World Wide Tax News Issue 53 - December 2019

2020 Tax Budget

On 17 September 2019, the Dutch Government published its Tax Budget for 2020. We summarise below some of the legislative bills and amendments that are of international interest.

Reduction of corporate income tax rates

The corporate income tax rates will be reduced in 2020 and 2021 as shown in the following table:

Taxable amount




Up to and including EUR 200,000




Exceeding EUR 200,000




Stricter rules for liquidation and cessation losses of subsidiaries

Benefits arising from a shareholding in another company of at least 5%, such as dividends and capital gains, are – in general - not taxed at the level of the Dutch parent company for Dutch corporate income tax purposes, due to the participation exemption. However, an important exception applies if the subsidiary is dissolved as a result of a liquidation or insolvency. In many cases, the parent company is then allowed to deduct a liquidation loss.

The Government announced that the rules on liquidation losses will become less generous from 2021 onwards. The following restrictions are likely to be introduced from that date:

  1. A territorial restriction, so that liquidation losses on participating interests in resident companies outside the EU and EEA will no longer be deductible;
  2. A material restriction, resulting in liquidation losses on participating interests in companies resident in the Netherlands or another EU or EEA member state being deductible only if the parent company has a qualifying interest in the subsidiary. An interest is regarded as qualifying if the parent company holds more than 25% of the subsidiary’s nominal paid-up share capital or can determine the activities of the subsidiary;
  3. A time restriction, so that liquidation losses will be deductible only if the liquidation of the subsidiary is completed by the third calendar year after the date on which the subsidiary’s activities cease or it is resolved to discontinue such activities. For this restriction, evidence to the contrary can be produced if there are commercial reasons for allowing a longer liquidation period.

Restrictions (a) and (b) will apply only to the extent that the liquidation loss on the participating interest exceeds EUR 1 million.

Introduction of conditional withholding tax on interest and royalties

A conditional withholding tax on interest and royalties will be introduced on 1 January 2021 (Withholding Tax Act 2021). The withholding tax is applicable to interest and royalty payments made by companies resident in the Netherlands to affiliated companies resident in low-tax jurisdictions. An affiliated company will in any event exist if the interest held in that entity represents more than 50% of the voting rights under the Articles of Association. This implies that the withholding tax will not apply to interest and royalties paid to individuals.

The Netherlands will publish a list of low-tax countries on an annual basis for the purpose of the withholding tax. The most recent list is that of 31 December 2018 which contains the following countries: American Samoa, Anguilla, the Bahamas, Bahrain, Belize, Bermuda, the British Virgin Islands, Guam, Guernsey, the Isle of Man, Jersey, the Cayman Islands, Kuwait, Qatar, Samoa, Saudi Arabia, Trinidad and Tobago, the Turks and Caicos Islands, Vanuatu, the United Arab Emirates, the US Virgin Islands. The withholding tax will only apply to (indirect) payments of interest and royalties to these countries (if the list will not change in the future).

Hans Noordermeer

Niek de Haan