CROP Tax Lawyers -International Tax Newsletter January 2011

1. January 2011
International Dutch Tax News
On December 21, 2010, the tax plan for 2011 was
Highlights: approved by Parliament. This tax plan consists of
two parts: on the one hand the tax plan and on the
- Changes enacted for 2011 other hand the remaining tax measures for 2011.
The Dutch parliament approved the tax plan
The tax plan contains several themes, the most
and other tax measures that are enacted per
important ones being:
January 1, 2011. We have outlined the
headlines of changes. The main changes
- Combating tax avoidance via structures;
regard:
- (Innovative) entrepreneurship;
- Combat against tax avoidance - Measures to temporarily support the
New legislation has been enacted to combat housing market;
tax avoidance through complex and artificial - Environmental and mobility measures.
tax structures.
- Entrepeneurship Below we shall describe the measures that regard
these themes.
Several changes have been enacted to
enhance the tax climate for entrepeneurs.
Combat against tax avoidance via
- Temporary support of the structures
housing market
In order to support the housing market, New legislation has entered into force to combat tax
several changes have been enacted. avoidance through complex and artificial tax
structures. First measure in this respect is the
- Additional legislation measure to combat the trade in companies that
Legislation on a range of topics has been have tax losses available that can be used for loss-
enacted. We have summarized some of the relief. This measure also is directed against the
main changes. situation where a previously profitable empty
- Prospects for 2011 company was bought and loss-making activities are
During the year 2011 changes may be subsequently shifted to that company. Under the
proposed to reform the Dutch tax system. anti-avoidance measures, losses incurred before
the acquisition of the company cannot be used to
credit against subsequent profits. Also, losses
incurred after the acquisition of the company cannot
Best wishes for 2011! be credited against profits made before the
company was acquired. If the holding in a company
First of all we would like to wish you all the best for
is changed by 30% or more, losses realized can
the year 2011. We hope that 2011 will bring you
lots of opportunities. only be compensated if certain requirements are
met, based on article 20a CITA. Losses realized
Tax plan 2011 during the year in which the interest is substantially
changed will be attributed to the preceding or
In our September 2010 issue of this newsletter we subsequent book year.
already informed you briefly on the headlines of the
Budget 2011. In this edition we will provide you with A second measure that is enacted is that the real
more details on the legislation that was enacted per estate transfer tax law on the transfer of immovable
January 1, 2011. property is amended to combat complex structures
aimed at avoiding this transfer tax. When a
company is sold and the assets on its balance sheet
-1-
www.crop.nl

2. consist for at least 50% of immovable property and e.g. literature that one is required to read
at least 30% of the assets of value of that company professionally (such as jurisprudence or
consists of immovable property situated in the advertisement magazines) can be remunerated or
Netherlands, this real estate transfer tax shall be be made available to employees free of wage tax
due. Until last year the percentage was 70% and without going at the expense of the 1.4% general
only real estate in the Netherlands was taken into forfeit of the total wages.
account. Furthermore, in the past certain techniques
were used to reduce the percentage of the real Also the arrangement of the accelerated
estate on the balance sheet (e.g. funds received depreciation is prolonged. Investments in certain
under a loan from a related company in the group). assets to be made in 2011 can be written off in 2
As of 2011 assets that are acquired from related years.
companies or persons are to be ignored when
determining the percentage of real estate in the Finally, entrepreneurs have got the opportunity to
assets on the balance sheet. Taxable basis for this opt for VAT for quarterly returns. This measure was
tax remains the fair market value of the real estate provisional but is made structural as of 2011.
in the Netherlands.
Temporary support of the housing market
(Innovative) Entrepreneurship
In the first place, the period during which individuals
In the first place, the application of the so-called who have purchased a new house, but did not
innovation box is widened. Benefits derived from an succeed in selling their old house, can deduct
asset starting in the year in which a patent for that mortgage interest for both houses has been
asset was requested, and in the year prior to that in extended from 2 to 3 years (i.e. until 1 January
which the patent was granted, are also covered 2013).
under the rules of the innovation box. Please note
that still a request is required by the taxpayer, at the In the second place, the VAT rate that is applicable
latest when submitting the corporate income tax on labor used in the renovation of houses that are
return. older than 2 years has been reduced from 19% (the
general rate) to the reduced rate of 6%. This
Secondly, a wage tax credit can be obtained for temporary measure applies from October 1, 2010
R&D activities. In 2011 an employer can reduce its until July 1, 2011. For the determination of the VAT
wage tax payments by 46% up to an amount of rate in that situation, the decisive element is
€ 220,000. The excess can be reduced by 16% up whether the taxable event takes place during that
to a maximum amount of € 11 million. period as set out above.
