Dear FS professional,
Welcome back! The summer holiday season has come to an end. We hope you had a wonderful summer and are ready to get back into the swing of things.
In this Budget Day 2018 Special we have made a selection of the relevant features of the 2019 Tax Plan. We have also included other recent tax measures and developments. For tax-related topics, not included in this FS Tax Newsletter, please visit our website.
If you would like to know more about the matters addressed in this newsletter please contact us.
Niels Groothuizen, Partner, Financial Services Tax Group
Table of Contents
- 1. Main features of the 2019 Tax Plan and other tax measures and developments
- 2. VAT – Continuation of the Dutch cost sharing exemption in the FS sector
1. Main features of the 2019 Tax Plan and other tax measures and developments
On Budget Day, September 18, 2018, the government presented the 2019 Tax Plan to the Lower House. It contains seven bills. On the same day the government also presented the implementation of the First European Anti-Tax Avoidance Directive (ATAD1).
Meijburg has written a memorandum about the main features of the 2019 Tax Plan and the implementation of ATAD1. Also other tax measures and developments have been included in this memorandum. The following measures/developments might be relevant for you:
A. Corporate income tax
- Gradual reduction of tax rates to 16% on income up to and including EUR 200,000 and 22.25% on income exceeding this amount in 2021
- Only possible to depreciate buildings in own use for corporate income tax purposes to 100% of WOZ value
- Implementation of the First European Anti-Tax Avoidance Directive (ATAD1) (not part of the 2019 Tax Plan)
- Abolition of interest deduction limitation for excessive participation interest and excessive acquisition interest
- Abolition of limitation of holding company loss set-off
- Abolition of legal tax deduction of remuneration on additional Tier 1 capital instruments (COCOs)
- Implementation of thin cap rule for banks and insurers (not part of 2019 Tax Plan)
- Important changes for fiscal investment institutions (2020) as remittance reduction for fiscal investment institutions (FBIs) canceled for dividend withholding tax purposes and FBIs will no longer be permitted to invest in Dutch property
- Implementation of Second European Anti-Tax Avoidance Directive (ATAD2, not part of the 2019 Tax Plan)
- Fiscal unity: per element approach, emergency remedial measures and future-proof group regime (not included in the 2019 Tax Plan)
B. Payroll taxes / Personal income tax
- Term of 30% ruling shortened from 8 to 5 years
C. Withholding taxes
- Current dividend withholding tax abolished as of January 1, 2020
- Introduction of withholding tax on dividends (as of 2020) and on interest and royalties (2021) to affiliated entities in low-taxed jurisdictions and in abuse situations
D. Other tax developments
- Mandatory Disclosure Directive
- Introduction of UBO register
- Ruling practice (advance certainty) and exchange of information
Please find hereby a link to this memorandum and an overview of the measures included in the Tax Plan.
2. VAT – Continuation of the Dutch cost sharing exemption in the FS sector
On June 7, 2018, the Dutch Ministry of Finance announced that it will endeavor to keep the cost sharing exemption in place for financial institutions and insurers as this may have a significant financial impact for the users of this exemption. To this end the Dutch Ministry of Finance intends to work with other EU Member States to make this possible at the EU level. We understand that several EU member states will continue to allow the FS sector to apply the cost sharing exemption as defined in Article 132(1)(f) of the EU VAT directive (Council Directive 2006/112/EC of November 28, 2006).
On September 21, 2017 the Court of Justice of the European Union (‘CJEU’) rendered judgments in the DNB Banka (no. C-326/15) and Aviva (no. C-605/15) cases. The CJEU ruled that the VAT exemption for cost-sharing groups does not apply to the financial and insurance sector. Please find our alert regarding these CJEU judgments here.
Following the CJEU judgments, the Deputy Minister of Finance had announced (March 29, 2018) that the Dutch cost sharing exemption would be restricted as of January 1, 2019; i.e. the VAT exemption would no longer apply for financial institutions and insurers. However, two months later the Dutch Ministry of Finance announced that the Dutch cost sharing exemption, which would exclude financial institutions and insurers as from January 1, 2019, will continue to apply in the Financial Services sector. This means that until further notice the Dutch cost sharing exemption can continue to apply in the FS space, provided that all conditions are met.