Did you know that the Netherlands is one of the five countries in Europe that fall within the world’s top fifteen corporate tax havens? And did you know that some of the 2020 changes to the corporate tax rates will make it an even more favourable location for companies? Let’s look at what the changes could mean for you and your business.
Changes in corporate tax rates as of 2020
The corporate tax rate on profits from € 200,000 will remain at 25% in 2020. In 2021 it will decrease to 21.7%. The low rate applied to profits up to € 200,000 will decrease further in 2020.
Tax rate adjustment
As of January 1, 2020, no corporate tax is charged on corporate income tax if an entrepreneur submits the return for the first day of the sixth month after the period over which the tax is levied (which is usually June 1) and the return filed is correct.
Announced corporate tax measures from 2021
The cabinet also plans to introduce three more measures for corporate tax. These measures will be included in the 2021 Tax Plan.
Increasing the ‘rate’ of the innovation box
If companies make a profit from certain innovative activities, they have to pay less corporate tax on this profit. The ‘rate’ of this innovation box is now 7%. This will increase to 9% from 1 January 2021.
Liquidation and strike losses less deductible
Businesses may incur losses if a business operation abroad or a subsidiary ceases. In many cases, they may now deduct these losses from the profit they make in the Netherlands. This so-called liquidation and strike loss scheme is being adjusted. The possibilities for companies to deduct these losses are limited.
No more discount if corporate tax is paid in one go
Companies can now receive a discount under certain conditions if they pay corporate tax in one go. This discount will disappear from 1 January 2021.
Other tax components of the National Climate Agreement are also incorporated in the 2020 Tax Plan. These comprise a rise in tax on fossil fuels such as natural gas but lower taxes on electricity. Moreover, the majority of companies will be subject to a rise in renewable energy surcharge, while private households will enjoy a reduction in this surcharge. Additionally, the time-limited exemption from vehicle purchase tax for electric vehicles, which expires in 2021, is now to stay in place until 2025. However, the private use of electric company vehicle tax will gradually rise from four to eight percent.
Not only has the tax office changed certain regulations. The Dutch companies have changed as well in tax reporting requirements.
Dutch companies have never been more transparent in tax matters
Major steps have been taken by Dutch companies in the past five years to improve transparency and reporting on such a complex and controversial subject as taxes.
According to PwC’s Bob van der Made, the report clearly shows that Dutch companies have never been more transparent in tax matters than they are now. The companies scored an average of 43 percent on the six good tax governance principles and Oikos. This is considerably higher than the measured 25 percent in 2015.
Van der Made said that the Tax Transparency Benchmark has ‘undeniably contributed to this result since 2015 through the balanced and objective approach of this annual survey. The ranking has even now been considered by the management of some companies as a useful, annually recurring benchmark for where they stand with regard to tax transparency, sustainability strategy, socially responsible behaviour and tax governance.’
There is a clear need to catch up on country-by-country reporting and third-party tax assurance. In its final verdict, the jury also emphasized that most Dutch companies can still make significant improvements in the country-by-country reporting components (making it clear that the business activities correspond to the tax payments in the relevant countries) and third-party tax assurance. (This involves having the internal processes and implementation of the tax strategy checked by an accountant so that an independent party can supervise it).
According to Van der Made, the report made it clear that country-by-country reporting and third-party tax assurance are not self-evident for most companies. He also drew attention to the special recommendations in the report for various stakeholders, namely: policymakers, politicians and tax authorities, NGOs, tax advisors, investors and universities.