2021 Dutch tax package would modify CIT rate and clarify interest deduction limitation rules

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September 2020

Overview

The 2021 Dutch tax package was presented, together with certain other tax measures, on September 15. Highlights of particular relevance to multinationals include modifications to the corporate income tax (CIT) rate, clarifications of the interest deduction limitation rules, a restriction in the liquidation loss regime, and the announcement of a wage tax discount for investments in the Netherlands. In addition, the legislature proposed changing the loss utilization rules effective January 1, 2022 and expects to propose additional legislation in 2021 intended to better align the treatment of a fiscal correction based on the arm’s-length principle. The 2021 tax proposals are currently being discussed in parliament and are expected to be approved by the Senate in early December. During this process some small amendments may be made to the proposals, but no major changes are expected at this stage.

The takeaway

Multinational entities should pay particular attention to the following provisions within the proposal: 

  • The headline corporate tax rate will remain 25%.
  • The Dutch government created the possibility of a COVID-19 reserve, which could result in a cash flow advantage.
  • To boost the Dutch economy, a job-related investment discount will be introduced that provides a payroll tax discount based on a percentage of the investment made in the Netherlands. 
  • A conditional withholding tax for interest and royalty payments to related parties should be effective January 1, 2021.  This conditional withholding tax only applies when the payments are made to related parties that reside in low-tax or non-cooperative jurisdictions. 
  • As of 2021, additional substance requirements apply to Dutch financial services companies.
  • As of 2022, losses may be indefinitely carried forward.

Contact us

Bernard Moens

US Inbound International Tax Services Leader, PwC US

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