Corporate - Significant developments

Last reviewed - 06 July 2020

The corporate tax system of the Netherlands contains a number of well-known features providing for an attractive investment climate, such as the fiscal unity regime with tax consolidation for group companies, a full participation exemption for capital gains and dividends from qualifying participations, and several favourable tax regimes (e.g. for patent income, investment vehicles, and income from ocean shipping activities). There is currently no withholding tax (WHT) on interest or royalty payments made by the taxpayer; however, this is about to change in certain (abuse) situations (see ‘Conditional WHT on interest and royalty payments’ below).

2019 Dutch Tax Package

On 18 September 2018 (Budget Day), the Dutch Ministry of Finance published the 2019 Dutch Tax Package. Changes included the gradual lowering of the corporate income tax (CIT) rates and the limitation of loss carryforward from nine to six years. It also included the abolishing of the specific limitations on loss utilisation for holding/finance companies and the abolishing of the interest limitation rules regarding excessive participation debts and excessive acquisition debts as per 1 January 2019. New standards for interest deduction follow from the European Union Anti-Tax Avoidance Directive (ATAD 1).


An important part of the 2019 Tax Package was the implementation of ATAD 1 into national law. To implement the ATAD 1 provisions, the Netherlands, as per 1 January 2019, adopted a controlled foreign company (CFC) rule, an earnings stripping rule, and slightly reformed its exit taxation rules for CIT purposes. The CFC regime aims to target corporate taxpayers that hold a direct or indirect interest, either standalone or with affiliated companies, of more than 50% in a subsidiary or disposes of a permanent establishment (PE) in either a low-taxed (i.e. less than 9%) or a non-cooperative jurisdiction that is explicitly listed by the Dutch Ministry of Finance. The ATAD’s general anti-abuse rule (GAAR) was not implemented as such, since, according to the Ministry of Finance, the GAAR is already effectively present by means of the standing Dutch fraus legis doctrine. The new earnings stripping rule limits the deduction of the on balance interest cost to 30% of the taxpayer’s earnings before interest, tax, depreciation, and amortisation (EBITDA), with a threshold of 1 million euros (EUR) and a carryforward rule. The exit taxation regime for CIT purposes is slightly altered, by, in line with the ATAD, providing that an exit levy must be paid in full within the five years following the exit but no later than the moment of realisation, e.g. the sale of the asset(s).


In the autumn of 2019, parliament and Senate approved the legislative proposal to implement the EU directive 'ATAD 2' (concerning hybrid mismatches and non-EU countries). The legislative proposal largely follows the EU directive but is stricter in some instances, e.g. taxpayers must document applicability on the measure for payments, losses, etc. and the Netherlands does not make use of the possibility to delay measures in relation to financial institutions, nor does CFC inclusion always qualify as sufficient inclusion. Along with the EU directive, the Dutch ATAD 2 legislation enters into force from 1 January 2020. The tax liability measure (for 'reverse hybrids') is to apply from 1 January 2022.

Beneficial ownership and substance requirements

As a result of the Court of Justice of the European Union (CJEU) judgements in the Danish Beneficial Owner cases (C-115/16, C-116/16, C-117/16, C118/16, C119/16, C-299/16), Dutch anti-abuse provisions of the CIT and dividend WHT laws are amended as of 1 January 2020. As of 1 January 2020, even in situations where the Dutch substance requirements are met, the Dutch tax authorities will be able to tackle abuse more effectively. This also applies vice versa: where a taxpayer does not meet the Dutch substance requirements, they still have the opportunity to prove there is no abuse. The Dutch substance requirements are therefore no longer considered to be a 'safe harbour' for beneficial ownership. The amendments apply in relation to EU member states but also to third states (e.g. the State Secretary in this context mentions Singapore).

Mandatory disclosure (DAC6)

On 13 March 2018, the EU directive 'DAC6' (Mandatory Disclosure) was approved and on 17 December 2019 the Dutch Senate approved the proposed Dutch implementation legislation. DAC6 require tax advisers, intermediaries, and in some cases taxpayers to exchange information with the tax authorities on certain structures. The aim is to counter aggressive tax planning, although non-aggressive structures may be impacted as well, as long as there is some connection to the European Union. Transactions as of 25 June 2018 fall within the scope of the reporting obligation. Following the EU initiative due to COVID-19, the reporting obligation is postponed six months, meaning that the date of first reporting is 31 January 2021 (i.e. 30 days after 1 January 2021, instead of 1 June 2020). All transactions as of 25 June 2018 are still to be reported, namely ultimately on 28 February 2021.

