Author: Selwyn Manning

Source: Government of the Netherlands

News item | 31-05-2023 | 16:23

Companies will only pay the new top-up tax if the group to which they belong pays a corporate income tax at an effective rate that is lower than the minimum tax rate. This will be determined by deducting the effective tax rate calculated for that state from the minimum tax rate of 15%. The minimum tax rate of 15% has been agreed internationally. The following simplified example shows how the primary measure works:

Less profit shifting

This bill reduces the incentive for companies to shift profits to low-tax countries. The bill is also intended to put a floor on competition between states over corporate income tax rates. This should prevent a race to the bottom in corporate tax and, in addition, level the playing field for multinationals.

‘I applaud this new step, which will result in a global approach to tackle tax avoidance,’ said Marnix van Rij, State Secretary for Tax Affairs and the Tax Administration. ‘Tackling tax avoidance is a priority for me. Because of tax avoidance, the cost of funding public services is borne entirely by individuals and companies who do pay their tax. This is unjust, especially since those companies who avoid taxes still benefit from services funded by taxation.’

Background

A global minimum level of taxation (Pillar Two) is part of the OECD agreement on the reform of the international tax system, to which 138 countries have signed up. The European Commission proposed a directive on implementing this minimum level of taxation in the EU. EU member states reached unanimous agreement on this proposal on 15 December 2022. Member States are obligated to implement the directive in their national legislation by 31  December 2023. The Netherlands has launched an online consultation on the draft implementation bill at the end of 2022. After the responses to this consultation had been processed, the bill was submitted to the Council of State for an advisory opinion.

The bill will be debated by the House of Representatives in the coming months, and then by the Dutch Senate. The bill  is expected to enter into force on 31 December 2023. The Tax Administration will strive to effectively implement the new rules into practice.

Source: Government of the Netherlands

News item | 17-05-2023 | 10:15

These conclusions can be found in the Central Government Annual Financial Report and the Central Government Annual Report, submitted to the House of Representatives on the government’s behalf by Minister of Finance Sigrid Kaag on Accountability Day.

‘The past, the future and the present all tell the same story: we need sound financial policy,’ explained the Minister of Finance, Sigrid Kaag. ‘We need solid foundations in order to transition to a green economy and take measures to protect nature and the climate, now and in the future.’

Public finances

Despite all the additional measures taken as a result of the war in Ukraine, the public finances were in better shape at the end of 2022 than a year earlier: the EMU balance showed a small surplus of €88 million, which rounds down to 0.0% of GDP.

This means that expenditure and income across the public sector are in balance. This outcome stems from a relatively high amount of money that has not yet been spent, and from lower spending on coronavirus measures. The government has not yet been able to carry out all the plans in its coalition agreement, due to the constraints faced by the public sector in terms of implementation and the current historically tight labour market. The total underspend for 2022 is €6.2 billion, up €1.4 billion on 2021. Government debt was lower than in previous years. In 2022 it stood at €480.1 billion, or 51.0% of GDP, compared with 52.1% in 2021

Management of central government finances

As in 2021, last year the management of central government finances was largely dominated by issues with substantial financial ramifications, such as the war in Ukraine, the influx of refugees, and compensation for higher energy costs. All these issues demanded a quick response. In addition, dealing with compensatory measures from previous years has also had an impact on financial management.

Nevertheless, there was improvement in financial management in 2022 compared with the two preceding years. The Court of Audit reached a more positive conclusion on regularity in 2022 than in 2021, for example. There was a marked reduction in the financial scale of the dossiers where central government did not comply with all the rules, or where its compliance could not be established with certainty: expenditure falling into this category amounted to 0.58% of the total. In 2021 that figure was 1.01%. Progress in the area of regularity is attributable to the efforts of all government ministries. What’s more, the procedures concerned with informing parliament in a timely and correct manner are far better known and are better followed.

The Court of Audit also assessed whether ministries had made errors when providing services or carrying out activities. In 2022 the Court of Audit found 44 shortcomings in operational management at seven ministries. This is a slight fall compared with 2021. However, the task of resolving shortcomings in financial management requires time and attention. Systematic improvements in financial management can only be achieved if the foundations are solid.

