On 1 January 2019, the new tax package came into force, including The Netherlands anti dividend stripping legislation. The latter is part of the EU Anti-Tax Avoidance Directive (ATAD 1) and, therefore, applies to all current EU member states.

Just over a year before, the Dutch Senate passed the 2019 tax package which was initially published by the Ministry of Finance with amendments on 15 October 2018. The tax package came into force on 1 January 2019 and comprises several alterations to the existing legislation surrounding Dutch corporate income tax:

Implementation of the EU Anti-Tax Avoidance Directive (ATAD 1), especially the Netherlands anti dividend stripping rule and controlled foreign company (CFC) laws;
A tapered lowering of the corporate income tax rate;
A reduction in the loss carry forward timescale and amendments to the laws concerning the depreciation of buildings.

The original proposals to put an end to the present dividend withholding tax and bring in a withholding tax on intercompany dividend distributions to low-tax jurisdictions and certain other circumstances, such as abusive situations were taken out.

Interest deduction limitation rules
Restrictions on interest deduction rules as called for by ATAD 1 were introduced as suggested in the initial proposal. The directive demands EU member states to launch an earnings stripping rule, under which excess (net) borrowing costs, such as currency exchange results and interest expenditure, will only be tax-deductible up to 30 percent of a taxpayer’s tax-based earnings before tax depreciation, interest, tax, and amortization (EBITDA). Any sum larger than this amount will be classed as nondeductible but may be carried forward to the next financial year, despite the fact that all interest is deductible up to the threshold of EUR 1 million (net). The Netherlands has formerly chosen to apply a EUR 1 million threshold, so that EUR 1 million of interest expense is always deductible, even if the amount is higher than the 30 percent threshold.

The 30 percent EBITDA rule comes into effect on the basis of a fiscal unity and no exception applies to groups. In 2020, a specific minimum capital rule will be introduced for financial institutions, such as insurance companies and banks.

Linked with the introduction of the earnings stripping rule, other rules were simultaneously abolished from 1 January 2019, in particular, the acquisition financing rule and the excessive participation financing rule.

Case study: interest deduction restrictions

My investor in USA is loaning me 100.000 USD for operating my business in Europe? Can I expense the interest payment pre-tax? What are the things to look out for? Any special considerations on interest rate?

With regard to interest deduction restrictions, a new regulation was introduced from 1 January 2019, the EBITDA rule. The EBITDA rule is a so-called generic interest deduction limit. This means that the EBITDA rule does not make a distinction between money borrowed from a third party (bank) or money borrowed from a group company (as is the case with another existing interest deduction limitation, the profit drainage rule is the case). The EBITDA rule limits the deduction of net interest in a financial year to the highest of:

1) 30% of income before deduction of interest, taxes, depreciation of assets and depreciation of loans / goodwill (tax EBITDA); and

2) EUR 1,000,000.

 Net interest is the interest costs and equivalent costs of the taxpayer minus the interest income and equivalent income. The amount not deductible in a year can be used in later years if there is room for that in that year. There is no time limit for the utilization of these losses.

 So if you have a loan of EUR. 100.000,- the interest will never be higher the EUR 1.000.000, so the interest will normally be deductible.

There could me other limitations for interest deductions, but for that it is important to know if your investor has shares in de Dutch BV (and if so which percentage%). Also, it can be important what you will do with the loan.

The Netherlands offers different type of foundations, the ANBI foundation is the foundation (Dutch: Stichting) most commonly used for non profit organisations. ANBI stands for: 'Algemeen Nut beogende instelling', an entity serving a general purpose.  Non profit organisations are also referred to as 'NGO' or Non Governmental Organisation.

What is an ANBI?

ANBI stands for algemeen nut beogende instelling, in English a charitable institution. But in The Netherlands not every charitable institution can call its self an ANBI. An institution can only be an ANBI if it is almost entirely committed to the public benefit (algemeen nut). Associations (such as sports, personnel, singing, harmony or drama associations) and hobby clubs are usually not ANBI.

The tax-inspector grants the ANBI-status to a charity if it applies for that status and the charity meets these requirements.

 Why an ANBI?

An ANBI fiscal advantages compared to charitable institution that does not possess that status. An ANBI has tax benefits, such as:

• An ANBI does not pay any inheritance tax or gift tax for inheritances and gifts that the institution uses for the public interest.
• If an ANBI makes donations in the public interest, the recipient does not have to pay gift tax.
• Donors of an ANBI may deduct their donations from income or corporation tax.
• In order to be eligible for the deduction of periodic gifts, the donor and the ANBI must record the gift in an agreement.
• An ANBI is eligible for a refund of energy tax.
• Volunteers who work for an ANBI make a donation to an ANBI under certain conditions.
• An extra donation deduction applies to donors of cultural ANBIs.

In short an ANBI is exempted from inheritance and gift taxes. Donors may deduct their donations to an ANBI from income or corporation tax. In order for an institution to get the status as an ANBI it needs to meet a number of conditions.

What conditions must an ANBI meet in general?

