International situations

Corporation tax liability tests

For purposes of corporation tax, various tax liability tests are used for provisions and antiabuse or anti-avoidance rules, to determine whether a taxpayer pays sufficient tax. The proposed amendment clarifies that a qualifying pillar two additional tax is also included in some tax liability tests. Pillar two ensures that multinational group companies and domestic group companies with a turnover of at least € 750 million, effectively pay at least 15% tax on their profits. This applies, among other things, to rules on the interest deduction restriction, participation exemption, as well as exemption for business income from foreign permanent establishments.

Tip

A tax consultant is able to identify whether the changes affect the existing structure.

Exemption for business income from foreign permanent establishments

The exemption for business income from foreign permanent establishments for foreign company profits has been adjusted to avoid double taxation of permanent establishments taxed in the Netherlands but not recognised as permanent establishments in other countries. With this adjustment, the exemption is now also applied if profits abroad are subject to taxation. This avoids unintended double taxation due to mismatches in recognising permanent establishments.

General anti-avoidance rule ATAD1

The Netherlands has transposed the general anti-avoidance rule (GAAR) of ATAD1 into national legislation. When ATAD1 was implemented in 2019, it was opted not to do so, because the GAAR was already included in the Netherlands’ legislation with the doctrine of fraus legis (fraud of law). Now that the European Commission has explicitly requested implementation of the GAAR, the Netherlands meets this request.

Amendments to Minimum Taxation Act 2024

The Minimum Taxation Act 2024 (Wet minimumbelasting 2024, WMB) is an implementation of the EU Directive. Remaining issues in administrative guidelines which require a legal basis, have been incorporated in the WMB, as are some technical changes. These include qualifying interest schemes, qualifying tradeable tax credits, currency conversion, domestic additional taxation, excess negative tax expenditures carried forward, income excluded on the basis of actual presence, the transitional Country-by-Country Reporting (CbCR) Safe Habor rule and procedural-law aspects.

New group concept for withholding tax

The Netherlands applies a withholding tax on interest, royalties and dividends paid to an affiliated entity established in a low-tax country. The withholding tax is relevant when a qualifying interest exists. This may also be the case if a collaborating group is involved. The concept of ‘collaborating group’ is replaced by the group concept: qualifying entity. This is when entities act together for the main purpose (or one of the main purposes) of avoiding taxation at one of the entities.

Tip

The burden of proof that a qualifying entity exists lies with the tax inspector, but in case of doubt it is wise to hold preliminary consultations. That offers a sense of security in advance.

International transfer payment

In 2023, the European Court of Justice delivered judgments on the international transfer payment of accrued pension benefits in the event of a job change. In response, legislation was amended for international transfer payments of accrued pension benefits. These amendments, effective since 16 November 2023, ensure that the conditions for transfer payments are in line with European law. Two important conditions are being discontinued: i) the obligation for foreign pension funds to accept liability and ii) the restriction on commutation options abroad.

Take note!

The condition of no wider-ranging commutation options abroad than pursuant to national law continues to apply for individual transfer payments outside the EU, the EEA and Switzerland.

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