Tax tips for international companies in the Netherlands
Only a few weeks to go before the start of the new year. This is the time to check whether taking action before January 1 2014 could give you a tax advantage. Here are 11 tax tips and points to note for international companies covering various Dutch tax areas.
1. Temporary ruling accelerated depreciations
Have you invested in new business assets in 2013, or are you intending to do so? In that case, it may be advisable to consider the new temporary facility for accelerated depreciation. Entrepreneurs may be eligible to use this corporate/personal income tax facility which allows for accelerated depreciation of investments made in new business assets between July 1 2013 and December 31 2013 inclusive. If the conditions are satisfied, accelerated depreciation of up to 50% of the investment costs becomes possible immediately. Please note that the business asset must be taken into commission before January 1 2016.
2. Energy-efficient and environmentally-friendly investments
Are you considering investing in new energy-efficient or environmentally-friendly business assets? Then you may find it worthwhile to consider whether such an investment should be made before the end of 2013. The minimum investment amount for the energy investment allowance (EIA) will be increased to €2,500 ($3,391) per investment with effect from January 1 2014. This also applies to the environmental investment tax scheme for businesses (MIA). For access to these investment facilities, it is important that you observe any applicable reporting deadlines.
3. R&D work allowance for in-house R&D work
Do you intend to start performing R&D work yourself? Since 2012, entrepreneurs with costs - other than wages - and expenditure directly attributable to in-house R&D work, may be eligible for the research and development work allowance (RDA). The rate of this supplementary allowable deduction will very likely increase from 54% to around 60%, with effect from January 1 2014. Therefore, you may find it beneficial to take this increase into account by incurring the costs and expenditure in 2014. The RDA rate is expected to be fixed in December 2013.
4. Mandatory work-related expenses scheme postponed for one year
Have you, as an employer, not yet switched to the Dutch work-related expenses scheme from January 1 2014? This scheme contains a substantial change of the tax regime for the allowances and benefits that an employee may generally receive from their employer tax-free. The transitional regime for the work-related expenses scheme will be extended for one year. No substantive changes have been made to the scheme. Have you not yet switched to the work-related expenses scheme and are you not planning to switch from January 1 2014? If that is the case, don’t forget to start implementing this new scheme in good time in the coming year, as its application by all employers is mandatory with effect from January 1 2015. The switch will require efforts by both your payroll administration and your accounting department, and it may also be necessary or desirable to make amendments to employment conditions.
5. The 150 km boundary in the Dutch 30% ruling
Do you have employees from the border regions who use the 30% ruling (a Dutch tax advantage for foreign employees working in the Netherlands)? If so, they might lose their 30% ruling in the near future, due to the 150 km boundary in effect since January 1 2012. If you wish to retain these rights, please contact your Dutch tax adviser.
6. The salary standard in the Dutch 30% ruling
Do your employees satisfy the salary standard for application of the Dutch 30% ruling? Perhaps you have university-educated employees who are at least 30 years old, or full-time employees who have transferred to part-time work, or employees to whom the new 30% ruling conditions apply after five years? If so, they might not meet the salary standard any more. We therefore recommend that you check this before the end of the year. Where appropriate, you could consider reducing the 30% allowance to meet the salary standard as yet.
7. The one-off Dutch 16% employer’s levy also applies in 2014
Do you have employees whose salary will be more than €150,000 in 2013? The one-off Dutch 16% employer’s levy which the Dutch government introduced in 2013, will also apply in 2014. Thus you might owe a 16% final levy in 2014 on part of the salary received by these employees in 2013. This so-called crisis levy can be avoided if you limit the salary of the relevant employees in 2013.
Do you have employees who are partially taxed outside the Netherlands? If so, you can restrict or even prevent the 16% employer’s levy if, before 2014, you exclude the employment income pertaining to the wages not taxed in the Netherlands from your payroll accounting. And bear in mind the benefits from shares awarded and from stock options that vest or have become vested in 2013 and are to be (partly) allocated abroad and thus are not taxed in the Netherlands. Ask your employees to provide their working day calendar so that you can make an estimate and adjust your payroll before the end of the year.
8. Negative declaration after purchase or sale of immovable property
Have you, in 2013, provided or received a negative declaration regarding immovable property purchased or sold with an option for taxable transfer in 2012? In the case of the supply of an immovable property that was purchased or sold with an option for taxable transfer, the buyer has to declare in writing that he will use this immovable property for purposes for which he has the right to deduct VAT for at least 90%. If the buyer fails to use the property for at least 90% for VAT deductible purposes in the book year in which the supply took place or the book year after that, he is required to notify the seller and the tax authorities in writing within four weeks after the end of this reference period (a so-called negative declaration). While in the past such declarations resulted in a VAT adjustment that had to be paid by the purchaser of the property, this is no longer the case, based on a recent judgment by the European Court of Justice (Pactor Vastgoed, October 10 2013, C-622/11). The amount of adjusted VAT owed that is accountable to activities after October 10 2013, the date of this judgement, can be levied from the original supplier. This also applies for the years to come. We would therefore advise suppliers of real estate to henceforth include clauses in their purchase agreements regarding the liability for this VAT damage.
9. Investments in real estate funds and Dutch real estate transfer tax
Do you have an investment in a real estate fund that does not constitute an investment fund within the meaning of the Dutch Financial Supervision Act (Wet op het financieel toezicht)? If so, note that the tax treatment of this investment may be affected by a change taking effect from January 1 2014. From that date, the Dutch levy of the real estate transfer tax (RETT) will be amended for investments through real estate partnerships. If you acquire (or expand) an interest in a partnership, limited partnership or mutual fund (fonds voor gemene rekening), you will be required to pay RETT from next year. This is not the case, however, if you acquire (or expand) an interest of less than one-third and the fund qualifies as an investment fund within the meaning of the Financial Supervision Act. Any trade in this interest after December 31 2013 may thus lead to a levy of RETT if the investment vehicle does not qualify as such an investment fund. The tax treatment for legal persons remains unchanged.
10. Increase of interest on overdue tax claims
Do you expect that you or your company will have to pay taxes in the Netherlands in 2014? If so, it is worth pressing for swift handling of your tax return by the Dutch tax inspector, because the interest payable on Dutch corporate tax will be a minimum of 8% from April 1 2014. With effect from that date, a minimum of 4% will apply for other taxes, such as income tax. The interest on overdue tax is 3% for all taxes. As the payment deadline of six weeks from the date of the tax assessment is part of the interest period, the Dutch tax authorities will effectively apply the changed interest rates to tax assessments dated from February 18 2014.
11. Increase of late payment interest
Have you or your company previously been granted postponement of payment of your tax assessment? Such postponement will be more expensive from April 1 2014, because Dutch late payment interest will then be charged at a minimum rate of 4%. Late payment interest is 3% now. Consequently, you may find postponement of payment less desirable in future.
Not yet passed
The Dutch tax tips and points to note are based on the current Dutch legislation and case law. We also write in anticipation of the measures proposed in the 2014 Tax Package, which was approved by the House of Representatives on November 19 2013. Because the Senate has not yet approved the 2014 Tax Package, it remains to be seen which of the proposals will eventually become law. This means that the content of the tax tips and points to note described in this contribution may still change.
Jessica Litjens (email@example.com) and Mitra Tydeman-Yousef (firstname.lastname@example.org) are tax specialists of PwC.