The Dutch government announced that - contrary to its earlier plans - it will not abolish the dividend withholding tax as announced in its Dutch 2019 Budget proposals. The budget reserved for abolishing the dividend withholding tax is now likely to be used, among other things, for (i) a further reduction of the corporate income tax rates and (ii) financing the costs associated with grandfathering rules in relation to existing 30% expat rulings. Below, we briefly summarise the above measures.
Dividend withholding tax not abolished
The dividend withholding tax will not be abolished: it will continue to exist. Due to the overlap of the dividend withholding tax with the newly proposed conditional withholding tax on dividends, the integration of these taxes and the consequences thereof will be reviewed. Therefore, the introduction of the conditional withholding tax on dividends will be postponed to a later date (under the Dutch 2019 Budget this tax would have been introduced effective as per 1 January 2020). A specific date has not been mentioned. Furthermore, given that there is no overlap of the dividend withholding tax with the newly proposed conditional withholding tax on interest and royalties, the latter tax will still be introduced effective as per 1 January 2021.
Further reduction of corporate income tax rates
The marginal top corporate income tax rate will be reduced from 25% to 20.5% effective as from 1 January 2021 (under the Dutch 2019 Budget proposals this rate was reduced to 22.25%). However, in 2019 this rate will remain at 25% (instead of being reduced to 24.3% as per the Dutch 2019 Budget proposals). Finally, for taxable profits not exceeding EUR 200,000, the corporate income tax rate will be reduced from 20% to 15% effective as from 1 January 2021 (under the Dutch 2019 Budget proposals this rate would have been reduced to 16%).
Grandfathering rules 30% ruling
The application of the so-called 30% ruling for employees seconded to the Netherlands will still be reduced to five years, down from eight years, as from 1 January 2019. However, grandfathering rules will be introduced in cases where the 30% ruling period would have ended in 2019 or 2020.
We will keep you updated on developments. However, feel free to contact your AKD adviser if you have any questions on the above.