The 2023 Dutch tax plan: Impact on businesses

Introduction

On 20 September 2022, the Dutch Ministry of Finance published its 2023 Tax Plan (Belastingplan 2023). The 2023 Tax Plan itself consists of seven proposals, mainly aimed at restoring individual's purchasing power and limiting the effects of the energy crisis. Most provisions of the Tax Plan are supposed to enter into force on 1 January 2023.

In this note, we discuss the proposals that we feel are most relevant to the international business community:

• Raise the low CIT rate from 15% to 19% and lowering the first bracket to € 200,000
• Increase general rate of RETT from 8% to 10.4%
• Expired exception to the customary wage scheme for innovative start-ups
• Tightening up CO2 levy industry
• Dutch entity tax classification rules (as of 2024)
• Limiting the 30% facility for expats (as of 2024)
• Cancel the FBI regime for real estate investments (as of 2024)

Note that the proposals are currently subject to parliamentary review and may therefore be subject to changes. It is already announced that as part of the current parliamentary review more details will follow with respect to the anti-dividend stripping rules through a subsequent amendment.

Raise the low CIT rate from 15% to 19% and lowering the first bracket to € 200,000

The top Dutch corporate income tax (CIT) rate will remain 25.8%; however it is proposed to increase the step-up CIT rate for the first bracket from 15% to 19%. In addition, it is proposed to lower the first bracket from € 395,000 to € 200,000 as of 1 January 2023. As a result, companies will pay the top CIT rate of 25.8% from a taxable amount of more than € 200,000.

Increase general rate of RETT from 8% to 10.4%

It has been agreed to increase the general rate for the RETT with effect from 1 January 2023 from 8% to 10.4%. The RETT rate for residential real estate that will serve as the owner's primary place of residence will not be changed and remain at 2% (or 0% under certain conditions if an individual acquires his/her first residence). This measure is intended to improve the relative position of starters and existing homeowners against investors in the owner-occupied market.

Expired exception to the customary wage scheme for innovative start-ups

In 2017, a mandatory wages threshold for substantial shareholders scheme was relaxed for so-called innovative start-ups. The taxable wages of taxpayers who hold a substantial interest in those innovative start-ups and who perform work for those innovative start-ups may be set at the statutory minimum wage for the application of the customary wage scheme. The scheme may be applied for a maximum of three years, after which the normal rules for determining the usual wage apply again. The aim of this scheme is to stimulate innovative start-ups by improving their liquidity position.

After a recent review, it was concluded that the scheme does not succeed in stimulating innovative start-ups by improving their liquidity position. It is therefore proposed that the scheme will be cancelled as of 1 January 2023. A grandfathering rule will be introduced: Substantial shareholders who are making use of the scheme in 2022 can continue to apply the scheme on the basis of this proposal.

Tightening up CO2 levy industry

The Climate Agreement includes the target for industry to reduce greenhouse gas emissions by 14.3 megatons by 2030. The CO2 levy for industry was introduced in 2021 to safeguard this emission reduction target for industry. Companies that emit more greenhouse gases than the exempt emission allowance must pay the levy on these emissions. The exempted emission allowance is allocated in the form of tradable dispensation rights. The number of dispensation rights is gradually reduced to an emission allowance that corresponds to the emission reduction target in 2030.

This legislative proposal results in an accelerated linear reduction in the number of dispensation rights for industry. On balance, the reduction factor due to the combination of these components for the year 2023 is 1.213. The reduction factor decreases by 0.078 for each subsequent calendar year. The rate path of the CO2 levy industry will not be changed as of 1 January 2023. It is expected that less than four megatons of dispensation rights will be granted to industry in 2030.

Dutch entity tax classification rules (as of 2024)

Originally, the Dutch Ministry of Finance intended changing the Dutch entity classification rules as of 1 January 2022 to reduce mismatches with foreign entity classification rules. This was in relation to the classification of Dutch and foreign entities as either tax transparent or opaque. An important change would have been that all Dutch limited partnerships would be treated as tax transparent per se. This would have resulted in the so-called open limited partnership (open commanditaire vennootschap) that are under the current rules treated as taxable entities no longer being subject to Dutch corporate income tax. Dutch resident entities, incorporated or entered into under foreign law having a legal form that is not comparable to a Dutch legal form, would be treated as taxable entities (and thus as opaque for Dutch corporate income tax purposes) in the Netherlands, notwithstanding the qualification in their jurisdiction of incorporation. Such entities include the German Kommanditgesellschaft auf Aktien (KGaA). The Netherlands would follow the classification made by the foreign jurisdiction for non-resident entities incorporated or entered into under foreign law that are not comparable to a Dutch legal form and that hold an interest in a Dutch entity or in which a Dutch entity holds an interest.

An updated legislative proposal is expected in Spring of 2023, which aims to become effective as of 1 January 2024. The impact for taxpayers should be monitored closely.

Limiting the 30% facility for expats (as of 2024)

For certain employees who come to the Netherlands from another country to work here (incoming employees), their employer may reimburse certain extra costs due to temporary work and residence in the Netherlands free of payroll taxes (targeted exemption). These extra costs (so-called extraterritorial costs) can be reimbursed on a declaration basis, but under certain conditions it is also possible to apply for the application of the so-called 30% facility. In short, with the application of the 30% facility, an employer can reimburse a maximum of 30% of the “wage” of an incoming employee untaxed without further substantiation of the costs.

It is proposed to cap the 30% facility for salaries exceeding the so-called Balkenende standard as of 1 January 2024. This norm refers to the remuneration standard for senior officials in the Top Income Standards Act (WNT standaard), which is € 216,000 in 2022 and will be adjusted annually.

Cancel the Dutch FBI regime for real estate investments (as of 2024)

As of 1 January 2024, the government will introduce a measure in corporate income tax on the basis of which Dutch fiscal investment institutions (FBIs) are no longer allowed to invest directly in real estate (real estate measure). This means that profits derived by a FBI from direct real estate investments will generally become subject to Dutch corporate income tax. The real estate measure which will be included in the Tax Plan package of next year may have a large impact on existing FBIs. The government recognised that some FBIs may want to restructure their real estate investments in advance and such restructuring could become subject to RETT. In the coming months, the government will therefore investigate the desirability as well as the need for specific RETT relief.