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DUTCH ASSOCIATION OF CORPORATE TREASURERS |
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CIT 2010 consultative document |
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Please be informed that a consultative document has been released earlier today in which the Dutch Under-Minister of Finance outlines various proposals to amend some parts of the Dutch corporate income tax act as per January 1, 2010. Through these proposals, the Dutch Under-Minister of Finance wants to further improve the Netherlands as a location for group financing activities, avoid the application of certain base-erosion strategies and relax some of the existing rules of the participation exemption regime.
The proposals that are in the consultative document are mainly as follows:
1. Introduction of a mandatory group interest box with an effective tax rate of 5%;
2. Introduction of measures to limit the deductibility of interest on group loans and unrelated party debt while certain existing interest deductibility rules will be
abolished. The consultative paper describes two alternative approaches:
a. Introduction of an interest deduction limitation dealing with interest costs related to shareholdings in subsidiaries and a measure that aims to limit excessive
interest expenses that relate to the acquisition of a company; or
b. Introduction of a general limitation on the deductibility of interest expenses through a so-called earning-stripping rule.
3. Introduction of more flexible rules in order to determine the applicability of the participation exemption on low taxed portfolio investment subsidiaries.
At this stage, interested parties can respond up to August 1, 2009 on the consultative document. After this date, the proposals will be incorporated into a law proposal that will be submitted to parliament. It is the intention that the new rules would become effective as per January 1, 2010. We would need to await the input on the consultative document and the parliamentary procedure to see whether the law proposal indeed can take effect on January 1, 2010.
It goes without saying that the proposed changes could have an impact on the tax position of US multinationals that operate in the Netherlands or that are interested to establish operations in the Netherlands. While the relaxation of the participation exemption regime and the introduction of the interest box would make the Netherlands even more attractive as a location for group holding and financing activities, the impact of the new interest deductibility rules must be carefully considered for each respective taxpayer.
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DACT
| t: +31 (0)35 6954101
| F: +31 (0)35 6945045
| E: erikalicht@dact.nl
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