Budget Day Special
19 September 2023
The third Tuesday of September (Budget Day or Prinsjesdag) is when the Dutch Ministry of Finance traditionally presents the Budget, including the Ministry’s tax plans for the coming year.
The draft bills will be discussed by the Dutch Parliament and could be amended during the legislative process. We have outlined the main proposals below. Except as noted otherwise, these proposals are expected to enter into force on 1 January 2024.
Corporate income tax
1. Qualification of Dutch limited partnership (CV) and similar non-Dutch entities
Dutch open limited partnerships (open CV's) qualify as non-tax transparent while closed limited partnerships (besloten CV's) are tax transparent. Essentially, in the present setup, a Dutch limited partnership only qualifies as tax transparent if transferring a partnership interest requires the prior written consent of all the partners. Effective 1 January 2025, this consent requirement will be lifted and Dutch limited partnerships will all become tax transparent for Dutch tax purposes.
For 2024, grandfathering rules will enter into force to allow limited partnerships to restructure and mitigate the potentially adverse Dutch tax implications.
Additionally, the qualification method of foreign legal forms will be codified.
2. Mutual funds and investment institutions
Effective 1 January 2025, all mutual funds (fonds voor gemene rekening, "FGR") will become tax transparent, except (i) the FGR is a regulated entity as defined in Article 1:1 of the Dutch Financial Supervision Act (Wet op het financieel toezicht) and (ii) the FGR's units can be transferred without the consent of all its participants. Transitional arrangements will be introduced to allow existing FGR's to restructure.
Starting in 2025, only investment institutions as defined in the Dutch Financial Supervision Act can qualify for the exempt investments institutions regime. Non-qualifying investment institutions will be fully subject to Dutch corporate income tax.
Effective 2025, fiscal investment institutions will no longer be allowed to directly invest in (i)Dutch real estate, (ii) the development of Dutch real estate if the investment is less than 30% of the real estate's fair market value before development, and (iii) servicing subsidiaries. Fiscal investment institutions that violate this rule will be subject to full Dutch corporate income tax. Transitional measures in the Dutch Real Estate Transfer Tax Act will facilitate steps to restructure Dutch real estate held by fiscal investment institutions.
Dividend withholding tax
3. Registration dates and burden of proof
On 1 January 2024, two measures will be introduced to further reduce dividend stripping. First, a legal registration date will need to be recorded. Second, the burden of proof position of the tax authorities will be improved by introducing additional documentation obligations for the taxpayer.
Real Estate Transfer Tax
4. Concurrence exemption
Effective 1 January 2025, it will no longer be possible to claim the concurrence exemption (samenloopvrijstelling) in connection with an acquisition of shares in a real estate company, unless at least 90% of the activities for which the real estate is used are subject to VAT and remain so for at least two years after the acquisition of the shares. If not, real estate transfer tax will be charged at a reduced rate of 4%.
5. Tax Box 3 Transitional Act
The introduction of the new Box 3 for tax on assets will be postponed until 2027. The Dutch Tax Box 3 Transitional Act (Overbruggingswet Box 3) will provide transitional rules until then. Currently, the Box 3 rules are being challenged in court. It is expected that the Tax Box 3 Transitional Act will also be challenged, given that the rules that it contains still consist of a lumpsum tax on notional income.
6. Amendment of lucrative interest scheme
Other property rights may result in a lucrative interest if these rights are subordinated and consist of less than 10% of the total issued share capital. The amendment stipulates that all loans with a renumeration element that do not qualify as informal capital are taken into account considered towards the total issued share capital to determine whether other property rights qualify as lucrative interests.
European tax law
7. Pillar Two
The Dutch Minimum Tax Act 2024 (Wet minimumbelasting 2024) will include adjustments to the Dutch tax system at 1 January 2024, in order to comply with the Pillar Two rules. The purpose of Pillar Two is to ensure a global 15% effective tax rate. The rules will apply to multinational groups and domestic groups with an annual turnover of at least EUR 750 million.
8. Payment Services Providers Directive
Payment service providers will be obliged to share information about international payments with the Dutch tax authorities to target VAT fraud via e-commerce.
ContactPlease contact our Houthoff Tax team if you would like to discuss the impact of any of the above bills in further detail.
You can find the various proposals here.