Dutch government plans to combat tax evasion

The Dutch Ministry of Finance has published a fact sheet listing all the measures taken by the government in the fight against tax evasion and a plan to step up this fight. Bulletin published in the government newspaper. Find out what changes await the Dutch legislation in the coming years.

Directions for combating tax evasion

The Cabinet of Ministers plans to focus on the following ways to increase tax revenues to the budget: 

Limit compensation of previous losses at the expense of profits

Under current law, a company that has suffered losses can compensate for them from the profits of the next six years. Part of the profit allocated to pay off losses, from the point of view of taxation, ceases to be considered profit and is exempt from tax. In 2022, they introduced a limit on the amount of profit used to pay off previous losses - now the company can repay no more than 1 million euros of losses from profit. Losses exceeding EUR 1 million are only allowed to be offset from profits by 50%.

Fight offshore schemes

The government believes that in international economic relations the same rules should apply to everyone. Currently, offshore companies through various schemes demonstrate profit in jurisdictions with low or zero tax rates. Countries in which profits are actually formed do not receive taxes. The government intends to discourage such tax evasion schemes.

Limit the percentage deduction from profits 

In the event that the percentage of income on loans issued is lower than interest expenses, the company has the right to compensate for the difference from profits. Under the current rules for such compensation, the difference between the interest received and the interest paid had to be more than 1 million euros (or 30% of operating income, whichever is greater). In 2022, the requirement was tightened: now we are talking about 20% of operating income.

What changes can be expected in the coming years?

The government plans to introduce legislative changes in stages. In the next two years we should expect:

2023 

It is proposed to enact the Tax Information Exchange Digital Platforms Act (DAC7). Companies providing platforms for doing business on the Internet will be required to submit information about sellers to the tax authorities in one of the EU states. EU tax authorities will exchange this information to find out the real income of residents of their states. In addition, the law will reduce the opportunities for non-declaration of income or its understatement when declaring.

2023/2024 

The governments of developed countries are interested in changing the rules of world taxation. In today's world, some countries benefit from various tricks, while other states are deprived of income. Complicated and so far ineffective negotiations are underway, which should serve as a fair distribution of taxes. In 2023-2024, it is planned to continue negotiations and, possibly, reach a solution on two main problems.

1. Redistribution of profits of multinational companies. Global corporations operating all over the world pay most of their taxes in the countries in which they are incorporated. Currently, there are about 100 such companies, including all the leading corporations doing business in the IT field. We are talking about billions in taxes. Countries in which such companies are not registered want to receive taxes on the profits received by these corporations in these countries.
2. Introduction of a global minimum income tax. Offshore states and territories profit in the following way: these countries do not have an economy that allows them to collect significant taxes. The following solution was found: extremely low and sometimes zero tax rates are introduced, which makes it possible to attract companies to register on their territory. As a result, offshore companies do not actually do business offshore, but pay taxes in them. Offshore territories believe that 1% of huge foreign taxes is better than nothing. If the tax rate is zero, companies pay a flat tax to the offshore. This system does not seem fair to countries where incomes are actually generated. So far, not very successful negotiations are underway to introduce a minimum global income tax rate of at least 15%.

2024 

• Taxation of dividends at source. This will prevent tax cuts through offshore schemes and make the Netherlands less attractive for companies using such schemes.
• unshell directive, aimed at combating the so-called mailbox companies. This is one of the tax reduction schemes, when the company is not actually engaged in economic activity, but is used in the schemes of other companies specifically to reduce taxes. It is assumed that they will create a mechanism for identifying such companies, and the EU countries will exchange all necessary tax information. If all this succeeds, the intermediary company (“mailbox”) and its fictitious activities will be excluded from the schemes when calculating taxes. 
• Cryptocurrency and Electronic Money Information Exchange (DAC8). The European Commission has already announced the submission of proposals on this issue. The essence of the changes is again in expanding the exchange of information between the tax authorities of the EU countries. In this case, we are talking about assets in cryptocurrencies based on blockchain technology or similar, including cryptocurrencies and NFTs (non-fungible tokens). The exchange of information will make it possible to determine the real income of the owners of such assets and tax them.

As we can see, the Government does not yet have a legislative basis for introducing most of the changes. However, tax rules change frequently. In order not to make a mistake when paying taxes in the Netherlands, get advice from Nalog.nl specialists.