Client Alert Newsletter | September 20, 2017 CONTACT US | FORWARD | WEBSITE The Netherlands - Budget 2018 On September 19, 2017 the Dutch government released its Budget 2018 containing the Tax Plan 2018 which includes certain amendments to Dutch tax law. After the general elections held on 15 March 2017, the Netherlands is still run by a care-taker government composed of the Liberal Party and the Social Democrats. Four parties (Liberal Party, Christian Democrats, Liberal Democrats and the Christian Union) have been negotiating the formation of a new coalition government for quite some time and the general expectation is that a coalition agreement will be concluded in the next weeks, followed by the installation of the new government by King Willem Alexander. The Budget and Tax Plan 2018 that was released today in the interregnum after the general elections is a reflection of the limited political leeway for the care-taker government; it is not controversial and also not very ambitious. Important political issues and potentially controversial choices are carefully avoided and left for the new government to deal with. As a result, there are various important tax policy issues that are not addressed in the Tax Plan 2018 but that will be high on the agenda of the new government. These include the implementation of the ATAD I package pursuant to which earning stripping measures and Controlled Foreign Company rules will be introduced in the Corporate Income Tax Act (a legislative proposal is announced for the beginning of 2018). Later this year, a bill will be submitted to Parliament to ratify the Multilateral Convention implementing tax treaty measures to prevent Base Erosion and Profit Shifting. In addition, it is possible (but not yet certain) that the new government may reduce the corporate income tax rate which is currently 25%. Furthermore, the introduction of a simpler flat personal income tax with two rates is being considered and the 30% facility for expatriates could be curtailed. The Tax Plan 2018 contains a number of legislative proposals (hereafter also referred to as the “Bill") which are summarized below. The government will discuss the Bill in the coming weeks in parliament. Further to these discussions, some elements of the Tax Plan 2018 may change. Most proposals will become effective on January 1, 2018. Corporate income tax & dividend withholding tax Dividend withholding tax - Dutch holding cooperatives subject to Dutch dividend withholding tax Profit distributions made by a Dutch cooperative to its members are currently not subject to Dutch dividend withholding tax, unless the structure is considered abusive. The Bill introduces an obligation for so called “holding cooperatives” to withhold Dutch dividend withholding tax at a rate of 15% on profit distributions to qualifying members. For further legislative changes introduced by the Bill with respect to corporate income tax & dividend withholding tax, please click below. READ MORE VAT Narrower scope of 6% VAT rate on “medicine” Under the Dutch VAT Act, certain pharmaceutical products - such as products that qualify as a “medicine” under the Dutch Medicine Act- are subject to the 6% reduced VAT rate. Under the Dutch Medicine Act, the qualification as “medicine” i.a. depends on whether a product is presented to consumers as “medicine”. In 2016, the Dutch Supreme Court has ruled that toothpastes that contain sodium fluoride as well as sunscreens with UVA and UVB filters can qualify as “medicine” for the purpose of the 6% reduced VAT rate. The question arose whether this judgment opened the doors for other products such as cosmetic products to fall inside the scope of the 6% reduced VAT rate. For further legislative changes introduced by the Bill with respect to VAT, please click below. READ MORE Wage Tax Abolishment deemed employment relationship for nonexecutive board member listed company It is proposed to abolish the deemed employment relationship for nonexecutive board members of listed companies. This is in line with the legislation previously introduced for supervisory board members in 2017. Consequently, it will not be necessary to withhold, report and remit wage tax for these board members as from 1 January 2018. As from that date these board members will be treated similar to a supervisory board member in a two tier board. For further legislative changes introduced by the Bill with respect to Wage Tax, please click below. READ MORE General General - Voluntary disclosure regime tightened Currently, a voluntary disclosure within two years after filing an incorrect tax return could prevent penalties and other punitive sanctions. Furthermore, voluntary disclosure later than two years after filing the incorrect tax return could result in a limitation of the penalties due. READ MORE Join our breakfast meeting or contact us for more information On September 26, 2017 we will be hosting a breakfast meeting in which we will address the Tax plan 2018 in further detail, with ample opportunity for questions and discussion. If you wish to attend this breakfast meeting, please register via the below link: REGISTER In any case, please do not hesitate to reach out to your regular Baker McKenzie advisor in case of any questions. Disclaimer - Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a "partner" means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an "office" means an office of any such law firm. This Tax Alert has been prepared for general information purposes only. The information presented is not legal advice, is not to be acted on as such, and may be subject to change without notice.