Wellbeing

Alongside these financial and economic results, the 2022 central government annual financial report also contains an overview of developments in the area of ‘wellbeing’. The government attaches importance to the development of wellbeing in terms of people’s current quality of life here in the Netherlands, and the degree to which this affects the quality of life of future generations and people elsewhere in the world. The government is pursuing policies aimed at enhancing wellbeing and is taking steps to integrate it into the budget system. The Netherlands Bureau for Economic Policy Analysis (CPB), Netherlands Institute for Social Research (SCP) and the Netherlands Environmental Assessment Agency (PBL) are also devoting attention to wellbeing.

The Monitor of Wellbeing & the Sustainable Development Goals (2015-2022), a survey published by Statistics Netherlands (CBS), presents a mixed picture: the general level of wellbeing in the Netherlands is high, but there is room for improvement on some themes. It is mainly indicators of ‘later wellbeing’, such as the development of natural capital, that are showing ‘red’. It is therefore vital that we achieve the ambitious objectives on climate change and the natural environment that we set in 2021 in the coalition agreement.

Moreover, wellbeing is not equally distributed across different sections of the population. A recent study by the SCP on ‘contemporary inequality’ shows that inequality not only depends on economic capital (education, income) but is also linked to social capital (‘who you know’), cultural capital (‘where you fit in’) and personal capital (‘who you are’).

Financial Management Task Force

In mid-2022 the Minister of Finance set up a task force to address the shortcomings in financial management within central government. Where possible the task force has supported government ministries, drawing attention to the issue at administrative and political level. The task force identified a need for enhanced expertise on financial management, the procedures that need to be followed and information sharing. This will again demand explicit attention in the year ahead. Ms Kaag has therefore decided that the task force will continue its work.

Source: Government of the Netherlands

News item | 21-04-2023 | 10:57

Shareholders not eligible

The compensation will be payable to holders of subordinated bonds, certain participation certificates and subordinated loans expropriated as a consequence of the nationalisation of SNS REAAL and SNS Bank on 1 February 2013. According to the judgment, holders of expropriated SNS Bank and SNS REAAL shares are not eligible for compensation. The process of paying the compensation will begin on 15 May, within the statutory time limit of four weeks after the Supreme Court’s judgment.

Statutory entitlement to compensation

The nationalisation of SNS REAAL and SNS Bank on 1 February 2013 caused the securities and assets to lose their value. In such cases the Financial Supervision Act (Wet op het financieel toezicht) requires the holders of expropriated securities and assets to be compensated. In its judgment of 21 April 2023, the Supreme Court upheld an earlier ruling by the Enterprise Division of Amsterdam Court of Appeal that holders of subordinated bonds, certain participation certificates and loans were entitled to compensation of approximately €805 million plus statutory interest. The Ministry will now proceed to pay that compensation.

Call for entitled parties to come forward

The payment process will begin within four weeks after the date of the Supreme Court’s judgment. The Ministry calls on entitled parties who are eligible for the compensation to apply for compensation through the website www.compensationsns.nl. Applications can be submitted from 15 May 2023 onwards.

Source: Government of the Netherlands

News item | 03-11-2022 | 15:35

In line with the declaration signed by the government at COP26, the intended government policy is aimed at ending new public support via the export credit insurance for the fossil energy sector abroad as of 1 January 2023. Within this intended policy, there won’t be any room for support for new projects aimed at the exploration and extraction, processing, storage, transshipment and transport of fossil fuels and electricity generation by means of fossil fuels. The elaboration of the declaration from last year’s COP26 climate conference in Glasgow is an important step in the further greening of export credit insurance.

Seizing opportunities in energy transition

Although the energy transition can be challenging for businesses with many activities in the fossil sector, this development also offers opportunities for the Dutch business community. In this way, businesses can use their knowledge for climate projects worldwide. In addition, the energy transition will require a great deal of investment in green projects in the near future. The government would like to take advantage of these opportunities and is committed to doing so. Many measures were recently introduced to better support green transactions with the export credit insurance, such as insuring higher-risk green transactions and green cover for investments in green innovations. With additional measures, the government is committed to further greening export credit insurance. For example, a start will be made on proactively setting up credit lines for foreign buyers of Dutch products, so buyers can obtain an export credit insurance-covered credit line for purchasing goods and services in the Netherlands. In addition, the aim is to have 70% of the assignments under the development collaboration infrastructure programmes carried out by Dutch businesses.

