The Dutch government has decided to support a new policy on taxes proposed by Menno Snel, State Secretary of Finance and to take action with respect to the first priority on the agenda: stop tax evasion and avoidance.

For the coming years, the policy includes 5 priorities:

  1. to stop tax evasion and avoidance;
  2. to reduce the taxes on labour;
  3. to promote a competitive tax climate for real activities in the economy;
  4. to make the system for taxation greener,
  5. and more workable.

According to Snel these five priorities constitute a big step towards an improved tax system. He adds that the new system is still incomplete. This and the next government need to put continuous efforts in pursuing a more comprehensible, workable, fairer and simpler tax system in order to ensure unbiased taxation for businesses and individuals alike.

Stopping tax evasion and avoidance

The State Secretary’s policy to tackle tax evasion and avoidance includes two pillars: to promote integrity and transparency and to protect tax base.

Introducing a withholding tax system

In 2021 Holland plans to adopt a withholding tax system with respect to royalty and interest flows to jurisdictions with low taxes and cases of abusive arrangements for taxes. In this way, Holland will no longer be a channel to low-tax countries. Mr. Snel makes it clear that he aims to stop tax evasion and avoidance and to end the image of Holland as a state that facilitates tax avoidance by multinationals. The good investment climate is threatened by this impression.

Treaties

It is the government’s aim to provide Holland and its partners with efficient tools to counter tax avoidance. Therefore the government is adding more provisions than numerous other countries to stop abuse in its treaties for tax by virtue of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting. This action is aimed at preventing improper use of the extensive Dutch system of tax-related treaties.

Building on the European tax avoidance directives

Holland will adopt more stringent measures in the implementation of the two EU directives preventing tax avoidance (ATAD1 and ATAD2) than foreseen in these directives., e.g. no group exemption regarding the rule for earnings stripping. Furthermore, no stand-still clauses will be applied with respect to existing loans and the maximum threshold shall be decreased from 3M to 1M Euros.

Holland will introduce a rule for minimum capital for insurance companies and banks to promote more equivalent treatment of equity and debt for all sectors. This action is expected to result in a healthier economy and greater company stability.

Non-disclosure right and public announcement of fines

Transparency is very important in tackling tax evasion and avoidance. The general policy aims in this aspect are inherited by the previous government. Holland shall clarify the non-disclosure right for notaries and lawyers. Culpable negligence fines will be announced publicly so that these providers of financial services become more accountable in giving advice on planning taxes.

Financial market integrity

The Dutch government is preparing legislation for the creation of a registry for ultimate owners. The legislation regulating trust offices will become more stringent.

European initiatives for culture change

The Dutch government approves the proposals of the EC to increase transparency. The Commission has proposed a mandatory disclosure directive requiring financial intermediaries (lawyers, tax advisers, trust offices, notaries, etc.) to inform the authorities of possibly abusive cross-border schemes for tax planning. The legislation proposed regarding the reports of multinational enterprises for tax jurisdictions will show the extent of incompliance with tax obligations.

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