of this new innovation is now 7% whereas it will increase to 9% from 1 January 2021.
Companies can make losses when a business activity abroad or a subsidiary ceases its operations. Nowadays they are allowed in many circumstances to deduct these losses from the profit they make in the Netherlands. This so-called liquidation- and discontinuance losses arrangement will be adjusted. The possibilities for companies to deduct these losses will be restricted.
Under certain conditions, companies can now receive a discount if they pay their entire amount of corporate income tax at once. This discount will disappear from 1 January 2021.
New measures on tax evasion and tax fraud
Some countries levy no or very little taxes. Yearly, some € 22 billion of interest and royalties make their way via the Netherlands to such countries. Oftentimes this happens by means of so-called mailbox firms. It’s possible that the funds involved will never be taxed. The Government proceeds against this with the introduction of a source tax on outgoing interest and royalties. The Netherlands has compiled a list of 21 countries with low taxes. Dutch companies that directly pay interest or royalties to companies seated in these countries will be obliged to pay source tax from the year 2021 and on. This will prevent mailbox firms to use the Netherlands for illicit transfer activities.
From 2020 fines for tax fraud imposed on accomplice service providers will be made public. In general it concerns tax advisors, but notaries and lawyers are not excluded. Information made public will visible on the website of the Dutch Tax Authority for 5 years.
With the tax amnesty arrangement, tax payers who have kept income undisclosed are allowed to nonetheless report this to the Dutch Tax Authority. In such case, no or a lesser fine will be imposed on them. In 2020 it remains possible to make use of the tax amnesty arrangement. However, a fine will be imposed when it concerns concealed income out of stocks or assets. From 2020, it will also no longer make any difference whether or not this income has been generated from abroad.
Incentives for innovative start-ups, small- and medium sized enterprises
The Government desires to have enough money in the Netherlands to finance to costs of higher expenditures to health care, education and social security. The Netherlands can achieve the economic growth necessary for this by designing production processes more intelligently and making use of the possibilities of digitalization. For example important technologies such as solar panels, artificial intelligence or biotechnology. In 2020, € 7.5 million will be allocated to these so-called key-technologies and for 2021 an amount of € 10 million has been reserved.
The Government also wants companies to be confident enough to invest in the development of new technologies. For example for big questions like the transition to sustainable sources of energy. Therefore the State has established Invest-NL. This Government-funded agency supports companies willing to do business internationally.
The Government wants starts-ups established in the Netherlands to able to develop in due course and have access to investments, skilled personnel, knowledge about research and international markets and clients. For this, € 65 million will be available from 2019 to 2023. A significant portion of this amount arrive at start-ups and scale-ups via through the TechLeap program.
In 2020, € 1.3 million will be available for the Digital Trust Center, through which the Government wants to support small- and medium sized enterprises to safely conduct digital business. And also to be resilient to hackers, data-leaks or online-crooks.
Lastly, from 2020, the Government will structurally allocate € 400 million for research. With these funds, companies are able to make use of the WBSO (Law for the Promotion of Exploration and Development Work) arrangement more often and more quickly. This investment in fundamental and applied research can help companies to create innovative products and thereby contribute to the Netherlands strong economic position.
Please, do not hesitate contacting us if you wish to discuss. Fill in the form. Our specialist will call you back asap.