Emergency measures fiscal unity regime

On 22 February 2018, the CJEU issued its judgement in the joined cases C-398/16 and C-399/16 on the consequences of EU law for the Dutch fiscal unity regime. It ruled the ‘per element approach’ applicable to the Dutch regime. In reaction to the ECJ’s decision, so called ‘emergency measures’ have been introduced with a retroactive effect to 1 January 2018. Based on these ‘emergency measures’, certain provisions in the Dutch Corporate Income Tax Act (CITA) will apply as if there was no fiscal unity, despite the presence of a Dutch fiscal unity. These provisions include the application of the rules on ‘the deduction of interest on loans that are directly or indirectly granted by a group company in order to finance an acquisition or capital contribution deduction’ and on the ‘deduction of excess interest on debts that are deemed to be related to the financing of participations’ (abolished per 1 January 2019) as if there is no fiscal unity. The same holds true for elements of the participation exemption with respect to the portfolio investment participations and the ‘anti-mismatch’ rule, as well as for the limitation of the utilisation of losses after a change of 30% or more of the ultimate control in a company and the effective reduction of dividend WHT payments in case of certain re-distributions of dividend. 

Treaty developments

The Netherlands pursues an active tax treaty policy in order to maintain and extend its wide tax treaty network. Most Dutch bilateral tax treaties are based on the Organisation for Economic Co-operation and Development (OECD) Model Tax Convention. The government has expressed, mid-2019, that treaties with developing countries will be based on the United Nations (UN) Model Convention more often than was the case. The Netherlands has concluded bilateral tax treaties for the avoidance of double taxation on income and capital with over 90 countries worldwide. Per 1 July 2019, the multilateral instrument (MLI) has entered into force for the Netherlands. The earliest date it may have effect is 1 January 2020.

Liquidation loss scheme (and cessation loss scheme)

On 2 October 2019 a draft bill was presented to amend the liquidation loss scheme and the cessation loss scheme for CIT. Currently, if the activities are carried out abroad by means of a participation in a foreign company, a loss will be deductible in the Netherlands upon the liquidation of that foreign company (liquidation loss scheme). If the activities are carried out by a foreign PE, the loss will be taken into account if the activities of the PE are discontinued (cessation loss scheme). According to the draft bill, the additional limitations will apply as follows: 

  • The liquidation loss provision would be applicable only:
    • in European Union (EU)/European Economic Area (EEA) situations and
    • with regard to interests of more than 50% or interests giving rise to decisive influence on the participation’s activities.
  • Cessation losses of PEs (within the so-called object exemption) are also only deductible in EU/EEA situations.

Losses up to the amount of EUR 5 million will remain deductible without the above-mentioned limitations (this also applies to interests of 5% or more and also for non-EU/EEA interests).

In addition, the liquidation or cessation loss can only be taken into account if the liquidation or cessation is completed within three years of the cessation or completion of the decision to do so. This restriction applies regardless of the amount to be deducted. The proposed entry into force is 1 January 2021, with a three-year transitional period for unrealised liquidation losses incurred before 1 January 2021.

Conditional WHT on interest and royalty payments

Currently, interest and royalty payments made by Dutch entities resident in the Netherlands are not subject to WHT in the Netherlands. On Budget Day 2019, the Dutch government has proposed a new conditional WHT on interest and royalty payments to affiliated companies in designated low-tax jurisdictions, and in certain tax abuse situations. The WHT is, in principle, levied from the Dutch resident entity that makes interest or royalty payments at a rate equal to the highest rate of Dutch CIT in the current year. For 2021, this rate is 21.7%. The WHT rate may, however, be reduced by a tax treaty.

The new WHT will only be levied on payments between affiliated companies (for purposes of this new WHT, companies that can directly or indirectly exercise a decision-making influence, in any event if the shareholder has more than 50% of the voting rights). The WHT applies to payments made to companies in designated low-tax jurisdictions (i.e. jurisdictions with a statutory CIT rate of less than 9%) or are on the EU list for non-cooperative jurisdictions. A Dutch list of low-taxed and non-cooperative jurisdictions is updated annually on 1 October, and becomes applicable the following year. Currently Listed Countries are Anguilla, Bahamas, Bahrain, Belize, Bermuda, British Virgin Islands, Cayman Islands, Fiji, Guam, Guernsey, Isle of Man, Jersey, Kuwait, Marshall Islands, Oman, Qatar, Samoa, Saudi Arabia, Trinidad and Tobago, Turks and Caicos Islands, United Arab Emirates, US Samoa, US Virgin Islands, and Vanuatu. Apart from direct payments made to affiliated companies in Listed Countries, the WHT may also apply to abusive situations (situations where artificial structures are put in place with the main purpose or one of the main purposes to avoid the Dutch WHT).

The tax is, in principle, levied from the company that makes the interest or royalty payment and that withholds the WHT. However, if the WHT has not been applied correctly, the tax inspector may also issue an additional tax assessment to the recipient of the interest or royalty payment or even the director of the paying company. The WHT will apply as of 1 January 2021.