The Dutch State Secretary of Finance has published it’s 2019 tax road map. In this road map he provides the milestones for 2019, 2020 and 2021 on the basis of the five themes which the Dutch Government has made it’s priority for this legislative period. In this newsflash we highlight the most relevant milestones of three of the themes, being tax avoidance and tax evasion, employment and business climate.
Prevention of tax avoidance and tax evasion
In the coming months – ultimately by September 2019 – we expect the legislative proposal for the implementation of the second European Anti-Tax Avoidance Directive (ATAD2) relating to hybrid mismatches with non-EU countries. ATAD2 intends to prevent tax structures which result in non-taxation, for example the commonly used CV/BV structures. Under the new rules the Netherlands may levy tax – or not allow a deduction – in case the other country does not levy tax. Furthermore, in the last quarter of this year the legislative proposal for the conditional withholding tax on interest and royalties will be published. In case a Dutch company pays interest or royalties to an affiliated company in a low taxed jurisdiction, the Netherlands will levy a conditional withholding tax. The tax rate will be similar to the corporate income tax rate, which will be 15 % for profits up to EUR 200,000 and 20.5% for the remainder as per 2021.
Lowering the burden on employment
As per 2020 the personal income tax rate will be lowered. The second and third bracket will be taxed against 37.8% and in the highest bracket a personal income tax will be levied of 50.5%. In 2021 the current four bracket system will be replaced for a two bracket system in which income up to EUR 68,507 will be taxed against 37.05% and a tax rate of 49.5% in the second bracket. Another advantage of employment will be the increase of the free space in the work related cost scheme (‘WKR’). Currently this is 1.2% of the amount of the total wages. It is proposed that as from 2021 the free space will be 1.7% up to EUR 400,000 and 1.2% for the remaining part.
Attractive business climate
The State Secretary of Finance is working together with the State Secretary of Economic Affairs and Climate Policy on new legislation to create a more attractive business climate for companies with genuine economic activities. One of the proposals is legislation with respect to the taxation of stock options. This should improve the willingness to work for a start-up or scale-up in the Netherlands. The intention is to postpone the taxation until the shares related to the stock options are sold. This rule is intended to be implemented as per January 1, 2020. Furthermore, the Dutch ruling practice will change. We recently published a newsflash on this topic.