Further, the corporate income tax rate has been Thirdly, the period of time during which the real
reduced to 25% (until 2011, 25.5%) for profits estate transfer tax exemption is in place in case a
exceeding € 200,000. Two tax rates exist, one tax house is sold twice in a short period of time, is
rate of 20% on the first € 200,000 in profits: this rate prolonged to one year. Previously, this period of
remains unchanged. Secondly, a tax rate of 25% time during which the real estate transfer tax on the
over the excess. sale of a house is only reduced to a surplus over the
previous purchase price, was only 6 months. Note
Also, the loss relief facility of 3 years carry back - that this is a measure that is only in place during
which is only a provisional measure – remains also 2011 and shall be abolished again in 2012.
in place during 2011. Note however that when this
facility is used the period of time available for carry Finally, the arrangement under which individuals
forward is reduced with 3 years. have a right to deduct mortgage interest, is
prolonged. Under the present rules, the right to
As of January 1, 2011 a new regulation is in place deduct the mortgage interest is only in place for a
with respect to costs that an employer can period of time up to a maximum of 2 years. This
remunerate tax-free to its employees. The basic right remains in place until the end of 2012.
idea is that an employer can remunerate his
employees tax free on the basis of a 1.4% general
forfeit of the total wages. In the budget proceedings,
several amendments have been made, under which
-2-
www.crop.nl

3. Under the Dutch income tax law, there is a
Environmental and mobility measures possibility for taxpayers with substantially fluctuating
income to request that this income derived during a
As of March 1, 2011 the excises duty on cigarettes period of 3 subsequent years is averaged, which
and tobacco will be raised. The increase of the duty mitigates the progressive effect of the tax rates. This
for the widest sold category of cigarettes amounts to averaging results in an equal attribution of one third
€ 11.68 per 1,000 cigarettes (i.e. € 0.26 per pack) of the income to each of the three years. If the
and € 4.93 per kilogram of tobacco. difference between the paid tax and the recalculated
tax exceeds € 545, the difference will – upon
The planned phasing out of the luxury tax on motor request by the taxpayer - be paid back to the
vehicles has been suspended. However, the taxpayer. To bring the Dutch legislation in line with
beneficial measures promoting the sale and use of EU-legislation, an amendment is introduced that
cars with a low CO2-emission will also be in place in provides that the facility also will apply to non-
2011. residents who derived almost their entire income
Tax plan 2011: additional legislations (i.e. 90% or more) in the Netherlands, but who did
not opt to be taxed as a resident taxpayer for the 3
Besides the tax plan, various other bits of legislation years.
have been amended. This is provided for in
additional legislation. In the past an exemption for investments in certain
small and medium companies was introduced in
As regards the corporate income tax, the taxable Box III. Because of comments made by the
period for non-resident taxpayers, that have an European Commission, some amendments are
accounting year that deviates from the calendar applied to this incentive. The main change is that
year, can link to the accounting year (as it can for the incentive is only applicable with respect to
resident taxpayers). Until 2011, for non-residents, issued shares, which may not be listed on a regular
corporate income tax is due on the profits in the stock exchange with the exception of the NYSE,
calendar year and not the accounting year of the Alternext or similar exchanges for such companies.
company).
