By Michael Molenaars, Jeroen Smits, Maarten de Bruin, Reinout de Boer, Emile Bongers, Joost Eyck
On 4 February 2019, the Dutch State Secretary of Finance sent a letter to the Dutch Parliament announcing transitional rules for Dutch taxes (other than customs legislation) if there will not be a Brexit withdrawal agreement (i.e. a no deal Brexit). The letter includes an outline of the transitional rules. Further – more detailed – guidance is being prepared and is to be issued at a later stage. According to the letter, the transitional rules would imply that for designated Dutch tax purposes (notably in personal income taxation and in corporate income taxation), the United Kingdom would be deemed to not yet have left the European Union. The transitional rules should in principle apply for a limited period of time.
On 15 January 2019, a majority of the British House of Commons effectively voted against the approval of the withdrawal agreement between the United Kingdom and the European Union. The United Kingdom is scheduled to leave the European Union as of 30 March 2019. Due to the lack of clarity on if, when and how (exactly) the Brexit will take place, the Dutch State Secretary of Finance considers it desirable to introduce a form of transitional rules for taxes, other than customs legislation, in the event of a no-deal Brexit.
Given that Dutch tax legislation in several provisions of law distinguishes tax treatment depending on whether a taxpayer is domiciled or established in an EU Member State or in a third country, a no-deal scenario would trigger a different tax treatment (immediately) from the date of withdrawal. The State Secretary wishes to mitigate such impact, in particular for abrupt changes in current financial years. For example, a corporate income tax fiscal unity of Dutch companies whose shares are held by a so-called top company that is established in the United Kingdom, would dissolve by virtue of law since the top company no longer would be a resident of an EU member state.
In a separate impact assessment the Dutch tax authorities have acknowledged that EU directives in relation to direct taxes would no longer apply vis-à-vis the United Kingdom after Brexit but further guidance would need to be awaited to see whether transitional rules may apply here as well, as the impact assessment hints at applying these directives for current financial years (starting before Brexit date and ending after it). Furthermore, the Brexit makes businesses, currently based in the United Kingdom, decide to establish themselves in the Netherlands. The tax aspects in relation to the move often are complex for the Dutch tax authorities. The tax authorities therefore have increased their capacity to efficiently deal with this and are open to extra prior consultation with UK businesses.
Once the preparation of the guidance is completed, a draft decree should be sent to Parliament.
Stibbe contributes Dutch chapter to Chambers Global Practice Guides Corporate Tax 2019
Lastly we are proud to share with you the Dutch chapter of the Chambers Global Practice Guides Corporate Tax 2019, that was written by Michael Molenaars, Jeroen Smits, Reinout de Boer and Rogier van der Struijk. Besides providing you with an outline of Dutch corporate income taxation, the chapter pays attention to the impact of BEPS on the Dutch corporate income tax landscape.
Compliments of Stibbe, a member of the EACCNY