Strict conditions for exceptions

Due to the energy transition, certain investments in fossil infrastructure will continue to be necessary in the coming years to provide our energy security. The export credit insurance therefore remains accessible under certain conditions for investments in existing fossil infrastructure, provided the economic life of the infrastructure is not extended. Other examples of exceptions are fossil infrastructure support services, multi-purpose ports and electricity production in low-income countries with extreme energy poverty. Due to current geopolitical developments, the proposed policy also offers scope for projects that safeguard the security of supply in Europe and are in line with European REPowerEU policy.

Careful implementation

Because many projects have a long lead time, the government has opted to apply a transition period of one year. In this respect, applications submitted before 1 January 2023, at the latest on 31 December 2023, can lead to a policy. The Netherlands has opted for careful implementation. 

Since the signing of the COP26 declaration in Glasgow (2021), businesses and NGOs have been involved in the elaboration. At an international level, coordination has been sought about the elaboration of the COP26 declaration with co-signatories. The government wants to ensure a careful introduction of the new policy and a level playing field for businesses. In the coming period, the government will continue to consult with other countries that have signed the COP26 declaration. The elaboration is therefore intended policy that can still be revised if policy developments in other countries give cause to do so.

Source: Government of the Netherlands

News item | 12-10-2022 | 18:02

Platform
The Coalition of Finance Ministers for Climate Action, a platform established in 2019, promotes climate action by finance ministries by enabling them to share climate policy information and experiences. The Coalition focuses on areas including aligning finance ministries’ policies with the Paris Agreement commitments, setting effective pricing measures for greenhouse gases, and ensuring that climate change has a place in macroeconomic policymaking, budgetary decision-making, public investment and procurement. Attention is paid in all these activities to climate change adaptation in society and the economy, and the role of private financers.

Growing involvement
The Netherlands has been involved in the Coalition from the beginning, along with 15 other countries. More than 75 countries are now members. A large group of institutions such as the World Bank Group, IMF and the Organisation for Economic Co-operation and Development (OECD) are also affiliated with the Coalition.

Greater impact
Over the next two years, finance minister Sigrid Kaag aims to work with her co-chair, the finance minister of Indonesia, to boost the influence of the Coalition of Finance Ministers for Climate Action and involve more countries in the platform’s work.
 

For more information on the Coalition of Finance Ministers for Climate Action, visit: www.financeministersforclimate.org.

Source: Government of the Netherlands

News item | 20-09-2022 | 19:10

‘The consequences of the war in Ukraine are immense, and that includes its financial impact,’ explained State Secretary for Tax Affairs and the Tax Administration Marnix van Rij. ‘We are all seeing the rise in prices at the checkout and in our energy bills. Inflation has not been this high in decades. That’s why we’re taking substantial measures to help people on low and middle incomes. We’re also introducing structural measures to improve the tax system. Over the years, the tax burdens on several different kinds of workers – employees, the self-employed and director-major shareholders – have grown further apart. This is due to various changes affecting the three classes of taxable income (boxes 1, 2 and 3). Wealthier taxpayers benefited most from these changes. The tax system wasn’t meant to work like this and the measures in this Tax Plan will rectify the situation. And in the area of climate policy, we are taking important steps towards a greener tax system.’

Purchasing power

The government believes that it has a great responsibility to support households and businesses in this difficult period. That is why it has devised a package of purchasing-power and energy-related measures to ease the burden. The government cannot relieve all the pain, but it can help cushion the hardest blows, in part through the tax system. In its budget plans the government has set out an exceptionally large package of purchasing power measures worth €17.2 billion, of which €5 billion will be made available on a structural basis. This package includes measures aimed at supporting vulnerable groups and people on middle incomes, such as an increase in the employment tax credit to a maximum of €500 net per year and a reduction in the income tax rate in the first band. As a result of these measures, it will pay more to work.

