Changes in the field of corporate taxation in 2021

In January of this year, numerous changes in legislation came into force, including in the field of corporate taxation.

Therefore, today we will focus on the changes in the calculation vennootschapsbelasting (BPV)* and tell you what companies should pay attention to when carrying out their activities in 2021.

1. Reducing the corporate income tax rate

Unfortunately, there was no reduction in the top corporate tax rate, and in 2021 this rate will remain at the same level – 25%. However, a reduction in the tax rate in the lower range from 16,5% to 15% was implemented. In addition, the taxable profit threshold for the lower rate has been increased, and in 2021 it is 245000 euros instead of 200000 euros. It is planned that in 2022 this limit will be increased further and reach 395 euros.

2.Crown tax reserve

When determining the profit received in 2019, it is possible to create a tax reserve for losses incurred in connection with the coronavirus crisis, which are expected to occur at the end of 2020. The amount you add to this reserve cannot exceed your 2019 profit. The coronavirus tax provision is fully taken into account when determining profit in the year following the year in which the provision was established.

3.Innovative box

Companies participating in innovative projects in the field of intangible assets may, subject to certain conditions, benefit from a reduced corporate tax rate. Effective rate of innovative boxing from January 1, 2021 will increase from 7% to 9%.

4. Statement of losses in case of liquidation and termination of activities

Companies may suffer losses if an overseas business or subsidiary ceases to operate.

In many cases, they are now allowed to deduct these losses from the profits they receive in the Netherlands. This liquidation / discontinuance scheme will be amended, however, the ability of companies to deduct these losses will be limited.

5. Limitation of deduction of interest

The specific interest deduction limit to prevent intra-group erosion of the tax base will be adjusted. This limitation can no longer lead to unwanted release of interest and exchange rate differences on debts used to pay / buy capital. Earlier, when calculating profit, interest on such debts to an affiliate was excluded from the tax base. The new amendment to the law ensures that a specific restriction on the deduction of interest on qualifying debt can no longer lead to a decrease in profits.

6. Transfer of losses

Income tax losses can be carried forward one year and six years forward. Please note that this rule only applies from losses incurred in 2019. For losses incurred earlier, the rules were slightly different.

There is currently no limit on the amount of loss that can be offset against taxable profit for the year. But, most likely, the rules will change from January 1, 2022. The Cabinet of Ministers wants to establish a lower limit for income tax payable for companies with profitable activities. Therefore, losses in excess of € 1 million can now only be settled up to 50% of taxable profit after this taxable profit has been reduced by € 1 million. The remaining amount of losses will remain available for settlement next year. The limitation will apply to both direct and reverse deductible losses. On the other hand, the time limit for the transfer of losses will be lifted.

* Our reference

Vennotschapbelasting (VPB) or corporation tax is the tax that a company pays on profits calculated for the financial year. Pay corporate tax and file a corporate tax return (declaration BPV) should only companies with a legal entity, the most common of which in the Netherlands are beslotenvennootschap (BV, bv) - an analogue of a Closed Joint Stock Company and naamlozevennootschap (NV, nv) - an analogue of the Open Joint Stock Company.

Companies / businesses without a legal entity, such as eenmanzak (EMZ) - individual / private entrepreneur and Vennootschaponderfirma (VOF) – a private enterprise/private firm does not file a corporate tax return. And the declaration of profit from their business is part of the annual income declaration of an individual (declaration IB - income tax).

We have already written in more detail about the forms of ownership in the Netherlands here

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If you are interested in the questions discussed in this article, or any other legal or accounting issues related to the activities of legal entities in the Netherlands, feel free to contact us - we will help, tell, advise!

And, taking this opportunity, we remind you that the filing of annual tax returns for 1 for individuals will begin on March 2021, 2020 - hurry up to do this within the deadline that expires on April 30.

Call, write, leave applications on our website - we are waiting for you!