Secretary of State Marnix van Rij disagrees with some MPs who say the Netherlands can still be seen as a tax haven. In his letter to Parliament on March 31, 2023, he reported on the measures that have been and will be taken at the international and national level to combat tax evasion.
Government position
The government considers tax evasion highly undesirable. This damages the economy and is unfair to those citizens and businesses that pay taxes on time and in full. However, the government does not share the view of some deputies that the Netherlands encourages tax evasion. The only truth is that the country's tax system, because of its international orientation, was vulnerable to structures that were created to avoid taxes. In recent years, the Netherlands has been fighting resolutely against tax evasion in various ways.
Minimum tax for multinational corporations
Combating tax evasion at the international level requires a coordinated approach. In 2021, at the suggestion of the OECD, 137 countries entered into a two-pillar agreement to improve tax legislation. In particular, Component 2 (Pillar Two) of this agreement provides for introduction of a global minimum tax rate of 15%. The purpose of this move is to prevent companies from shifting their profits to countries with lower taxes (“tax havens”) through international trading structures.
It is expected that before the summer of this year, the relevant bill will be submitted to the Dutch Parliament so that the law is adopted and enters into force on January 1, 2024 (more on this here).
Tax at source to dividend, royalty and interest flows to low-tax jurisdictions
We remind you: withholding tax is an income tax paid by a resident company when paying interest, dividends, royalties to non-residents. From January 1, 2021, the Netherlands introduced a withholding tax on interest and royalties when they are paid to low-tax jurisdictions. And from January 1, 2024, withholding tax will also apply to dividend flows to low-tax jurisdictions (more on this in our article).
According to reports from De Nederlandsche Bank (DNB), the measures taken are already showing results. Royalty and dividend flows to low-tax jurisdictions have declined from €38,5 billion in 2019 to €6 billion in 2021. For some other measures, there is not yet enough data to draw conclusions, so the government will continue to monitor developments.
Fight against misuse of conduit companies
We remind you: conduit (transit) company is a company used in the field of international economic relations in order to reduce taxes when withdrawing profits. Such an intermediary company is created in a state with a preferential income tax regime. For example, in order to organize the receipt of income from country A by a company in offshore country B, an intermediate conduit company is registered in the Netherlands. Country A has a tax agreement with the Netherlands. A company in country A pays income to the conduit company at preferential rates, which in turn pays this income to company B offshore.
The government considers the abuse of the services of conduit companies undesirable, therefore it welcomes the proposal of an EU directive to combat them. Benefits from conduit companies in terms of Dutch employment and tax revenue are limited, while these companies have a negative impact on the international reputation of the Netherlands.
Other steps at the national level
According to van Ruy, the government has planned for 2023-2024. a range of measures to help balance the tax system in addition to the international focus on combating tax evasion. Among other things, this will bring additional millions of euros to the budget.
In particular, in his letter, the Secretary of State highlights the following tax measures:
- self-employed deduction reduction (EMZ/ZZP);
- abolition of the tax reserve for old age (FOR);
- introduction of a progressive bet in Boxing 2;
- reduction in the amount of income for the first category for the payment of corporate tax;
- limit tax credits on donations;
- increase in the low income tax rate to 19%;
- DGA taxable salary increase;
- limitation on 30% ruling by "Balkenende standard".
We will be able to learn more about the innovations and plans of the government regarding tax policy from Voorjaarsnota 2023 - do not miss our comments in the news on Nalog.nl.
Publication Date: 14.04.2023
