Dutch 2024 Tax Plan and other Tax proposals

On Tuesday 19 September 2023 the Dutch State Secretary for Finance published the 2024 Tax Plan and related legislative tax proposals. This newsflash primarily discusses the proposals that we consider most relevant for (international) companies.

Dividend stripping

Dividend stripping is the practice of splitting the economic interest in and legal title to dividends in order to obtain a dividend withholding tax advantage. The 2024 Tax Plan proses to improve the possibilities to combat dividend stripping through the following two separate measures:

1. The introduction of a record date for recording the beneficiary of the dividends and the underlying credits, refunds or reductions of dividend withholding tax; and
2. Improving the burden of proof for tax authorities in cases of suspected dividend stripping. The later measures only apply if the underlying tax amount exceeds EUR 1,000.

Dutch tax classification rules for (foreign) entities

A new regime for the classification of (foreign) entities for Dutch tax purposes is proposed as of 2025. The regime aims at reducing (hybrid) mismatches between the Netherlands and other jurisdictions and will include the following key elements:

1. the codification of the current tax classification method for foreign entities;
2. the current tax classification method for foreign entities will be supplemented by the 'fixed'-method and the 'symmetrical'-method for foreign entities that do not have a comparable Dutch legal form, whereby:
   1. the 'fixed'-method entails that if an entity established under foreign law is resides in the Netherlands, the entity will always be regarded as tax opaque; and
   2. the ''symmetrical'-method means that if an entity established under foreign law (with a shareholder relationship with a Dutch resident taxpayer) and that entity does not reside in the Netherlands, the Dutch qualification of the entity will follow the qualification of its country of residence; and
3. the so-called unanimous consent requirement (toestemmingsvereiste) will be abolished and all Dutch limited partnerships (CV), including the open limited partnerships (open CV) that currently is regarded as tax opaque, will qualify as tax transparent (except for reverse hybrid structures).

The change in the tax classification of the open CV from tax opaque to tax transparent will trigger a final settlement which may result in a tax liability. Facilities are proposed to allow for a tax neutral restructuring. The impact of this proposal needs to be assessed as soon as possible with a viewing to benefitting from the special restructuring facilities in 2024.

Changes to the tax classification of Dutch mutual funds (fonds voor gemene rekening or FGR)

Under the current rules, the FGR can be structured as tax transparent or tax opaque for Dutch tax purposes. An FGR qualifies as tax transparent it the rules relating to the transfer of units are structured according to:

1. the unanimous consent variant –units are only transferable with the prior unanimous consent of all other unitholders.
2. The redemption variant – units can only be redeemed and issued by the FGR, i.e. only be transferred to the fund itself.

All other FGRs are currently treated as tax opaque for Dutch tax purposes.

Under the proposed new rules, an FGR will only qualify as tax opaque for Dutch tax purposes if the FGR is regulated under the Dutch Financial Supervision Act and the participation units are freely transferable. In this respect, the units will not be considered freely transferable if the units can only be redeemed and issued by the FGR itself. All other FGR's will be treated as tax transparent as of 2025.

The change in tax classification from tax opaque to tax transparent will trigger a deemed disposal of the assets and liabilities of the FGR which may result in a Dutch corporate income tax liability. In order to give taxpayers the opportunity to restructure in a tax neutral manner in preparation for the change in the tax classification of FGRs, several facilities are offered. We would advise FGRs that currently qualify as tax opaque and are affected by this proposal to take advantage of the restructuring opportunities in 2024 before the proposed changes take effect from 2025.

VBI regime

It is proposed that the Dutch exempt investment institution regime (VBI regime) will be limited to entities that are regulated under the Dutch Financial Supervision Act as of 2025. This will eliminate the current possibility of using this exempt regime for Dutch corporate income tax purposes for the investment in private assets.

FBI regime

It is proposed that Dutch fiscal investment institutions (FBI) will be prohibited from directly owning Dutch real estate. Any FBI directly owning Dutch real estate as of 2025 will be subject to corporate income tax. Any FBI affected by the change in legislation and wishing to avoid such tax obligations will have to complete a necessary restructuring in 2024. During this period, a real estate transfer tax exemption will be introduced for restructurings by FBI to divest any prohibited assets or subsidiaries.

Real estate transfer tax on share deals / concurrence exemption

From 2025 the so-called concurrence exemption for the acquisition of shares in a real estate company will be abolished (concurrence between VAT and real estate transfer tax). As a result, the indirect acquisition of newly developed real estate will be subject to real estate transfer tax at the new rate of 4%, calculated on the fair market value of the new building or buildings. However, the concurrence exemption remains available if during the first 2 years after the share acquisition the underlying real estate is used for activities that entitle the owner (entity) to recover at least 90% of the VAT. With respect to asset deals, no changes are proposed concerning the concurrence exemption from real estate transfer tax.

Environmental measures

A number of environmental measures are proposed, the most important of which are an increase in the carbon emissions tax from 2024 and the extension of existing tax incentives (albeit at reduced percentages). In addition, it has been stated that all relevant tax breaks for the 'fossil industry' and their effectiveness have been identified during the last government period. However, due to the caretaker status of the current cabinet, any decisions regarding potential adjustments to these tax incentives will be deferred to the next cabinet.

Other tax changes as per 2024

Box 2 tax rates for income from substantial interest

As per 2024, the flat rate of 26.9% will be replaced by a general rate of 31%, with a step-up rate of 24.5% applying to the first EUR 67,000 of income from substantial interest. In short, a substantial interest is held if a private shareholder owns 5% of a company (or 5% of a special class of shares).

Box 3 – income from savings and investments

From 2024, the box 3 tax rate (which applies to income from passive investments) will increase from 32% to 34%. In addition, further guidance has been published on a number of points to determine the relevant tax base for box 3. The introduction of a new box 3 regime based on actual income will be delayed from 2026 to 2027.

30% ruling limited to maximum public sector salary

Employees recruited from abroad who have specific expertise that is rare in the Netherlands are offered a favourable tax regime under which 30% of their gross salary can be paid as a net remuneration.

From 2024, the application of the 30% ruling will be limited to the maximum salary for the public sector (EUR 223,000 in 2023). For existing 30% rulings with an expiry date after 1 January 2024, a transitional regime will be introduced under which the limit will apply from 1 January 2026.

The way forward

In the coming months, the 2024 Tax Plan will be discussed in both chambers of Dutch parliament. This means that the proposed measures are subject to change. We will keep you informed of any relevant changes. Please do not hesitate to contact us if case you have any questions.