Most relevant changes of Dutch tax legislation

This alert discusses the most relevant changes in Dutch tax legislation applicable per 1 January 2024 and upcoming years, with a focus on rules relevant for cross border corporate structures and internationally oriented companies.

We already informed you about the proposed legislative changes for the occasion of Budget Day by way of our tax alerts dated
20 September 2023, 31 October 2023, 3 November 2023 and
21 December 2023. Besides the proposals sent on Budget Day, also other changes which are relevant for CIT payers involved in cross border corporate structures entered into effect on 1 January 2024, such as the increase of the scope of the conditional withholding tax (CWT) to distributions (e.g. dividends) and the applicability of CWT to recipients having a tax presence in certain tax treaty jurisdictions. Also, certain other legislative proposals are summarized which entered into force on 1 January 2024 or are expected to enter into force from1 January 2025 onwards.

Rules changed on 1 January 2024

Minimum tax act 2024
The minimum tax act 2024 requires large multinational enterprises with an annual turnover exceeding EUR 750 million to be subject to 15% minimum corporate income tax due to the so-called OECD Pillar 2 project. The Minimum tax act 2024 enters into force on fiscal years starting on or after 31 December 2023 and therefore effectively in general per 2024.  For more information regarding Pillar Two, we refer to one of our previous articles.

Conditional withholding tax on dividends
The Dutch legislator implemented the CWT on interest and royalty payments to affiliated beneficiaries located in low-tax and non-cooperative jurisdictions per 2021 and abusive situations. Per 1 January 2024, the CWT is also applicable on dividend payments. Furthermore, the CWT applies to tax treaty jurisdiction insofar the tax treaty allows the Netherlands to withhold tax. Finally, an amendment has been made to the CWT rules regarding the tax classification of limited partnerships based on which the envisaged new tax classification rules applicable on 1 January 2025 can already apply from 1 January 2024 onwards. For more information, reference is made to our alert of 3 November 2023.

Excessive borrowing from private company
A Dutch company that (in)directly provides a loan to a shareholder which holds a substantial interest (i.e. 5% or more) will be deemed to be a fictitious regular benefit for personal income tax purposes in box 2 insofar the loan exceeds a certain maximum amount. As per 1 January 2024, the maximum amount has been decreased to EUR 500,000 from EUR 700,000 in 2023. For more information, reference is made to our alert of 31 October 2023. 

Dividend stripping rules
The Dutch legislator aims to further prevent abuse of dividend stripping. The new rules include a reversal of the burden of proof from the Dutch tax authorities to the entity that reclaims the dividend tax in case of a claim for a tax credit or refund of withholding tax of at least EUR 1,000 per book year or calendar year and in case of the application of the Dutch dividend tax exemption. For more information, reference is made to our tax alert of 20 September 2023. 

Update Netherlands blacklist of low-taxed jurisdictions
On 29 December 2023, the Dutch legislator issued an updated list with countries which are regarded as low-tax or non-cooperative (so-called Netherlands blacklist). It was decided to add Antigua and Barbuda, Belize, Russia and the Seychelles and to remove the United Arab Emirates. For more information, reference is made to our tax alert of 
9 January 2024.

Limitations of 30% facility         
The 30% facility covers a tax-free rate for wage taxes for expats. Per 1 January 2024, this scheme may be applied up the maximum amount under the Standards for Remuneration Act (EUR 223,000 in 2023). Furthermore, the 30% facility will be scaled back to 20% after 20 months once the 30% facility will be applied from 1 January 2024 onwards. If an employee would start utilizing the facility on 1 January 2024, the facility will therefore be scaled back to 20% from 1 September 2025 onwards. The facility will be further scaled back to 10% again after 20 months. The limitations do not apply to applicants who already applied the 30% ruling before 1 January 2024.