A better balance between tax on labour and tax on wealth

Several measures are proposed that will strike a better balance between the tax burden on labour and that on wealth. They include changes to the rate of corporation tax, the accelerated phasing out of the self-employed person’s tax deduction, and the abolition of the customary-pay efficiency margin used to calculate the taxable salary of director-major shareholders. This will yield €5 billion. The aim is to reduce the disparity that has arisen in recent years between the tax burden on employees and that on business owners. In addition, the capital yield tax allowance in box 3 will be raised to €57,000. More tax will have to be paid on larger amounts and the tax rate will be increased annually, up to 34% in 2025. The tax exemption for gifts to finance the buying of a home will be lowered in 2023 and abolished as of 2024. The general rate of transfer tax will be raised from 8% to 10.4% for investors in residential property and for the purchase of commercial property.

Part of the amount generated by these increases in the tax burden will be ploughed back into structural measures that will benefit SMEs. For instance, €600 million will be set aside on a structural basis to reduce employers’ costs and make it more attractive for them to invest. The changes in box 2 in 2024 will help in this regard; there will be a lower invalidity insurance fund (AOF) contribution for small employers, and the energy investment tax credit, the environmental investment tax credit and the work-related costs scheme will be expanded. Moreover, SMEs will ultimately profit from the reduced tax burden on households, as it will increase consumers’ tightly squeezed disposable income.

Simplification

The Bill on the 2023 Tax Plan goes a long way towards simplifying the tax system. It proposes to abolish the following four schemes: the income-related combination tax credit (IACK), the averaging scheme, the pension reserve scheme (FOR), and the customary-pay scheme for startups. Measures to tackle and put an end to tax avoidance schemes will generate up to €550 million. In addition, before the summer of 2023 the government will present a plan outlining further steps to abolish or simplify tax regulations that have received a negative evaluation.

Climate policy

Climate issues and the energy transition occupy a central place in this government’s policy. Environmental taxes provide an important tool to encourage climate-friendly conduct. Because of the current high level of energy prices, an increase in tax on polluting sources of energy (natural gas) and a reduction in the tax on electricity will take effect in 2024, a year later than planned. The government is thus continuing to take long-term measures to advance sustainability. The Tax Plan also includes other long-term climate-related measures. For example, industrial enterprises will be encouraged to make extra cuts in CO₂ emissions through a reduction in their ‘dispensation rights’, which represent emissions that are exempt from the levy on CO₂ industrial emissions. In addition to the existing carbon levy, a carbon price floor will be introduced for industry as of 1 January 2023, creating a minimum price to be paid by industrial enterprises for all their emissions. Aviation tax will be raised to €26.43 as of 1 January 2023. It will also be made easier to buy solar panels by lowering the rate of VAT on their purchase to 0%. Finally, the government will be taking additional measures in the area of mobility. From 2025, car and motorcycle tax on light commercial vehicles will be levied on the basis of their CO₂ emissions instead of their list price. At the same time, the exemption for businesses will be abolished.

Box 3

The redress for taxpayers and the transitional legislation relating to box 3 set out in this Tax Plan are based on how the box 3 tax base is actually divided between savings, investments and debts and, as far as possible, on the actual earnings on this income, rather than notional allocations. This means that, from 2021, taxpayers will pay virtually no tax in box 3 on their savings (at the current low rates of interest). The arrangements for redress and the transitional legislation are therefore fairer than the old system.

In recent months the government has examined whether and, if so, how taxpayers who did not lodge objections against their tax assessments for box 3 income could be offered some form of compensation. Ways of directing any compensation primarily towards small savers were explored. However, the government has now decided not to compensate taxpayers who did not lodge objections. Full compensation would cost €4.1 billion, more than half of which would go to taxpayers with box 3 income of over €200,000. The government’s current priority is the socioeconomic security of people who are already struggling to pay their bills. It has therefore opted for a comprehensive package of purchasing power-related measures.

Source: Government of the Netherlands

News item | 16-09-2022 | 16:32

Excise Movement and Control System (EMCS)

European businesses record the movements of goods that are subject to excise duty. These goods include manufactured tobacco, alcohol and alcoholic beverages, and energy products such as oil and gas. A record is also kept of the European country in which excise duty has been remitted and where duty must still be remitted. Member states use the EMCS for this purpose, and the introduction of the 2020 Horizontal Excise Directive will expand its use.

