The Dutch government released its Budget 2013, containing the Tax Plan 2013 which includes certain amendments to Dutch tax law. The government will discuss the plans the coming weeks in parliament. Further to these discussions, some elements of the Tax Plan may change. Most proposals will become effective on January 1, 2013. The Tax Plan 2013 contains the 2013 Bill ("The Bill"). The amendments included in The Bill are additions to the amendments to Dutch tax law already adopted by the Senate in July 2012. Please find attached to this Tax Alert the July Tax Alert on these previous amendments.
- Corporate Income Tax
The Bill contains two main changes to Dutch corporate income tax law: (i) the abolition of the thin cap rule as of January 1, 2013 (already announced in our July Tax Alert) and (ii) the expansion of non-resident corporate taxation on directors' fees.
Abolition of the thin cap rule
The thin cap rule is a general interest deduction limitation rule that limits the deduction of interest expenses on intra-group debt in case the debt exceeds a certain debt-to-equity ratio. This thin cap rule was introduced in 2004 to deal with the expected adverse budgetary consequences resulting from the Bosal Case (C-168/01). As a result of this EU court case, the Netherlands had to allow interest deduction, even where the related income benefitted under the participation exemption. Because meanwhile a new specific interest deduction limitation rule has been introduced (see our July Tax Alert), the government decided to abolish the general thin cap rule. The thin cap rule no longer applies to book years that start on or after January 1, 2013.
Expansion non-resident corporate taxation on directors' fees
Foreign companies acting as a member of the board of directors or of the supervisory board (a 'bestuurder' or a 'commissaris') of a Dutch resident company, are subject to Dutch non-resident corporate taxation with respect to the directors' fees or other remuneration they receive. The definition of a director has always been formally interpreted. Therefore, only directors' fees received by foreign companies which qualify as statutory director are currently subject to non-resident corporate taxation.
The Bill includes a proposal to expand this taxation on directors' fees also to fees paid to de facto directors. As a consequence, also directors' fees paid to a foreign company that de facto exercises directors' or management functions will be subject to non-resident taxation.
Because under most tax treaties concluded by The Netherlands only directors' fees paid to statutory directors can be taxed by the Netherlands, the abovementioned expansion will only have a limited impact. The only tax treaty currently in force allowing the Netherlands to levy said tax is the one with Belgium. The impact of the proposed expansion is therefore limited to Belgium or countries with which the Netherlands has not concluded a tax treaty. The proposed expansion will apply to directors’ fees paid to a foreign company in book years that start on or after January 1, 2013.
- Wage Tax
New Expense Allowance Scheme
No adjustments have been introduced in the Tax Plan to the new Expense Allowance Scheme (mandatory as of 2014). In 2013 an evaluation will take place in order to determine whether or not fine-tuning of the new Expense Allowance Scheme is required.
As of 1 January 2014 Dutch Employers will have to apply a new Expense Allowance Scheme. Before that date Employers can elect to implement the new scheme. If the employer chooses to do so, a budget (the "distributable margin") equal to 1.4% (up to 1.6%) of his total fiscal salary costs will be made available for tax-free reimbursement of costs and allowances. There will no longer be a requirement to demonstrate the arm's length nature of these distributions, but the nature and amount of the reimbursements or allowances falling within the distributable margin will have to be customary for the employee ("standard practice criterion"). In addition, a limited number of "specific exemptions" will apply that fall outside the scope of the 1.4% distributable margin. Furthermore, a "nil valuation" will apply to specific expense allowances that fall within the scope of the distributable margin. As a result, the 1.4% distributable margin is not reduced by distributing such reimbursements (or allowances) to the employee.
As of January 1, 2013 the tax-free reimbursement of (employees') commuting expenses is abolished. This refers to all type of commuting, including commuting by public transport. In addition, with respect to the taxation of private use of the company car (lease car) as of January 1, 2013 commuting is no longer considered business travel but private use of the company car. Since the tax-free use of the company car for private purposes is limited up to 500 kilometres per calendar year, it is expected that as of January 1, 2013 – due to the requalification of commuting as private travel - most company cars will trigger taxable wages in kind for the employees involved. Transitional rules are announced for employees driving a company car (lease car) before May 25, 2012 and employees using a specific public transport card before aforementioned date.
Because of the strong adverse public opinion regarding the abolishment of tax-free commuting allowances, and due to the outcome of the Parliamentary elections of September 12th, it is still highly uncertain if and to what extent the aforementioned proposal will actually be implemented.
- Real Estate Transfer Tax: six month period extended to three years
In the event of successive acquisitions of Dutch real estate within a period of six months real estate transfer tax on a later transaction is only due on a raise in value or purchase price. This six months period is extended; as of 1 September of this year the provision will apply to all transactions within a period of three years.
- Value Added Tax (VAT)
The Tax Plan 2013 does not change VAT rules. The recent change in the standard VAT rate (from 19% to 21%) was already introduced some months ago. The 21% rate will apply to all transactions completed after October 1, 2012.
- Landlord Levy
A new tax is introduced: the Landlord Levy ('verhuurderheffing'). This tax is levied upon the ownership of houses in the regulated housing market (this means a monthly rent below € 665). The levy is calculated upon the aggregate ('WOZ') value of the houses. An exemption exists for the value of the first ten houses of each owner. For 2013 the tariff will be 0,0014%, for later years a 0,231% rate will apply.