The Council of Ministers approved the fiscal policy agenda on a package to combat tax avoidance and tax evasion. The most important changes are summarized below:

Corporate Income Tax (CIT) rate:

According to the Agenda, the current standard Dutch CIT rate will be reduced from 25% to 24% in 2019, to 22.5% in 2020 and to 21% as from 2021.

Interest deduction limitation rules:

The Agenda confirms that the earnings stripping rule of the ATAD will be enacted as from 1st January 2019. Pursuant to the Dutch implementation of this rule, interest deduction limitation rules in accordance with the EU Anti-Tax Avoidance Directive which includes a general 30% of EBITDA limitation with a EUR 1 million safe harbor threshold, moreover a rule for banks and insurers limiting interest expense deductions on debt exceeding 92% of the total commercial balance sheet value.

Introduce withholding tax:

As of 2021, the Netherlands will introduce a withholding tax on outgoing interest and royalty flows to low tax jurisdictions and in abusive situations. This prevents the Netherlands from being used for transfer activities to tax havens. As from 1st January 2020 the new government eliminate the 15% dividend withholding tax. In addition the government intends to introducing a withholding tax on interest and royalty payments made to countries with very low tax rates (currently, no withholding tax is applied on interest and royalties in any case).

Controlled foreign corporation (CFC) rules:

In the CFC measure, which must prevent companies from evading tax by moving mobile assets to a CFC in a low-tax jurisdiction, the Netherlands opts for an interpretation that addresses tax avoidance through entities in tax havens. The Agenda shares further details about the implementation of the CFC rule of the ATAD as from 1 January 2019.

This legislation will apply if a Dutch company owns a participation of more than 50% in a foreign company and the foreign company is taxed at a rate which is less than half the Dutch rate. If these conditions are met the profits of the CFC pro rata the participation are included in the tax base of the Dutch company. The CFC profits will be added to the profits of the Dutch company and will be based on the arm’s length principle.

Anti-hybrid rules:

According to the Agenda, the Dutch Government aims to implement the anti-hybrid rules of the ATAD as of 1st January 2020. The implementation of ATAD 2 ensures tax avoidance via ‘hybrid mismatches’ as much as possible is prevented. Hybrid mismatches caused by differences between taxes systems what companies can use.

Approach tax avoidance and evasion:

State Secretary Snel bases the fight against tax avoidance and tax evasion on two pillars. On the one hand, he wants to protect the tax base. On the other hand, he takes measures in the area of ​​transparency and integrity.

  • The Netherlands has a tax system that hinders entrepreneurs as little as possible in the abroad, and encourages foreign entrepreneurs to trade in the Netherlands to invest. That fits with an open economy like the Netherlands.
  • One of the reasons for this letter is the (international) criticism of the Dutch tax system.