In order to be designated as an ANBI, the institution must meet all of the following conditions:

• The institution must be fully focused on the public benefit. This must be apparent from, among other things, the statutory objective and the intended activities.
• The institution must serve the public interest with almost all of its activities. This is the 90% requirement.
• The institution is not for profit with all of its activities that serve the public interest.
• The institution and the people directly involved with the institution meet the integrity requirements.
• No natural or legal person may dispose of the institution's assets as if they were its own assets. Directors and policymakers may not have a majority of control over the assets of the institution.
• The institution may not hold more capital than is reasonably necessary for the work of the institution. Therefore, equity must be limited.
• The remuneration for policymakers is limited to an expense allowances or attendance fees.
• The institution has an up-to-date policy plan.
• The institution has a reasonable ratio between management costs and expenditure.
• Money that remains after the institution has closed down is spent on an ANBI, or on a foreign institution that focuses for at least 90% on the public benefit.
• The institution complies with the administrative obligations.
• The institution publishes specific data on its own or joint website.

What conditions must an ANBI meet? in detail

• 90% requirement: In order to be designated as an ANBI, an institution must meet the 90% requirement. In addition, the activities that pursue the objective of the institution must serve a general interest almost entirely. An ANBI must spend at least 90% of its expenses usefully in general. In some cases, generally useful activities that did not cost money can also be included in this 90% test.
• No profit motive: An ANBI may not make a profit with all of its activities that serve the public interest. An ANBI must make a profit from commercial fundraising activities. The condition is that the profits benefit the main activities of the ANBI.
• Integrity requirements: An institution can only be an ANBI if the institution and the people directly involved with it meet the integrity requirements. If the tax inspector has reason to doubt the integrity of an institution or a person involved in it, he can ask for a Certificate of Good Conduct (VOG). If the VOG is not submitted, the institution will not receive the ANBI status or it will be withdrawn. The tax inspector no longer sees an institution as a public benefit institution if a director, a manager, or a person who determines the image of the institution has been convicted of a crime and:
• the crime was committed in the capacity of the person concerned
• the conviction took place less than 4 years ago
• the offense constitutes a serious breach of the legal order

A face-determining person is a person who is seen as a representative of the ANBI. He or she does not need to have legal ties to the institution, such as employment. Think, for example, of an ambassador of an institution.

• Control over the assets: A number of guidelines are attached to the management and spending of the assets of an ANBI. For example, a natural or legal person may not dispose of the institution's assets as if they were its own assets. Directors and policymakers may not have a majority of control over the assets of the institution. It is also not allowed for one of the board members to have a casting vote or veto. For example, if a board or policy-determining body consists of 3 persons with the same voting rights, then it satisfies the condition. It is recommended to record these subjects in the statutes of the institution.
• Limited equity: An ANBI may not hold more capital than is necessary for the activities of the institution. This is called the 'spending criterion'. An ANBI may, however, hold assets if there is:
• assets received as a bequest (through an inheritance) or a gift

The condition is that the deceased or donor has determined that the donated or bequeathed capital must be maintained, or that it has been determined that only the return from that capital is used to pursue the purpose of the ANBI. This is also referred to as 'stem power'. Often the donor or deceased stipulates in a will that the estate must retain its value due to inflation by means of an annual adjustment. The ANBI must take this into account when spending the available returns.

• capital arising from the purpose of the ANBI: For example, it concerns a nature reserve or place of worship to be maintained by an ANBI.

• capital that is needed as a means to realize the purpose of the ANBI

For example, the business premises or the wn storage facility for relief supplies.

• a reasonable capital necessary to ensure the continuity of the work
• Remuneration policy makers: The policymakers of an ANBI (for example members of the supervisory board) may only receive compensation for expenses incurred. Policymakers may also receive attendance fees that are not excessive. An example of attendance fees is a fee for preparing and attending meetings.
• Ratio between management costs and expenditure: The management costs of the ANBI must be in reasonable proportion to the expenditure. What is 'reasonable' depends (among other things) on the nature of the ANBI. For example, an institution that raises funds often has different costs than an institution that manages assets. Management costs are costs for the management of the institution, such as costs associated with conducting administrative management (eg costs for an accountant).
• Liquidation: It must be clear from the statutes of an ANBI that money that remains after the ANBI has been dissolved (positive liquidation balance) is fully spent on an ANBI. If the articles of association state that the positive liquidation balance will be spent 'as much as possible' on an ANBI or a foreign institution that focuses for at least 90% on the public benefit, the tax inspector will reject the application.
• Administrative obligations for an ANBI: An ANBI is obliged to keep an administration. This administration must at least show:
• which amounts have been paid per policymaker for expense allowances, attendance fees and other payments. This enables the tax inspector to assess whether the members of the policy-making body (such as members of the supervisory board) do not receive excessive expense allowances or attendance fees.
• what costs the institution has incurred: Consider, for example, the management costs of the institution. This allows us to assess whether there is a reasonable relationship between costs and expenditure.
• the nature and size of the institution's income and assets: In this way the tax inspector can assess the spending of the ANBI on the spending criterion.
• what the expenditures and expenditures of the institution are: In this way the tax inspector can assess the spending of the ANBI on the spending criterion.
• Policy plan: An ANBI must have an up-to-date policy plan. This plan provides insight into the way in which the ANBI wants to achieve its objective. The plan may be a multi-year policy plan, but it must in any case provide insight into the coming year.

