On 19th September, 2023, the Dutch Ministry of Finance presented the 2024 Budget Plan to the House of Representatives. Among other objectives, the plan seeks to boost purchasing power, combat poverty, improve and simplify the tax system, and achieve climate goals.
Here are some proposals that may be relevant for opening businesses and investments in the Netherlands:
Changes in Dutch tax qualification for domestic and foreign companies
The new Dutch budget plan proposes that the non-transparent limited liability company no longer exists, and all unlimited liability companies will be treated as transparent entities for tax purposes, eliminating the “unanimous consent requirement.”
Open-End Dutch investment funds
The budget plan redefines open-end Dutch investment funds for tax purposes. Specifically, under the proposed rules, a Dutch mutual fund (as an opaque taxpayer subject to Dutch corporate income tax) should qualify as an investment fund.
To qualify as a corporate taxpayer, units must be transferable in any way other than solely through redemption by the fund itself, while all other funds will qualify as transparent. Following this change, it will no longer be possible to use mutual funds for investing in private assets within the family circle.
Foreign incorporated entities
Two methods for the Dutch tax qualification of foreign corporate entities were presented in specific circumstances: the fixed method and the symmetric method. The fixed method is adopted when the entity is incorporated or established under foreign law and is situated in the Netherlands. In this situation, the entity will always be considered a Dutch corporate taxpayer for Dutch corporate income tax purposes.
The symmetric method provides a solution for cases where the foreign entity is incorporated or established under foreign law and is situated abroad. This foreign entity is considered non-transparent for Dutch tax purposes if it is subject to taxation independently under the tax laws of a country that treats it as a resident.
Adjustment of tax credits for environmental and energy-efficient investments
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Environmental investment credit and arbitrary depreciation for environmental investments:
The Dutch government may offer investors an environmental investment credit of up to 45% (depending on the type of investment), available for certain environmental improvement assets. In addition, the government has decided to increase the budget for environmental investment credit starting in 2027.
In addition to the above credit, there is also the option for arbitrary depreciation of up to 75% for environmental investments.
At first, this credit could only be applied until 1st January, 2024. However, it has been proposed to extend this period for another 5 years.
Energy-Efficient investment credit:
Investments in commercial assets requiring low energy use may currently qualify for an additional energy-efficient investment credit of 45% (in 2023) of the investment value. The minimum investment is €2,500, with a limit of €136 million in investments per taxpayer per year.
To qualify for this credit, the company must be located in the Netherlands and subject to Dutch corporate income tax. Investments are only eligible for the credit if they relate to commercial assets listed in the “Energy List” and have not been previously used.
Although the benefit has been reduced, the new proposal ensures that more entrepreneurs can benefit from the investment credit. Furthermore, the government has decided to extend the budget for energy-efficient investment credit through 2025.
The current benefit will be applicable until 1st January, 2024, but it has been proposed to extend this period for another five years.
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Published on October 20, 2023