More details of the 2011 Tax Package as announced on Budget Day

On 21 September 2010 - Budget Day in the Netherlands - the Dutch Government made public the 2011 Tax Package. The plans presented reflect the Dutch government’s policy to stimulate and to accommodate entrepreneurship.  Below is a summary of the most important changes that were proposed in the Tax Package. Since both the House of Representatives and the Senate have to approve these plans, significant changes could still occur. Most proposals included in the 2011 Tax Package are set to take effect on January 1, 2011.

Corporate income tax: reduction top rate and abolition of intermediate rate

The 2011 Tax Package proposes to cut the highest rate of corporate income tax 25.5% to 25%. This rate will be applied to taxable profit exceeding € 200,000. If the taxable profit is less than € 200,000, a rate of 20% will be applicable. The intermediate rate of 23% for profits between € 40,000 and € 200,000, which was made inoperative for fiscal years 2009 and 2010, will definitively be abolished.

Continuation of the temporary measure to opt for an extension of the loss carry back period

Taxpayers liable to Dutch corporate income tax can currently opt for an extension of the loss carry back period from one year to three years. However, as a consequence the loss carry forward period will be limited from nine years to six years. At the moment, this option is a temporary provision that is valid for fiscal years 2009 and 2010. It has been proposed that for purposes of corporate income tax, the optional extension of the loss carry back period also be valid for fiscal year 2011. If losses are carried back to the added two years a cap of €10m is in order. This means that, for loss compensation purposes, a €10m maximum of tax losses can be carried back to each of the extra two years.

Continuation of accelerated depreciation facility

Investments made in 2009 and in 2010 are conditionally eligible for the accelerated depreciation facility, allowing for an arbitrary depreciation on specified business assets. A maximum of 50% of the acquisition or production costs may be amortized in the year that the liability is accepted or production costs are incurred. Arbitrary amortization of the remainder may take place in the following year or subsequent years. Prior to usage of the business asset, the amount of arbitrary amortization may not be higher than the amount that has been paid with regard to the investment. This provision has been introduced in 2009 (and extended in 2010) as one of the emergency measures that the Dutch government has adopted at the time. In order to similarly grant the accelerated depreciation facility to companies that make investments in 2011, it has been proposed that the measure be prolonged with one year.

Taxable period non-resident taxpayers

The taxable period for non-resident taxpayers as required under Dutch corporate income tax currently differs from the taxable period that applies to resident taxpayers. For resident taxpayers, the year for which the taxable amount is calculated constitutes the fiscal year. Non-resident taxpayers are to follow the approach of the individual income taxation act that instructs the calendar year. For implementation purposes, the taxable period for non-resident taxpayers liable to corporate income tax with an off fiscal year (not concurring with a calendar year) will be deemed equal to the taxable period that applies to resident taxpayers. The proposed changes will be effective for fiscal years that start on or after 1 January 2012.