A closer look at the Capita Selecta Tax Plan 2018

A closer look at the Capita Selecta Tax Plan 2018

Every year on the third Tuesday of September, the Dutch government reveals its Tax Plan for the coming year to the House of Representatives (Tweede Kamer). This day is known as ‘Prinsjesdag’ (Budget day). The revealing of the Tax Plan on this day is obligated under the Dutch constitutional law. The Tax Plan includes proposed bills aimed at simplifying the tax system and providing measures to address tax arrangement and tax evasion for the coming year. This article will outline proposed bills and legislative amendment that will go into effect in 2018, which might be of interest to you.

Voluntary disclosure scheme abolished
The Dutch voluntary disclosure scheme offers a limited opportunity to voluntarily correct the tax return related to a previous tax period which were incorrect or incomplete. In addition, the taxpayer only pays the tax and interest when the previous tax return is corrected within two years. If it isn’t rectified in two years, penalties will be given to the taxpayer. Starting from the 1st of January 2018, the voluntary disclosure scheme will be abolished. Taxpayers will face penalties even when the previous tax returns were voluntarily corrected and submitted.

Double business test on third-party loans
Article 10a of the corporate tax law limits the in-terest deduction on debts to a related-party or -person if it relates to an infected legal act, also known as ‘antiwinstdrainageregeling’. This limitation of the interest deduction does not apply if the taxpayer proves the loan businesslike. On the 21st of April 2017, the Supreme Court had a case about a company (Party B) that couldn’t secure loan from any other lenders except from Party A. This kind of loan is seen as not-businesslike because Party B would not be able to get the loan in any other circumstances. Party A, which is a related-party to Party B, borrowed money from a non-related party (Party X) and lent it to Party B. There was parallelism in this case, because the loan between Party A and X was deemed businesslike, making the loan between Party A to Party B also businesslike. This is known as the double business test (dubbele zakelijkheidstoets). Basically, the debt is caused by a third party, therefore the interest deduction is not limited. The Tax Plan 2018 includes legislative amendment due to this judgement.

Fictitious employment relationship of a non-exe-cutive director abolished
In 2010, the fictitious employment relationship was introduced to directors of listed companies. This is because directors of listed companies are not employees according to civil law and have no withholding tax responsibility. A fictitious employee is treated as an employee for payroll tax. However, a distinction is made between executive directors and non-executive directors. This fictional employment relationship is intended for the executive directors. There are uncertainties for the fictitious employment for directors. Non-executive directors are being examined to see if they should be seen as executive directors or commissioners. In 2017, the fictitious employment relationship for commissioners has been abolished. The Tax Plan 2018 includes solutions for the uncertainties of non-executive directors. As of January 1, 2018, the fictitious employment relationship does not include non-executive directors.

All in all, the Tax Plan 2018 was announced without a cabinet. Therefore, it is possible that the new cabinet may add additional taxation plans 2018 because each political party has its own interest.

If you would like to receive more information and/or professional advice on the impact of proposed bills for your organization, do not hesitate to contact us.

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