Tax impact new coalition plans

Last Wednesday, four political parties reached a provisional agreement to form a government in the Netherlands. This provisional agreement contains the coalition plans for the coming years. A key focus is on improving the business climate in the Netherlands, with priorities including the availability of talent, strengthening the knowledge economy, fostering innovation, and enhancing (digital) infrastructure.
 
More specifically, the annex to this agreement details the impact of the outlined plans on public finances and includes several tax measures to achieve these goals. In this tax alert, we will highlight the most important tax measures:

• For corporate income tax purposes, the generic interest deduction limitation rule on net interest expenses (earnings stripping rule) currently has a threshold of the highest of EUR 1 million or 20% of the EBITDA. This percentage will be increased to 25%, which is in line with the EU average. Please note that the existing government expressed its intention to adjust the earnings stripping rule in relation to the EUR 1,000,000 threshold for real estate entities in 2025. There is no reference to this intention in the plans so far, so it is not completely clear what the status of this intention is.  
• For Dutch dividend withholding tax purposes, an amendment was made by Dutch Parliament to the Tax Plan 2024. As a consequence, the dividend withholding tax exemption for the buyback of own shares for listed companies was abolished. Based on the provisional agreement, the measure will be reversed.
• For personal income tax purposes, income derived from substantial interests (in short: interests of 5% or more) held by taxpayers in legal entities, is subject to personal income tax in Box II. The tax rate on Box II income of excess of EUR 67,000 was increased by way of an amendment by the Dutch parliament from 31% to 33% (see tax alert). The plan is to reverse this amendment and to reduce the personal income tax rate to 31%.
• For personal income tax purposes, income derived from savings and investments is subject to personal income tax in Box III. It is also planned to reduce this relevant rate.
• The tax measures for donations for personal and corporate income tax purposes will be limited starting in 2025. Donations to qualifying charities are - subject to conditions - currently deductible for corporate and personal income tax purposes.

Several items such as scaling down the expat regime (known as the 30% ruling) and the new Box III regime are not discussed in the plan. It is expected that the plans will be proposed on Budget Day later this year in September.