The tax credit of 1.3% (heffingskorting) for
The individual income tax has been amended to investments in the public interest, investments in
enable the tax administration to issue tax returns to green funds, and social-ethical investments, will be
the tax payers that already contain certain types of reduced gradually over a period of time of 4 years.
income (including items relating to Box II income) on In 2014 the tax credit amounts to nil.
the basis of the information that was already
available to the tax authorities (e.g. wages and As regards the dividend withholding tax, the rules
wage tax or bank account positions and dividend on dividend notes are modernized. An electronic
withholding tax paid). note is now accepted. No note is required when no
dividend tax was withheld in accordance with a tax
The tax rate in the first bracket of personal income treaty, or when the recipient of the dividends has an
tax and wages tax is per January 1, 2011 reduced interest of at least 5% in the distributing company as
to 1.85%. As regards 2012, the percentage is set out under Box II of the income tax.
already set at 2.00%. This reduction of the rate in
the first tax bracket of individual income tax is The VAT rules for travel agents are amended. VAT
combined with a higher levy rebate for individuals is due as of April 1, 2012 on the profit margin
earning business profits or employment income to realized in the state in which the travel agent is a
maintain the purchasing power of the individuals at resident. The profit margin equals the selling price
current levels. of the trip, less the cost for goods and services
obtained by the travel agent. Any VAT on goods and
The incentive for monuments has been expanded. services obtained by the travel agent will not be
When the monument is no longer the main taken into account as input VAT. Accordingly, the
residence of an individual, under certain long-standing practice giving a special treatment to
circumstances, expenditure related to such travel agents under the Decree of March 22, 1971
monument may be deductible. will be terminated as of April 1, 2012.
-3-
www.crop.nl

4. The VAT rate for performing arts, art, pieces of art, possible revision of Dutch tax law. Amendments are
collector items and antiques will as of July 1, 2011 not intended. Instead, it is aimed at modernization.
be increased from 6% to 19%. The main subjects to be dealt with in that respect –
and also most likely to be dealt with in the letter –
are the following.
The insurance premium tax rate will be increased
from 7.5% to 9.7% as of March 1, 2011. This is a
In the first place, the tax treatment of private
temporary increase and as per 2015 the rate shall
dwellings and more in particular a possible limitation
be decreased again to 9.5%.
in mortgage interest deductibility.
The inheritance tax is amended in relation to
changes made to the definition of "partner" in the Secondly, several topics in the corporate income tax
general taxes Act under the Fiscal Simplification Act spheres are to be reconsidered, such as broadening
2010. The amendments that are proposed aim at the tax basis and the difference in treatment
maintaining the current situation, and neutralizing between equity and loans.
the changes to the definition of "partner" in the
General Taxes Act. Further, an investigation into the (im-)possibility to
enact a flat tax rate, the abolition of several minor
The exemption of gift tax due by members of the taxes, variation in the taxation of a car (e.g. taxation
royal family will be restricted. The exemption applies per kilometer or more/less taxation on fuel) and the
only to gifts made by members of the royal family in introduction of one facility for entrepreneurs.
their official capacity.
All together, quite some developments are taking
Under the energy tax, reduced rates are applied for place or shall possibly start taking place in 2011.
the use of natural gas for the growth of agricultural CROP tax advisors is also in 2011 in place to assist
products under glass. In the case where no natural you in dealing with these Dutch tax developments
gas is available, the reduced rates shall apply to and matters. We look forward working with you on
mineral oils. The approval by the European these matters.
Commission expires on December 31, 2010.
Although the request for an extension has been
filed, it is uncertain whether the requested extension
will be granted. Therefore, the reduced rates will no For information please contact:
longer be applicable from a date to be determined
Marco Visser or Frans Tempel
by a Royal Decree. T: +31 33 495 25 00 T: +31 33 463 57 27
E: visser@crop.nl E: ftempel@crop.nl
Changes are made to the tax collection Act of
1990: the interest that a taxpayer either receives (in
case of having paid too much tax) or pays (in case Disclaimer: CROP registeraccountants and CROP belastingadviseurs
makes no representation nor gives any warranty (either express or
of having paid too little) varies. Interest receivable implied) as to the completeness or accuracy of this publication. CROP
registeraccountants and CROP belastingadviseurs is not liable for the
by the taxpayer is 1.5% less than the interest information in this publication or consequences of the use of this
payable. publication. CROP registeraccountants and CROP belastingadviseurs will
not be liable for any direct or consequential damages arising from the use
of the information contained in this publication.
Prospects
The under minister of finance has indicated during
parliamentary proceedings that before April 2011, a
letter shall be sent to Parliament regarding a
-4-
www.crop.nl