Fiscal changes 2012

01-30-2012

Corporate income tax

Interest deduction limitation for acquisition holdings

As from 1 January 2012 an additional restriction on the deductibility of interest paid on acquisition loans applies if a Dutch buyer enters into a fiscal unity with the acquired company. In principle, the interest due on the acquisition loan can no longer be set off against the profit of the acquired company. The interest in any event remains deductible up to EUR 1 million. The interest is furthermore fully deductible in the case of ‘sound financing’. Financing is deemed to be sound if the acquisition debt in the year of acquisition does not exceed 60% of the acquisition price. That percentage is then reduced over a seven-year period (by 5% a year) to 25%.

Object exemption for foreign permanent establishments

Until 2012, any losses of a permanent establishment were directly deductible from the profits of the Dutch company. As from 1 January 2012 an exemption has been introduced. The profits and losses of a permanent establishment will be excluded from the Dutch tax base. Any final losses of permanent establishments that remain when the company terminates its activities are still deductible. The exemption does not apply to low taxed permanent establishments; an imputation system applies in that case. Any rights and claims that already exist when the exemption was introduced will be honoured.

Non-resident taxation of foreign substantial interest holders

As from 1 January 2012 corporate income tax can only be imposed on foreign shareholders in Dutch companies or cooperatives if a shareholding or other interest of more than 5% is held by the foreign taxpayer for the purpose of avoiding Dutch dividend withholding tax or Dutch income tax. This requirement has been introduced in addition to the existing requirement that the substantial interest does not form part of a company’s business assets. If both requirements are met, 25% corporate income tax is due on the income (both dividends & cap gains) from the substantial interest. If the only intention is the avoidance of Dutch dividend withholding tax, the rate remains limited to the dividend tax rate, i.e. 15%.

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