Expanded EMCS not ready on time

The Dutch part of the EMCS must be expanded in order to comply with the new European directive. However, Dutch Customs will not be able to complete this task by 13 February 2023. Furthermore the current Dutch part of the EMCS has to be updated first before it can be expanded. There is currently insufficient IT capacity to process all the necessary changes in time. Systems of member states and businesses that are ready in time will no longer be able to exchange messages with the Dutch part of the EMCS from 13 February 2023. Both excise goods on which excise duty has been paid and those on which no excise duty has yet been paid will be affected. The aim is to have finished updating and expanding the Dutch part of the EMCS by 1 October 2023.

Interim solution

In order to minimise the impact of the delay on businesses and other member states, such as an increased administrative burden, Customs is working hard to devise an interim solution. The business community will of course be involved in working out the concrete and practical details of this solution. Dutch Customs is also in close contact with the European Commission on this matter.

Source: Government of the Netherlands

News item | 28-06-2022 | 14:17

From 2024 the entry into force of a new withholding tax on dividends will reduce these money flows even further. This was set out in a letter submitted to parliament today by the State Secretary for Tax Affairs and the Tax Administration Marnix van Rij. The letter details the effects of several measures, based on the figures provided by the Dutch central bank (DNB). These figures are provisional in nature and were calculated in part using forecasts based on past data.

‘The issue of tax avoidance via the Netherlands has been successfully tackled using a range of measures, including the introduction of a withholding tax on interest and royalties from 2021 onwards,’ said the State Secretary. ‘There has been a significant reduction in funds flowing through the Netherlands to low-tax jurisdictions. But our fight against tax avoidance is not over. There are still too many letterbox companies in the Netherlands. In the period ahead, the government wants to continue working with other countries in order to further combat abusive arrangements involving conduit companies. That’s why we’re doing all we can to ensure the success of the proposal that has been put forward by the European Commission in this regard.’

From 2021, the withholding tax on interest and royalties has enabled the Netherlands to tax payments to countries that levy too little tax or none at all. The measure applies to payments to countries with a corporate tax rate of under 9% and to countries on the EU list of non-cooperative jurisdictions. The withholding tax can also be applied in situations of tax abuse. As of 2024 the scope of the  withholding tax will be extended. As of then dividend payments will also be subject to the withholding tax. 

In addition to keeping track of financial flows to low-tax countries, the actual tax return data for the withholding tax is also being monitored. In 2021, €51 million was paid in withholding tax, while the government had not forecast any revenue. This tax revenue is due in part to the fact that companies did not adapt their structures in time. It could also be that in some cases companies preferred to pay the withholding tax than bear the high costs associated with reorganisation. The remaining flows of interest and royalties to low-tax jurisdictions (and the corresponding tax revenue) are still expected to disappear in the long run.

An assessment has also been made of whether the withholding tax in the Netherlands has shifted the money flows to other conduit countries, like Singapore and Hong Kong. Currently there is no reason to assume this is the case.

In the period ahead, the government’s approach to tackling tax avoidance will focus on additional international measures, implementing international agreements on a minimum tax rate and the European Commission’s proposal to counteract abuse of conduit companies. All of these measures will make the Netherlands even less attractive to letterbox companies. The Netherlands will continue to annually monitor developments on combating tax avoidance.

Source: Government of the Netherlands

News item | 26-06-2023 | 14:30

Minister Yesilgoz-Zegerius (JenV):

“Cybercriminals and enemy states are becoming increasingly cunning and effective in the digital theft of money and information or the sabotage of organisations and processes vital to our society. We therefore need to pool our knowledge and skills to ensure that we stay one step ahead of these malicious parties. The revamped organisation will be founded upon the strengths of the current organisations. This will enable the new organisation to provide all organisations in the Netherlands, large or small, public or private, vital or non-vital, with relevant information and knowledge and provide assistance in the event of incidents. I am therefore pleased that the organisations are already collaborating to the greatest extent possible so that we are better equipped to defend against cyber attacks.”

Minister Adriaansens (EZK):

“The importance of digital resilience for our society and economy is steadily increasing. If the internet is down due to a cyber-attack, for example, that leaves shops empty or even halts industrial production. Digital devices and systems offer economic opportunities and consumer convenience, but also make us vulnerable. We are therefore increasing the legal cyber requirements on devices and services themselves. On the other hand, we are investing in knowledge sharing and expertise in large-scale incidents. This operates most effectively with a single government desk where organisations and businesses can receive support.”

