11 October 2010
Dutch Finance Minister Jan Kees de Jager has unveiled key details of the country’s 2011 tax plan, containing a number of fiscal measures designed to encourage entrepreneurship and innovation, and containing new rules designed to combat fraud and tax avoidance.
The 2011 tax plan includes plans to reduce corporation tax in 2011 to 25%. The government also plans to make permanent the reduced rate 20% corporate tax rate on the first EUR200,000 in profit, announced last year and retroactive to 2008.
In addition, companies will significantly benefit from the extension by one year of the temporary three-year loss carry-back facility (previously losses could be carried back for just one year) as well as the extension of the temporary accelerated depreciation scheme, which allows certain capital assets to be depreciated at 50% per year, to investments made in 2011 as well as those made in 2009 and 2010.
According to the government, its 2011 tax plan contains important measures designed to combat fraud and tax avoidance, including plans to introduce supplementary legislation to prevent investors and entrepreneurs using artificial arrangements to avoid corporation and transfer tax, and to provide the country’s tax administration with statutory power to exchange information on savings accounts and other banking details with countries outside of the European Union (EU).
The government also plans to extend existing regulations for EU countries on the automatic exchange of savings balances to include information on other banking details such as securities and insurance products. These measures are expected to yield additional revenues of more than EUR300m per year.
The government has confirmed that there will be no changes to existing tax benefits for highly fuel-efficient cars and announced that taxpayers will be able to benefit from the tax breaks over a longer period. Current owners of highly fuel-efficient cars will retain their entitlement to the zero rate of motor vehicle tax until at least 2013.
The package of temporary tax measures intended to stimulate the housing market in the Netherlands was announced at the end of August. Measures include a temporary reduction of the VAT rate for labour costs in renovation projects completed from October 1, 2010 to June 30, 2011. In addition, individuals paying two mortgages (when they have bought a new house but not yet sold the old one) will temporarily be eligible for mortgage interest relief on both homes for an additional year, thus expanding the period from two to three years. If a home is bought in 2011 and sold again within twelve months, transfer tax for the second sale is due only on the profit. This tax usually applies when the home is sold within six months.
To compensate for the higher healthcare contributions in 2011, the government plans to reduce personal income taxes by introducing a lower tariff in bracket one and to expand the bandwidths of the three brackets. In a bid to encourage labour force participation, the government plans to increase the earned income tax credit, thus making it more profitable to have a job. Furthermore, individuals aged 65 and over will benefit from a higher elderly person’s tax credit.
Commenting on the tax plan, Finance Minister de Jager stated that: “To ease the pain of the crisis we are making great efforts in 2011 to stimulate entrepreneurship and innovation. Because it is the entrepreneurs who are helping us back on our feet. At the same time, everyone must pay their share. And so we will take measures against people or companies purposely circumventing the tax rules. And also the focus on hidden savings will be expanded".
Following approval by the Dutch parliament, the 2011 tax plan is due to enter into force on January 1, 2011.