Business succession scheme
The legislator adopted several changes to the current business succession scheme (in Dutch: BOR) with respect to inheritance tax and personal income tax. Per 1 January 2024, immovable property leased to third parties will no longer qualify as business assets and therefore qualify as investments assets which are out of scope for the BOR. Per 1 January 2025, the 5% efficiency margin for investment assets will be removed. Under this margin, investment assets up to 5% of the value of the business assets will be considered as business assets and therefore qualify for the BOR. Also, per 1 January 2025, the employment obligation will be removed. This obligation stated that the successor should be employed in the company which shares are acquired for three years to qualify for the BOR. In addition, the 100%-exempt amount will be increased from EUR 1.2 million to EUR 1.5 million. The surplus of EUR 1.5 million will be exempt for 75%, instead of the current rate of 83%.

Extension of business investment incentives
The business investment incentives Energy Investment Deduction (EIA), Arbitrary depreciation of environmental investments (VAMIL) and Environmental Investment Deduction (MIA) should expire per 1 January 2024, however, due to positive outcome from the evaluations of these schemes, the application of the incentives are extended until 1 January 2029. The percentage of deduction for the EIA is reduced from 45.5 to 40% per 1 January 2024.

Personal income tax rates
Box 2 of the personal income tax consists of income derived from substantial interest (i.e. 5% or more) and was taxed at a rate of 26.9% up and until 2023. Per 1 January 2024, box 2 has two brackets. The first bracket – income up to EUR 67,000 – will be taxed at a rate of EUR 24.5%. The surplus of EUR 67,000 will be taxed at a rate of 33%. The tax rate from income derived from savings and investment (box 3) increased from 32% to 36% on 1 January 2024. The tax-free amount of box 3 income remains EUR 57,000 (EUR 114,000 for taxpayers with a tax partner).

Rules (expected) to be changed on 1 January 2025

Partial non-resident taxation
An expat which is resident in the Netherlands may currently apply to be treated as non-Dutch resident for tax purposes. As a result, the expat would not be taxed on income derived from substantial interest (i.e. 5% or more) and on savings and income, also known as box 2 and box 3 income respectively. Per 1 January 2025, expats may no longer apply for this scheme and expats will therefrom be treated as regular Dutch tax resident from 1 January 2025. Transit facilities are in place for expats who already were eligible for this scheme on 31 December 2023.

Earnings stripping rules
The Dutch implementation of the earnings stripping rules states that a taxpayer may deduct EUR 1 million of net interest expense or, if higher, deduct a maximum amount of net interest expenses of 20% of EBITDA. Per 1 January 2025, real estate entities may no longer deduct net interest expenses up to EUR 1 million but may only deduct interest expenses up to an amount of 20% of EBITDA. This legislative change aims to reduce interest deduction by real estate entities which, according to the legislator, split up in multiple companies in order to apply the threshold of EUR 1 million multiple times.

Change tax classification rules
The Dutch tax treatment of limited partnerships (e.g. CVs) will change per 1 January 2025. CVs will be considered as transparent for Dutch tax purposes per 2025. The Dutch classification regarding funds common account (FGR) will also change per 2025 as such that FGRs will in general be treated as transparent for Dutch tax purposes, except if it qualifies as investment institution within the meaning of the Act of Financial Supervision. For more information, reference is made to out tax alert of June 2023.

VBI/ FBI
Fiscal investment institutions (FBIs) will be subject to regular corporate income tax rules should the FBI invest directly in Dutch real estate. FBIs are now, subject to conditions, taxed at a rate of zero percent. Exempted investment institutions (VBIs) may only apply for the regime in which it will be exempted from tax if the entity qualifies as regulated investment institution within the meaning of the Act on Financial Supervision. Reference is also made to our tax alert in June 2023.

Repurchase of shares
Currently, repurchasing shares by listed companies are exempt from the dividend withholding tax. This exemption will be abolished as from 1 January 2025. However, as stated in our tax alert, the State Secretary of Finance has promised to present other options in the spring.

Real estate transfer tax
Under current legislation, there is an exemption of real estate transfer tax (RETT) applicable to share transactions to companies whose supply is subject to VAT. Such transactions will on 1 January 2025 be subject to 4% RETT. Certain transitional rules apply for ongoing projects.