Dutch tax alert: Tax Plans 2022

Update: 13 October 2021

On 21 September, the Dutch Ministry of Finance published the tax package for the year 2022.
It includes relevant changes for (multinational) companies, (real estate) investors and employees.

The tax package contains various proposals of which we discuss the key points. In addition, we touch upon certain other announced and/or expected changes. Finally, we describe certain relevant tax measures that were enacted before and that will become effective as of the year 2022. We include relevant updates regarding the tax plans published after budget day.


1. Corporate income tax rate
2. Earnings stripping rule
3. Arm’s length principle / informal capital
4. ATAD2: reverse hybrid rule & extension of related party definition to natural persons
5. Interest and royalty withholding tax act: extension of scope to other Dutch sources & payments made by hybrid entities
6. Holding/financing losses reparation
7. Employee stock options for start-ups, scale-ups and other companies
8. Sofina changes
9. Various other bills, including wage tax exemption for employees working from home

10. Loss compensation rules (NOLs)

11. Dutch and foreign entity classification rules
12. DAC7



1. Corporate income tax rate

During the parliamentary discussion of the tax plans, a political agreement was reached to increase the headline CIT rate from 25% to 25.8%. As of 2022, the step-up rate will apply to the first EUR 395k of taxable profits (currently EUR 245k).

2. Earnings stripping rule

During the parliamentary discussion of the tax plans, a political agreement was reached to decrease the earnings stripping percentage from 30% to 20% of EBITDA. This will be the new threshold for net interest deductions in the Netherlands.
Another possible change that is being considered is to restrict the possibility of splitting of companies to use the franchise multiple times.

3. Arm’s length principle / informal capital

The Dutch government has published a bill to amend the Dutch arm’s length principle for book years starting on or after 1 January 2022, following a consultation round earlier this year. The so-called “informal capital” concept that was developed in Dutch case law will as such be tightened.

The proposal aims to neutralize certain transfer pricing (“TP”) mismatches (to which the ATAD2 anti-hybrid mismatch rules generally do not apply). This is done by denying the deduction of a downward TP adjustment if there is no corresponding adjustment. A corresponding adjustment exists if a counterparty takes into account the corresponding amount or value for tax purposes. A corresponding adjustment may exist if the income is subject to a 0% rate, benefits from an objective exemption or is not actually taxed due to the use of tax losses. No corresponding adjustment is considered present in case of the absence of an income tax or in case of a subjective exemption. The taxpayer has the burden of proof of the corresponding adjustment.

The rules only apply to related party transactions as defined in article 8b of the Dutch corporate income tax act (which contains the arm’s length principle). Based on this article, a related party is a party which participates in the management, supervision or the capital of another entity (and vice versa). A broad related party definition would therefore apply.

TP mismatches that are neutralized

A downward TP adjustment exists if for Dutch tax purposes: 1.) a higher amount of expenses or 2.) a lower amount of income is reported than the amount that is agreed upon from a legal perspective. Based on the new rules, the deduction of the downward adjustment is denied if there is no corresponding adjustment.

The bill furthermore neutralizes TP mismatches related to the acquisition of assets in the following situations: 1.) a Dutch taxpayer acquires an asset from a related party against a lower price than the fair market value or 2.) a Dutch taxpayer acquires an asset by way of a contribution or distribution. To the extent the cost price reported for Dutch tax purposes is higher than the transfer value for which the related party is subject to tax, the cost basis of the Dutch taxpayer will be adjusted to a lower amount. This results in lower amortization or depreciation expenses.

Depreciation and amortization expenses related to asset acquisitions between 2019 and 2021 may also be affected in case there was a TP mismatch related to the cost price of the assets.
TP mismatches can also occur in relation to the transfer of debts. Differences in the transfer values are also brought under the scope of the bill in case they result in downward adjustments.
TP mismatches in relation to the allocation of profits to permanent establishments are not covered by the bill.


The proposal is an important shift in Dutch tax policy. The one-sided perspective whereby Dutch taxable income is calculated in accordance with the arm’s length principle is partly abandoned. Instead, the policy to neutralize mismatches and to consider the functions, risks, assets and tax treatment in the counterparty jurisdiction has become more important, even if these mismatches do not arise in the Netherlands.

The bill is expected to result in complex situations for specific fact pattens. Even though the explanatory notes contain some clarifications, also many questions remain.

As a result of this bill, it appears that common TP methods may bear risks towards the future. As an example, if a taxpayer applies the TNMM and the actual results fall outside of the arm’s length range, the taxpayer may need to make a downward TP adjustment. As the method implies that a certain margin is tested, it is difficult to pinpoint a transaction that is to be adjusted.
The interplay with other rules (such as controlled foreign company and withholding tax rules) can result in overkill. Only limited relief for cumulation with the anti-hybrid mismatch rules is included in the proposal.

As the proposed rules will only apply to cross-border situations, it is not certain that the bill is fully EU proof.

4. ATAD2: reverse hybrid rule & extension of related party definition to natural persons

4.1. Reverse hybrid rule
Based on the second Anti-Tax Avoidance Directive (ATAD2), a reverse hybrid rule must be implemented with effect as from 1 January 2022. The Dutch government now proposes to incorporate the reverse hybrid rule into the corporate income tax act, the dividend tax act and the conditional withholding tax act as of 1 January 2022.

The reverse hybrid rule will be applicable subject to the following conditions:
(i.) The entity should be considered tax transparent from a Dutch tax perspective (such entities may include limited partnerships (such as CVs) and general partnerships);
(ii.) The entity should be formed under Dutch law or established in the Netherlands;
(iii.) One or more related party participants in the entity should consider the entity to be non-tax transparent (opaque); and
(iv.) The related party participants should be entities that together own 50% or more of the voting rights, capital interests or rights to a share of profit.