Accessible government desk

After integration, all organisations in the Netherlands will be able to turn to a single central desk for cybersecurity advice and assistance in digital incidents, while the new cybersecurity organisation can also respond quickly and adequately to intelligence on threats and incidents at national and sectoral level. The first significant steps have been taken. Organisations are already working together to the greatest extent possible. This includes jointly organising the process of alerting victims and targets of a cyber-attack and providing action perspectives to all organisations in the Netherlands, enabling them to better defend themselves against attackers.

The minister of JenV will have ownership of the revamped organisation. The Ministry of JenV and EZK will jointly assume responsibility as commissioning authority.

The transition will take place in two phases so that upcoming legislation and ongoing processes from the Netherlands Cybersecurity Strategy (NLCS) are taken into account wherever possible.

In this first phase leading up to 1 October 2024, the organisations have already been working together wherever possible. This includes alerting parties regarding concrete cyber threats and vulnerabilities as well as jointly providing action perspectives to all organisations in the Netherlands, enabling them to better defend themselves against attacks.

In the second phase up to 1 January 2026, tasks and processes will be integrated and optimised. The implementation of the Security and Information Systems Act (Wbni), including the European Network and Information Security (NIS2) Directive, sectoral legislation within which CSIRT tasks are performed and the Act on Promoting Digital Resilience for Businesses (Wbdwb), pending approval by the Lower House of Parliament, will also be implemented. Following the first phase, the current organisations no longer pursue their own independent trajectories and will continue to exist only in a formal sense in their current form.

Source: Government of the Netherlands

News item | 29-05-2023 | 07:57

Minister Micky Adriaansens (Economic Affairs and Climate Policy): “The Netherlands has a very blooming Life Sciences & Health ecosystem including promising startups and scale-ups who contribute to regenerative medicine for example. We are Europe’s connected Life Sciences & Health metropolis. In 2019 we’ve started to work closer together with Massachusetts to strengthen our economic and scientific ties. I’m confident that this trade mission will boost economic opportunities for collaboration and investment between US and Dutch companies and knowledge institutions in the field of life sciences and biotechnology.”

Minister Ernst Kuipers (Health, Welfare and Sport): “I am thrilled to witness the remarkable synergy between the US and the Netherlands in the biotech and med tech sectors. Our cooperation transcends borders, and I’m convinced we should intensify this relationship. By joining forces we can revolutionize healthcare through cutting-edge innovation, unlocking new frontiers in medicine. Together, we are poised to reshape the future of healthcare, empowering lives and fostering breakthroughs that will inspire generations to come.”

In Boston the ministers will attend the 2023 BIO International Convention, including the dedicated Dutch pavilion and joining side events such as various panel discussions and roundtables. The ministers will visit separately companies and research institutions, at the expo and in the Greater Boston area, that are pivotal to the successful life sciences ecosystem in Massachusetts. Together with Governor Maura Healey of Massachusetts they will host a so-called ‘Future of Life Sciences’ event. On Tuesday, June 6 this specific event will be joined by all Dutch participants of the trade mission and representatives of the US life sciences ecosystem.

The Dutch ministers will separately travel to Washington D.C. for meetings with their US counterparts at the departments of Commerce and Health and the National Economic Council. Minister Adriaansens will discuss topics such as transatlantic economic relations, economic resilience and security, (clean) emerging tech, innovation and critical raw materials. Minister Kuipers will have conversations about health care, research and the medical supply chain.

Life Sciences & Health in the Netherlands and Boston

In total 3.000 Life Science & Health research and development companies are active within the Netherlands with an economic impact of approximately €7 billion. The Dutch LSH sector received an additional boost with the relocation of the European Medicines Agency (EMA) to the Netherlands in 2019. The twenty-billion-euro National Growth Fund directly benefits the sector with funding for projects as RegMedXB, Health-RI, Biotech Booster, Pharma NL and Oncode-PACT.

The Greater Boston area is the world’s capital of the life sciences industry. It’s home to more than 1,000 biotechnology companies, ranging from startups to billion-dollar pharmaceutical companies. The many world leading universities in the area give the region a large network of scientists and an excellent talent pipeline.