Most relevant changes of Dutch tax legislation

This tax alert provides a summary of the most salient new tax rules in the Netherlands, which become applicable from 1 January 2023 onwards and which are expected to apply from 1 January 2024 and 1 January 2025 onwards, 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 alert dated 22 September 2022. 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, such as the law on excessive borrowing from a private company.

Rules changed on 1 January 2023

Corporate income tax (CIT)
Increase of CIT rate for SME’s
In 2022, the Dutch CIT rate was 15% for taxable profits up to EUR 395,000 and 25.8% for taxable profits exceeding this amount. The bracket limit of the lower rate is now reduced to EUR 200,000 and the CIT rate over the lower bracket is increased to 19%. The CIT rate for taxable profits exceeding this amount remains 25.8%.

Payroll tax
The so-called customary wage rules are amended. The customary wage rules require a substantial shareholder performing work for his company to pay a minimum salary. For 2022 the customary wage amounted to the highest of the following amounts:
(i) € 48,000, (ii) 75% of the wage for the most similar position and (iii) the highest wage of the employer or the group of companies of the employer. Under the new 2023 rules, the amount of condition (i) is EUR 51,000 and the percentage of condition (ii) is 100% of the wage for the most similar position.

Real estate transfer tax (RETT)
Increase of RETT rate
The general RETT rate increased from 8% in 2022 to 10.4% as per 1 January 2023.The RETT for residential properties that serves as the principal residence for the individuals purchasing such property is 2% (and 0% in specific situations).

Personal income tax (PIT)
Changes box 3 rules
A Dutch tax resident individual is subject to PIT in box 3 in respect of income from savings and investments, including share interests of less than 5% and real estate which is not used as the residential home (and is not a part of a business enterprise) of the taxpayer. The tax basis was in principle determined based on the value of all investment assets minus debts (reduced by a threshold) for the fair market value on 1 January, reduced by an exemption, and taxpayers were deemed to hold certain types of assets and to received deemed income depending on the type of assets held. In view of case law, the determination of taxable income based on too many deeming provisions is no longer allowed.

In box 3 assets are over 2023 subject to 32% PIT instead of 31% in 2022, and the types of assets actually held are decisive. The deemed income for "other assets" in Box 3 such as shares and real estate is set at 6.17%. The other deemed income rates for bank deposits and debts have not been established yet. These rates will be determined after the end of 2023 to approximate the actual return as closely as possible. The preliminary rate of return for 2023 is 0.36% for the bank and savings deposits and cash, and is -/- 2.57% for the debts. If the percentages would change, such changes will be taken into consideration in the final assessment after the tax return has been filed.

Rules (expected to be) applicable from 1 January 2024 onwards

Personal income tax
Changes box 2 rules
The PIT rules for the so-called substantial interest holders of box 2 shall change. In short, this relates to individuals holding at least 5% of (a certain class of) shares, either on their own or together with certain others. As of 2024, box 2 is expected to have two brackets. The first EUR 67,000 of taxable income will be taxed at a rate of 24.5% and any excess will be taxed at a rate of 31%. There is currently only one rate in box 2, which is 26.9%.

Payroll tax
The basis for the calculation of the extraterritorial allowance (also known as 30% allowance or 30% ruling) will be maximized to the maximum amount under the Standards for Remuneration Act (EUR 223,000 in 2023) from January 2024 onwards.

Conditional withholding tax (CWT)
The scope of the CWT will apply to distributions (e.g. dividends) on 1 January 2024. In addition, the CWT will apply to certain tax treaty jurisdictions.

Exit tax for Dutch dividend withholding tax (DWT) purposes
Based on a draft law which is currently discussed in Dutch parliament, exit taxation rules may be included in the Dutch DWT Act 1956. Since the Dutch government does not support this bill, it is likely that this draft law will not be enacted.

Changes transparency rules for partnerships
A highly criticized draft law was published for consultation, changing the criteria determining the qualification of Dutch CVs and foreign legal forms as “transparent” or “non-transparent” for Dutch tax purposes in 2021. Under the proposed rules, Dutch CVs would always be treated as transparent for Dutch tax purposes. In other words, the so-called consent requirement (based on which the transparency depends on whether or not both the admission and change of partners are subject to the approval of all partners) would no longer be relevant. This change would also be relevant for the qualification of foreign legal forms that are comparable to a CV, such as a foreign limited liability partnership. Such foreign partnerships would be treated as transparent for Dutch tax purposes as well. Based on the legislative proposal, the general partner of a non-transparent CV would be deemed to have transferred its assets on the moment directly prior to the conversion from a non-transparent entity to a transparent entity. In view of the reactions obtained in the consultation process the proposal is currently subject to review and most likely change. It is now expected that the new legislation will be published in Q3 2023 and would apply from 1 January 2024 onwards.

Dutch dividend stripping rules
Recently, draft legislation has been published for consultation aimed to make the Dutch anti-dividend stripping rules stricter. The new rules are not expected to apply prior to 1 January 2024.

Rules (expected to be) applicable from 1 January 2025 onwards

Corporate Income Tax
Changes to FBI, the Dutch real estate investment trust regime
The government has announced that the measure that the FBI (fiscale beleggingsinstelling), may no longer invest directly in Dutch and foreign real estate, which was proposed during Budget Day in 2022, will be delayed by one year until 1 January 2025. This was announced in the government’s response to an evaluation report on the FBI and the exempt investment institution (VBI). As a consequence, profits derived by FBIs from Dutch real estate investments will be subject to Dutch CIT as per 1 January 2025. In addition, a conditional exemption from transfer tax may apply as per 1 January 2024 for restructurings directly related to the above measure.

Rules (expected to be) applicable from 1 January 2026 onwards

Personal income tax
Changes box 3 rules
As of 2026, it is expected that a new box 3 regime will be introduced in which the taxable income will be based on actual income. In the meantime, a transitional regime applies based on certain deeming provisions which resemble as much as possible the actual income.

If you have any questions regarding the above, please do not hesitate to contact us.