A year is nearing its end. So a new year will start soon. And for the Netherlands that always means that it is time to have a look at what will be the most important changes for Dutch corporate income tax purposes that come into force as per January of the following year. So below you will find a high level description of some important changes that based on the Belastingplan 2022 (The Tax Act 2022) and some other measures that the Dutch Eerste Kamer (House of Lords) approved on December 21, 2021will come into force in the Netherlands as per January 1, 2022.

 

Corporate income tax rates and brackets

As you probably know the Dutch corporate income tax is of a progressive nature. The Dutch corporate income tax knows 2 brackets.

 

As per January 1, 2022 the first bracket will be increased to EUR 395,000 (was EUR 245.000 in 2021). The applying corporate income tax rate for this first bracket remains 15%.

 

The corporate income tax rate that applies to the second brackets (the taxable income exceeding EUR 395k) will be increased to 25.8% (Was 25% in 2021).

 

NB Please be aware that as per January 1, 2022 the higher rate of 25.8% will also be the rate of the tax that is raised via the Wet bronbelasting 2021 (Withholding tax Act 2021). Under this Act Dutch withholding tax is levied over interest and royalty payments made to beneficiaries being residents of low-taxing/non-taxing jurisdictions.

 

Preventing mismatches caused by a different application of the arm's length principle

Within a group, business must do business with each other in the same way and against the same conditions as independent third parties do (the at arm’s length principle). If an other country does not apply that principle, or if it applies it differently, mismatches can arise resulting in groups paying too little tax. As of January 1, 2022 the “Wet voorkoming mismatches bij toepassing zakelijkheidsbeginsel” (The Act to prevent mismatches when applying the at arm’s length principle) enters into force. This Act introduces new legal measures that aim at preventing that mismatches arise when one jurisdiction applies the at arm’s length principle and the other jurisdiction doesn’t or applies it in a different manner. In such case no costs can be deducted for Dutch corporate income tax purposes in the Netherlands, if the other party does not take the at arm’s length price into account for income/profit tax purposes in its jurisdiction of residence.

 

Implementation of the reverse-hybrid measure from ATAD II

As per January 1, 2022 the reverse-hybrid measure will enter into force. This measure ensures that in certain situations a partnership established in the Netherlands, or established under Dutch law, will become liable for Dutch corporate income tax as of 1 January 2022. This is the case if this partnership is considered as transparent for Dutch corporate income tax purposes, but the country of which the majority of the participants in this partnership are residents regards this partnership as non-transparent.

 

Tightening to the earnings stripping measure

As of 2022 the so-called earning stripping regulations change. In short, the earnings stripping measure limits the interest that a company may deduct from its taxable profit, if the interest balance (the difference between interest expenses and interest income on loans) is more than 30% of its EBITDA (for tax purposes) or more than EUR 1 million. For financial years starting on or after January 1, 2022, the aforementioned 30% will be lowered to 20%.

 

Limiting the possibilities of setting off losses for corporate income tax purposes

For financial years starting on or after January 1, 2022 the regulations regarding the possibilities to sett off losses for Dutch corporate income tax purposes change. Companies may only fully offset losses up to EUR 1 million against its taxable profit. Above that, losses can only be offset against 50% of the taxable profit exceeding ERU 1 million. The current maximum of 6 year of tax loss carry forward will disappear. Consequently losses can be carried forward indefinitely. These new loss carry forward rules will not only apply to future losses, but also to all losses that are still available for tax loss carry forward as per January 1, 2022.

 

The carrying back of losses to the previous financial year continues to exist. However, with the addition of the aforementioned 50% cap.

 

Crediting of withholding taxes

As of January 1, 2022 Dutch entities can only credit the dividend withholding tax and gambling tax that has been withheld over their income against the Dutch corporate income tax that they actually have to pay. If no Dutch corporate income tax is due over a certain financial year then the Dutch tax authorities will no longer refund the dividend withholding tax or gambling tax that were withheld. The amounts of withholding tax that have not been credited in a certain financial year can be carried forward for an indefinite period.

 

 

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