COVID‑19 related tax reserve
The COVID‑19 related corporation tax reserve serves a liquidity improving purpose. The option of creating such a reserve against the profit for 2019 is now being anchored in legislation.
Exemption prevention through specific interest deduction restrictions
The specific interest deduction restrictions act as a brake on the deduction of the aggregate interest charged on the sum total of eligible debts. The current phrasing of the law leaves room on balance for an amount in debit interest and currency gains on debts being exempted (which would be the case where the amount in debit interest and currency gains relating to the full complement of eligible debts turned out greater than the amount in credit interest or costs or currency losses). As this is not supposed to happen, it has been suggested that the specific interest deduction restriction per eligible debt should no longer leave room for the profit to be eaten into. In order to prevent the deduction restriction per eligible debt causing the profit level to turn out lower, the plan is from now on to have a calculation made per individual (eligible) debt of whether the associated amount in debit interest or currency gains is or is not surpassing the associated amount in credit interest or costs or currency losses and, if it is, no longer to allow the amount in debit interest or currency gains to be left out of consideration (as part of the deduction restriction regime) in determining the profit. The (proposed) change in legislation will no longer enable tax paying entities to set off the debit interest or currency gains associated with certain eligible debts against the deduction exclusion where it concerns credit interest or costs or currency losses associated with other eligible debts. Although the option of setting off debit or credit interest and costs or currency gains or losses per eligible debt as such is to remain available, the deduction restriction will no longer leave room for exemption on balance of debit interest or currency gains per eligible debt.
Corporation tax rates
The Netherlands applies a system of dual corporation tax rates, the lower of which applies to the first bracket (which covers profits of up to 200,000 euros for the year). Surplus profits if any (upwards of 200,000 euros for the year) are charged at the higher rate corporation tax rate, which was supposed to be reduced from its current level of 25 percent to 21.7 percent effective the first of January 2021. This part of the plan has now been shelved, unlike the reduction in the lower corporation tax rate from 16.5 to 15 percent, which is going ahead as planned. The first corporation tax bracket is being widened to 245,000 euros in 2021 and to 395,000 euros in 2022.
Effective innovation box rate
The Cabinet on the occasion of the State Opening of the Dutch Parliament, on 15 September last, announced that the effective innovation box rate was to change to 9 percent (up from its current level of 7 percent) from the first of January 2021 onwards. The Double Taxation (Avoidance) Decree 2001 is to be amended accordingly where it concerns the set-off of taxes charged on royalties levied by non-Dutch based tax authorities.
Dutch version: Belastingplan 2021: vennootschapsbelasting