Companies

Tax rate for box 2 reduced to 31%

The government is reversing the tax rate increase in the second tax bracket of box 2. On 1 January 2024, this tax rate rose to 33%, but is being reduced again to 31%. In doing so, the government aims to bring the tax burden on substantial interest holders more into line with that of employees and entrepreneurs subject to income tax rules. The aim is to limit tax-driven choices of the legal form.

Tip

Deferring a dividend distribution until 2025 may be beneficial for tax purposes. Otherwise, you may make use of the lower rate by paying dividends up to € 67,000 in 2024. Partners can even gain double benefits by paying a dividend of € 134,000, which is divided equally between both partners (€ 67,000 per person) and therefore, taxed at the lowest rate by both persons.

Adaptation of measure on excessive borrowing

Since 2023, directors and major shareholders (directeur-grootaandeelhouder, dga) can no longer borrow more than € 500,000 from their own company without tax consequences. However, an unintended consequence of this measure has led to a double counting of loans in joint ventures, such as commercial partnerships (vennootschap onder firma’s, vof) and limited partnerships (commanditaire vennootschappen, cv). Such double counting will now be prevented. It also prevents debts from being taken into account at more than the nominal value.

Take note!

If you have borrowed more than € 500,000 from your own company, please check what is best for you to do in such a case.

Tip

This measure will have retroactive effect to 1 January 2023. So, also check existing partnerships and debts carefully to prevent unjustified double counting.

Deduction of gifts ceases to apply for private limited companies

The deduction of gifts for purposes of corporation tax (vennootschapsbelasting, Vpb) and ‘donations from the private limited company’ scheme are being abolished. As from 1 January 2025, companies will no longer be able to deduct charitable donations from their profits. This applies both to deductions for gifts for purposes of corporation tax and to donations from companies following shareholder’s motives. Sponsorship and Corporate Social Responsibility will remain deductible as business expenses.

Take note!

Companies will need to review and possibly restructure their donations from 2025 onwards to optimise tax advantages. Consider business sponsorship as an alternative.

Reduction of self-employed deduction

The self-employed deduction is being scaled down. For 2025, the self-employed deduction amounts to € 2,470.

Adjustment of interest deduction for property companies

The interest deduction restriction for property companies is being tightened. In the case of rented property, the interest deduction is being optimised by spreading interest balances over several companies. As a result, the earning stripping rule will not reach the limit (€ 1,000,000 or 25% of the adjusted profit). In order to counter this, the threshold of € 1,000,000 will lapse for companies with properties rented mainly to (non-affiliated) third parties. This means the splitting of property companies in order to optimise the interest deduction, will no longer have the envisaged effect.

Tip

Reassess the constructs of property activities.

Increased threshold of interest deduction restriction

In determining the tax profit before corporation tax, interest is not to be deducted to the extent that it exceeds the higher of (currently) 20% of the adjusted profit or € 1,000,000. It is proposed to increase the rate of this interest deduction restriction (earning stripping rule) to 25%. The amendment partially reduces a previous tightening and brings the rate more into line with the European average. The government wants this to improve the Dutch business climate.

Tip

Assess the financing structure within the company. The increased threshold offers more scope for deduction.

Deduction of working space costs clarified

The deductibility of costs for a non-autonomous working space in a dwelling belonging to the business assets is being clarified. Tenancy charges such as fitting-out costs, gas, water and electricity are not deductible. The measure explicitly enshrines case law and existing practice in the law.

Tip

Assess whether it is possible to transform the non-autonomous working space into an autonomous working space. This would create more scope for deduction of costs.

Side-step merger facilities

Simplified direct side-step mergers, in which a shareholder holds all the shares of the companies to be merged, will also qualify for tax transfer facilities. This avoids tax obstacles for substantial interest holders in these mergers. The existing approval is thus enshrined in legislation. In the case of indirect side-step mergers, the scheme will not be amended because, in practice, there seems to be less need and its complexity is greater.

Adjustment of liquidation loss scheme

The liquidation loss scheme determines whether a loss incurred in the liquidation of a subsidiary is deductible from corporation tax. It is proposed to amend the liquidation loss scheme in two respects. The first amendment implies that calculation of the liquidation loss also takes into account a subsequent upward revaluation of a claim on the subsidiary. Secondly, the law is being amended so that non-deductible losses on sales of an indirectly held subsidiary cannot be converted into deductible liquidation losses of a directly held subsidiary.

Adjustment of the remission profits scheme

Due to the 2022 restriction of loss setoff, companies with more than € 1,000,000 in deductible losses and a taxable profit (including remission profits) of more than € 1,000,000 always pay corporation tax. This may be a hindrance in concluding an agreement with creditors. For this reason, the exemption from remission profits is being adjusted for purposes of corporation tax. If the company has more than € 1,000,000 in deductible losses, the remission profits in that year are fully exempted to the extent that it exceeds the other losses in the year.

Take note!

If the present deductible losses are less than € 1,000,000, the remission profits are exempted only to the extent that they exceed the losses present.

Mandatory exemption of dividend withholding tax

The dividend withholding tax has several exemptions which are optional, such as in intercompany situations or within a tax group. The entity distributing dividend may choose whether or not to apply the exemption. This makes the beneficiary to the income dependent on the entity’s choice. It is proposed to abolish this option. If the conditions for exemption are met, then it is mandatory to apply it. This would eliminate the need to withhold and remit dividend tax, which would eliminate the liquidity costs or loss of interest for the shareholder.

Dividend tax registration date

The registration date was introduced on 1 January 2024. The purpose of this date is to determine who is entitled to the proceeds of publicly listed company shares from that date onwards. In practice, the scheme was unclear in parts. It has therefore been clarified that the registration date refers to the end of the working day on the date specified by the issuing institution. On the basis of this date, it can then be determined who is entitled to dividend distributions and therefore to offsetting, exemption, refund, or a reduction of dividend withholding tax. Of course, the remaining conditions must also be met.

Take note!

The registration date is only used to indicate the time when the beneficiary to the income must be determined. The provision does not detail the concept of ‘beneficiary to the income’.

Reversing the abolition of the repurchase facility

The repurchase of own shares is taxed with dividend tax. An exemption applies, subject to certain conditions, for a listed company to repurchase own shares. This exemption would have expired on 1 January 2025, which would mean a deterioration in the competitive position of Dutch listed companies vis-à-vis foreign listed companies. The Tax Plan proposes that the repurchase facility should not be abolished.

Objections and appeals to RVO for MIA and Vamil

Income tax and corporation tax have a number of fiscal investment schemes, such as the Energy-saving Investment Credit (energie-investeringsaftrek, EIA), Environmental Investment Credit (milieu-investingsaftrek, MIA) and Arbitrary depreciation of environmental investments (willekeurige afschrijving milieu-investeringen, Vamil). The investment must first be notified to the Netherlands Enterprise Agency (Rijksdienst voor Ondernemend Nederland, RVO). The application process of the MIA and Vamil now differs from the EIA, so it is preferable to align them. It is therefore proposed that, in future, the RVO should also issue a statement for the MIA/Vamil, to which the taxpayer can lodge an objection to the RVO. In this way, the technical assessment of the application will be carried out in full by the RVO.

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