On Budget Day 2023, the plans for the coming year were announced. We list the most important (tax) proposals from the Tax Plan 2024 for you. What might change for you?
Adjustment of reference to box 2 rate due to introduction of progressive rate box 2 as from 2024
From 1 January 2024, a progressive rate will apply. This rate will be 24.5% next year for income up to €67,000, and 31% on the amount above that. This change will also be updated in other legal texts referring to the previous flat box 2 rate.
Gifts by private limited company
Non-business donations by a private limited company to an ANBI or Steunstichting are under current legislation deductible for corporate income tax up to 50% of the profit, with a maximum of €100,000. If the threshold amount is exceeded, the donations are not deductible for corporate income tax and are considered a disguised distribution to private persons. This is then regarded as a donation from private individuals by the substantial interest holder to the respective ANBI or Foundation. The substantial interest holder owes income tax on this distribution. However, the substantial interest holder can use the gift deduction in the income tax.
It is proposed that from 1 January 2024, a gift from the company - to an ANBI or Support Foundation - will no longer be deductible for corporate income tax. As a result, from now on there will also no longer be a hidden distribution to private individuals. As a result, donations by the company will no longer be considered a taxable benefit for income tax or proceeds for dividend tax.
This measure leads to simplifying the possibilities to donate from the company to an ANBI or Support Foundation. By doing so, the government continues to encourage companies to make large donations from the company.
Business expenses by companies to charities, such as sponsorship or advertising, will continue to be deductible.
Abolish independent tax liability of open limited partnerships
On Budget Day, the Bill on the Adaptation of Qualifying Legal Forms Act was published. With effect from 1 January 2025, every CV will become fiscally transparent. Henceforth, CVs will no longer be subject to independent taxation, but all partners will be taxed to the extent they are entitled to the assets and results of the CV.
Because the independent tax liability of the open limited partnership ends, the transitional law includes a disposal fiction and a final settlement fiction. The transitional law also provides four facilities: pass-through facility, share merger, spread payment and pass-through facility in posting situations.
Tightening regulations for investment institutions
An exempt investment institution is exempt from corporate income tax, while a fiscal investment institution is subject to a 0% corporate income tax rate under certain conditions.
The rules for exempt investment institutions have been tightened. From 1 January 2025, this exemption will only apply to investment institutions or undertakings for collective investment in transferable securities (UCITS) as defined in the Financial Supervision Act. This will limit access to the exemption for investment institutions and UCITS offering rights to a broad public or institutional investors. Exempt investment institutions owned by high-net-worth individuals will be subject to corporate income tax from 1 January 2025.
From 1 January 2025, fiscal investment institutions will no longer be allowed to invest directly in real estate, this applies both in the Netherlands and abroad. Profits made from real estate investments will be subject to corporate income tax in all cases.
Approach to dividend stripping
Dividend stripping is a practice of splitting the economic and legal rights to dividends with the aim of achieving a dividend tax advantage. The Tax Plan 2024 includes a bill containing measures to strengthen the approach to dividend stripping. Among other things, this bill changes the burden of proof of beneficial ownership. This will strengthen the inspector's evidential position.
Minimum tax - Pillar 2
The minimum tax bill 2024 (Pillar 2) was sent to the House of Representatives on 31 May 2023. The minimum tax bill ensures that multinationals and domestic companies with an annual turnover of €750 million or more pay a profit tax of at least 15%.
Announcement tax measures European Union
Proposed European directives BEFIT and Transfer Pricing
The European Commission published the EU directive proposals BEFIT (Business in Europe: Framework for Income Taxation) and Transfer Pricing on 12 September 2023. The BEFIT proposal replaces previous European Commission proposals that provided for a common (consolidated) corporate tax base (CCTB and CCCTB). The BEFIT proposal is scheduled to enter into force on 1 July 2028.
The Transfer Pricing proposal incorporates the arm's length principle and key transfer pricing rules into EU law. The proposal aims to clarify the role and status of the OECD Transfer Pricing Guidelines and will create the possibility of establishing common binding rules on specific aspects of transfer pricing. Despite the Transfer Pricing proposal being part of the BEFIT Directive, the aim is for it to enter into force on 1 January 2026.
Proposed European directive HOT (Head Office Tax)
The European Commission published the proposed directive HOT (Head Office Tax) on 12 September 2023. The proposal aims to provide relief to SMEs. European SMEs, which operate across borders through permanent establishments, will be allowed to submit only one tax return to the tax authority of the head office. In addition, these companies will only have to calculate their tax based on the tax laws of the EU member state of their headquarters. However, the tax rates applicable to permanent establishments will remain in line with the member states where the permanent establishments are located.
Like to know more about Tax Plan 2024?
Would you like to know more about the proposed changes and what this means for you? If so, please contact Dominique Belt - van Maurik, by e-mail or by phone: +31 (088) 277 24 40 and Rick van Horik, by e-mail or by phone: +31 (088) 277 16 24. They will be happy to help you.