It is mostly advised to publish the policy plan on the website of the ANBI. In this way one informs sympathizers and donors and one immediately complies with the publication obligation that applies to ANBIs. Publishing the policy plan is not mandatory. One does need to highlight a number of information from the policy plan on the website.

 Transparency of an ANBI via the internet

An ANBI is obliged to publish data on its own website, or on a joint website. Since January 1, 2021, large ANBIs are obliged to use standard forms for the publication of the data. Large ANBIs are:

• ANBIs that actively raise money or goods from third parties (fundraising institutions) and whose total income in the relevant financial year exceeds € 50,000.
• Non-fundraising ANBIs if the total expenses in the relevant financial year exceed € 100,000

If the  institution not a large ANBI, then one can use the standard form, but there is no obligation to do so. Usage of the standard form can be an easy way out.

If one chooses not use the form, the following information must published:

• the name of the institution
• the RSIN (Legal Entities and Partnerships Information Number) or the tax number
• the contact details of the institution
• a clear description of the objective of the ANBI
• the main points of the policy plan
• the function of the directors: such as: 'chairman', 'treasurer' and 'secretary'.
• the names of the directors
• the remuneration policy
• Publish the remuneration policy for the statutory board and the policymakers.
• an up-to-date report of the activities performed
• a financial statement must be published on the website. This has to be done within 6 months after the end of the financial year. The statement covers a balance, a statement of income and expenses and an explanation

Content of a policy plan of your ANBI?

The backbone of your ANBI is its policy plan. An ANBI is obliged to have a policy plan. One is also obliged to include and explain the following information in the policy plan:

• the institution's objective and activities to be performed
• the method of acquiring income
• the management and use of the institution's assets

The institution's objective and work to be performed:

Describe in the policy plan as specifically as possible what the institution wants to achieve, in the form of a clear objective.

In addition, indicate how you will implement the objective, such as which activities the institution carries out and will carry out in order to achieve the stated objective. An example could be providing emergency aid during disasters or establishing schools in developing countries.

Is your institution committed to the interests of a specific target group? Describe this target group as clearly as possible.

The method of acquiring income
Describe in the policy plan how your ANBI will raise income.

The management and use of the institution's assets
Finally, describe in the policy plan how the assets are managed. This differs per institution. Explain not only the management of the assets, but also the use of the collected funds and goods. If money is reserved for spending in future years, this must be explained in the policy plan.

Optional data

In addition to processing the aforementioned data, a policy plan is free of form. You are free to include further information in the policy plan that will increase your transparency towards sympathizers and donors, such as:

• the name the RSIN or tax number
• the postal or business address
• a phone number or email address
• possibly the number of the Chamber of Commerce
• possibly the details of the bank account
• board composition and the names of the directors and policymakers
• an overview of income, expenditure and assets your ANBI can add a forecast for the coming years.
• the remuneration policy for the board or the policymakers

(FAQ) ANBI Stichting

• What is the difference between an ANBI foundation and a regular foundation?
  The difference between an ANBI foundation and a regular foundation is the ANBI status. The ANBI status is an extra step that needs to be performed after forming the ANBI. The ANBI also has certain tax exemptions, but also certain restrictions that a regular foundation does not have.
• What are the benefits of an ANBI foundation?
  Donators to the foundation may receive tax exemptions for their donations. The ANBI foundation also has certain tax exemptions that stimulates the charitable aspect. There is no tax to pay on donations received, there is also no tax to pay on founders donating to the foundation.
• Can an ANBI foundation make profits?
  Yes it can, as long as the profits are used to fund it's main charitable cause.
• What can the ANBI spend funds on?
  In short: Anything that benefits the goal of the charitable cause. This can include fundraisers, promotions, giveaways and so forth. And all activities that are related to that.
  A foundation may involve other companies for assistance with it's services. Imagine the World Nature Fund hires an event planner company to plan a fundraiser, or a digital marketing company to fix their website.
• What are the restrictions of an ANBI foundation?
  In short: For obtaining the NGO status, the founders declare that the goal should not be to make the board members wealthy, or for board members to receive disproportionate amounts.
• May an ANBI foundation compensate board members?
  Yes, but there are limits to board member compensation. For preparing and filing a meeting, a board member can receive a maximum of €356. For larger NGO's there are different criteria.
• May an ANBI Foundation compensate it's staff and volunteers?
  Yes, volunteers may receive up to €170 per month or €1900 per year tax free.Above this amount the foundation would need to pay the salary through a payroll accountant and pay the employer taxes. The employee in this case has to include this in his income tax filings.
• Can an ANBI foundation pay out cost declarations to it's members?
  Yes, any declared costs (which has to be substantiated in the accounting with a proper document), may be paid out to members. There are no limits on such declarations. Of course the relevancy to the organisation and it's activities should be clear.