Alongside all international tax developments affecting the Dutch tax system now and in the (near) future, we are currently heading to Budget Day 2021. On Budget Day 2021, i.e. Tuesday 21 September 2021, the government will present its budget for the calendar year 2022 as well as the envisaged tax changes and plans for the years to come (Tax Plans 2022).
At this moment, we have a caretaker government that must limit itself to changes and plans that are not controversial. Certain more controversial measures, among which the revision of taxation rules for individuals with respect to their savings and investments, already have been assigned to the new to be formed government. Also potential changes to the current innovation box regime will depend on the parties that will form part of the new government (see our blog of 15 March 2021).
Inter alia, the following proposals could be included in the Tax Plans 2022:
Corporate income taxation and withholding taxes
- A legislative proposal regarding reverse hybrid
entities in view of ATAD2
A draft of this proposal was published for consultation on 4 March 2021 (see our Tax Flash of 5 March 2021).
- Substance requirements for certain Dutch flow-through entities that apply the participation exemption on dividends from foreign subsidiaries. Non-compliance with these substance requirements will lead to an exchange of information with the source states. It is not certain whether these requirements will form part of the Tax Plans 2022. It is also possible that the government will await the expected EU proposal fighting the abuse of shell entities (see our Tax Flash of 19 May 2021).
- Limitation for the credit of dividend withholding tax and gambling tax with corporate income tax. Following the Sofina case, the Dutch government acknowledged that the current different treatment of Dutch corporate taxpayers and foreign corporate investors may not be in line with EU law. Therefore, the Dutch government intends to allow (only) for a credit of Dutch dividend withholding tax and gambling tax up to the CIT due in that year, with any uncredited Dutch tax to be carried forward to future years (see our Newsletter of 9 December 2020).
- Increase of the discretionary budget of the employment cost regulation due to COVID-19. In 2020 and 2021 this budget was already increased due to COVID-19. The budget was increased to 3% for total annual wages up to € 400,000. For total annual wages in excess of € 400,000, the discretionary budget was 1.2% (2020) and 1,18% (2021) of the total annual wages. The exact increase for 2022 is yet unknown.
- Introduction of specific wage tax exemption for reimbursement for working from home costs. Currently, if an employee incurs costs for working from home, the employer can usually not reimburse these costs tax-free. This can lead to unbalanced outcomes in these times of working from home. A specific wage tax exemption for the costs of working from home will be introduced as part of the Tax Plans 2022.
- Providing stock option rights as a salary becomes fiscally more attractive. At present, stock options agreed upon by an employer and employee, are taxable upon exercise. This also applies in case the shares acquired upon exercise are not freely tradable. A proposal to shift the moment of taxation to the moment the shares acquired upon exercise can be sold, is expected. This makes it more attractive to provide stock options on shares that are not freely tradable.
- Alterations with regard to the real estate transfer tax
exemption for residential properties introduced in 2021
for starters (aged between 18 and 35 years). We foresee the
following three alterations:One of the conditions for the
application of this exemption is that the value of the acquired
property does not exceed EUR 400.000. In order to prevent
structuring around this threshold, for instance by acquiring the
right of usufruct first and acquiring the bare ownership at a later
stage, the law contains an anti-abuse clause. The (scope of the)
anti-abuse clause is expected to be altered as part of the Tax
In order to apply the transfer tax exemption, the acquiring party must use the property as its principal place of residence. This condition is expected to be refined in such a way that unforeseen circumstances occurring before the acquisition of a residential property, but after the purchase can no longer be terminated, will be taken into account when determining whether this criterion is fulfilled. Furthermore it is required that the acquiring party declares directly before the acquisition that he/she has never applied the exemption before. As part of the Tax Plans 2022, the word 'directly' is expected to be deleted, which will offer some more freedom to all parties involved in real estate transactions.
- Reduction of the Landlord levy in specific circumstances. The Landlord levy tax rate is expected to be (further) lowered as part of the Tax Plans 2022, which should result in a structural decrease of the landlord levy proceeds of around EUR 150 million per year. The expected changes are intended to compensate landlords for the rent freeze applied to the maximum statutory rental price for social housing units.
- Introduction of interest on repayment of import duties. The EU Court of Justice has ruled that if import duties are repaid because they were collected in violation of Union law, interest does become payable. Dutch law currently does not contain a provision to this effect.
- The earlier announced simplification of the vat one-stop shop for e-commerce transactions.
- Prevention of possible double taxation of energy storage.
- Simplification of the WBSO application system.
- Clarification of the legislation regarding R&D costs and expenditures.
Other envisaged developments in 2021/early 2022
Apart from these Tax Plans 2022, in September 2021 we are also awaiting the legislative proposal addressing the elimination of double non-taxation through transfer pricing mismatches in the coming weeks. A draft of this proposal was already published for consultation on 4 March 2021 (see our Tax Flash of 5 March 2021).
In addition, reports on a possible implementation of a deduction on equity, a change to the earnings stripping rule and a report focusing on flow-through entities are expected around Budget Day 2021.
Later this year we expect, inter alia, the proposal to overhaul the current classification rules for Dutch limited partnerships (CVs or (commanditaire vennootschappen) and foreign entities comparable to CVs in order to avoid entity classification mismatches.
In the beginning of 2021 a proposal thereto (also covering funds for joint account (FGRs)) was published for consultation with the aim to publish a final proposal on Budget Day 2021 (see also our Tax Flash of 30 March 2021). However, it was already announced before the summer that this proposal is now expected to be published in the coming winter and will thus not enter into force as from 2022. In a subsequent letter of 1 July 2021, the Dutch state secretary of Finance furthermore announced that the changes to the Dutch tax classification rules for Dutch FGRs will not be part of this proposal but will be reviewed as part of the intended evaluation of the tax regimes for investments funds (FBI- and VBI-regimes) expected in the first quarter of 2022 (see also our Newsletter of 1 July 2021).
Although the Tax Plans 2022 might be relatively limited in number and impact, the ongoing tax developments will certainly impact your business. We strive to do our utmost to keep you informed on this webpage and other communication sources on all developments.
We will inform you as soon as possible about the Tax Plans 2022 and other developments. Visit our Budget Day 2021 page here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.