Netherlands Budget Day 2022: Impact of tax proposals on multinational enterprises
International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX
Copyright © Legal Benchmarking Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Netherlands Budget Day 2022: Impact of tax proposals on multinational enterprises

Sponsored by

Sponsored_Firms_piper.png
The Dutch Ministry of Finance presented its 2022 budget to the Dutch parliament on September 21 2021

Jian-Cheng Ku and Tim Mulder of DLA Piper discuss the most relevant tax proposals announced in the Netherlands 2022 budget that are relevant for multinational enterprises with activities in the Netherlands.

The Dutch Ministry of Finance presented its 2022 budget to the Dutch parliament on September 21 2021. Part of the budget are the draft tax proposals for 2022 and onwards. The draft tax proposals will be discussed by the parliament within the next months. If enacted, the tax proposals are expected to enter into force on January 1 2022.

Employee stock option rules

To provide more flexibility to companies offering employees stock options, a deferral of taxation will be proposed. The taxable amount of the stock options is the fair market value at the moment of taxation. 

The tax proposal provides more flexibility for the moment of taxation. The moment of taxation will be the moment that the option right is exercised, the underlying shares become tradable or when the option is sold. 

Taxation of reverse hybrid entities

In line with the Dutch implementation of the EU Anti-Tax Avoidance Directive 2, certain reverse hybrid entities will become Dutch corporate income taxpayers as per January 1 2022. 

These rules apply to reverse hybrid entities that are incorporated or established under Dutch law and is treated transparent from a Dutch tax perspective while from the perspective of its participants holding at least 50% of the voting or profit rights, the entity is treated opaque. For certain investment funds an exemption may apply.

It is anticipated that on January 1 2022, the reverse hybrid entity should prepare a tax balance sheet and value its assets and liabilities at fair market value. In case the reverse hybrid entity has participants treating the entity as transparent, the results attributable to these participants will be deducted from the entity’s Dutch tax base.

Elimination of double non-taxation through TP

In March 2021 the Dutch Ministry of Finance published an internet consultation for its legislative proposal to eliminate double non-taxation under the Dutch arm’s-length principle. This proposal included three types of measures against a downward profit adjustment for Dutch tax purposes in case of no corresponding taxable upward adjustment at the level of the related party.

The legislative proposal to eliminate these transfer pricing (TP) matches are part of the of the Budget Day Tax Proposals. The measures should become effective for fiscal years starting on or after January 1 2022. There will be no retroactive effect, except for business assets that are acquired in financial years starting on or after July 1 2019 and before January 1 2022. If these assets are acquired against a book value lower than its fair market value, amortisation of these assets might be restricted as of January 1 2022.

Other announced changes

As per January 1 2021, the lower bracket of the corporate income tax rate of 15% will increase from €245,000 in 2021 to €395,000 in 2022. 

As per January 1 2021, the loss compensation rules will be amended. These changes were already part of the 2021 Budget Day Tax Proposals. As a result, losses can be carried forward indefinitely, but the offset will be restricted to 50% of the annual profits in excess of a €1 million threshold.

The announced changes regarding the Dutch tax qualification of partnerships will likely postponed until the winter of 2021–2022.

Comments

Contrary to the last couple of years the number of tax proposals affecting multinational enterprises is limited. Furthermore, proposals regarding reverse hybrid entities and the elimination of double non-taxation through transfer pricing were already announced earlier this year.

The tax proposals are currently discussed in Dutch parliament and subsequently might be amended. In case the proposals are adopted by the parliament, the tax proposals will be enacted into law by the end of this year and become effective as per January 1 2022. 

 

Jian-Cheng Ku

Partner, DLA Piper

E: jian-cheng.ku@dlapiper.com

Tim Mulder

Senior associate, DLA Piper

E: tim.mulder@dlapiper.com

 

more across site & bottom lb ros

More from across our site

Proposals by HM Revenue and Customs to raise standards in the advisory market are ‘well overdue’, one partner declared
An intimate understanding of a client’s sector is essential to winning new business, a survey of over 28,000 corporate counsel reveals
‘Auditors are failing to perform their core function’ according to a think tank; in other news, White & Case adds a tax partner in Luxembourg
An overhaul of EU import taxes could spell the end of an exemption for cheap parcels
Sharma, managing director for A&M in the United Arab Emirates, tells ITR about intense time pressures, mimicking Jurgen Klopp and what makes tax cool
AI will speed up some of the most laborious TP processes without making human input redundant, argues Hank Moonen, CEO of TaxModel
Firms with a broad geographic reach are more likely to win work, especially from global companies with high turnovers, according to survey data of nearly 29,000 corporate counsel
Australian businessman Gordon Merchant used EY’s advice to offset an A$85 million capital gain, according to the Federal Court
Griggs has been drafted in ahead of schedule as the incumbent Tim Ryan departs for Citigroup; while the Netherlands plans to scrap a 15% share buyback tax
Authorities must ensure that Russian firms do not use transfer pricing schemes to increase profits made from oil sold in different markets, advocacy organisations have argued
Gift this article