If these conditions are met, the reverse hybrid entity will become subject to Dutch corporate income tax, its dividend distributions will in principle become subject to Dutch dividend tax and in certain situations, royalty and interest payments become subject to the Dutch conditional withholding tax. As an exception, the reverse hybrid rule will not apply to regulated collective investment vehicles with a diversified portfolio.

Certain accompanying measures are introduced to avoid double taxation, such as a corporate income tax deduction for participants that consider the reverse hybrid entity to be transparent and a dividend tax exemption for certain dividend distributions.

The reverse hybrid rule is expected to affect transparent (closed) Dutch CVs in particular.

4.2. Extension of related party definition
Currently, under the regular hybrid mismatch rules that entered into effect as of 1 January 2020, hybrid mismatches are only targeted if they arise between the taxpayer and a related entity, and not if they arise between the taxpayer and a related natural person. The Dutch government now proposes to extend the scope of the hybrid mismatch measures also to mismatches with related natural persons.

5. Interest and royalty withholding tax act: extension of scope to other Dutch sources & payments made by hybrid entities

5.1 Extension of scope to other Dutch sources
As of 1 January 2021, certain interest and royalty payments may be subject to a withholding tax based on the conditional withholding tax act. In short, withholding tax may be levied in respect of related party interest and royalty payments made by Dutch taxpayers to recipients in a Dutch or EU blacklisted country or to certain hybrid entities. Payments that are attributable to a Dutch permanent establishment of a foreign taxpayer may also be subject to this withholding tax.

On 8 October, the Dutch government published a bill to extend the scope of the withholding tax act also to certain foreign taxpayers that do not have a permanent establishment in the Netherlands, but that derive income from other Dutch sources, such as real estate located in the Netherlands. Payments of interest and royalties attributable to such Dutch sources would as such become subject to the conditional withholding tax as of 1 January 2022.

This rule in particular seems relevant for foreign investors holding Dutch real estate that is financed with related party debt.

5.2 Payments made to hybrid entities
Another amending bill to the conditional withholding tax act has been published to clarify that hybrid entities will no longer be subject to interest and royalty withholding tax if no investors hold a “qualifying interest” in the hybrid entity.

The change will be implemented with retroactive effect to 1 January 2021.

6. Holding/financing losses reparation

A loophole will be closed that relates to the set off of holding and financing losses (which follows from a recent case of the Supreme Court).
Historically, holding and financing losses could only be offset against holding and financing profits, and not against general operating profits. It follows from the Supreme Court case that it may be possible to circumvent the holding/financing loss restriction by forming a fiscal unity.
Even though the holding/financing loss regime has been abolished, a reparation measure has been published on 8 October. The rule applies as from book years starting on or after 1 January 2022.

7. Employee stock options for start-ups, scale-ups and other companies

The tax package contains the announced bill to change the stock option rights regime, which should make it more attractive for companies to grant stock options to employees. Although the new regime is in particular meant to benefit start-ups and scale-ups, the rules will apply to all companies across the board.

Under the proposal, the moment of taxation on exercising a stock option in principle shifts to the moment when the acquired shares become tradable. Income tax will then be levied based on the value of the shares at that moment. At the option of the employee, taxation may also still occur when the stock options are exercised. Employees should opt for such immediate taxation prior to the option exercise. In these cases, income tax will be levied based on the value of the shares at the moment of the option exercise.

A downside of postponing taxation until the moment the shares become tradable, is that eventually a higher amount of tax will be due by the employee if the shares increase in value. Also, it should be noted that dividend income will be taxed as employment income if dividends are distributed on shares in respect of which taxation is postponed.

The bill is in particular important for start-ups and scale-ups, as it aims to solve the liquidity issues that would typically arise in connection with income tax that becomes due immediately when a stock option is exercised.

8. Sofina changes

The bill is introduced as a response to the Sofina ruling of the Court of Justice of the European Union (C-575/17) and was already announced in last year’s tax plan.

As of 1 January 2022, Dutch dividend tax and gambling tax will only be creditable up to the amount of corporate income tax payable in a given year. It will as such no longer be possible to obtain a refund of dividend tax or gambling tax if the recipient is in a loss-making position. Withholding tax that is not creditable in a certain year can be carried forward to later years.

The Sofina Decree issued by the Dutch government last year (based on which certain non-resident investors could claim a refund of Dutch tax) will be withdrawn as of 1 January 2022.

9. Various other bills

9.1. Compulsory salary for substantial shareholders (gebruikelijk loon)
For start-ups, the minimum compulsory salary to be reported for substantial shareholders can be set at the minimum wage level. This temporary rule has been extended for at least another year until 1 January 2023.

9.2. Wage tax exemption for employees working from home
In the wage tax act, a specific exemption is introduced based on which employers may grant their employees a tax free allowance of EUR 2 per home working day. The allowance may be combined with the existing home workplace exemption, but cannot be used in combination with the tax free travel allowance.

9.3. Work-related expense regime at 3%
The temporary increase of free space in the work-related expense regime (3% for the first EUR 400.000 of wage sum) is formalized.

9.4. WBSO simplifications
Certain simplifications are proposed for the innovative wage tax subsidy “WBSO”. More flexibility is achieved in the request procedure and in the crediting of the subsidy. Going forward, the actual costs and expenses should be included in the request, in order to apply the WBSO based on (approved) actual costs.

9.5. CFC credit
A technical rule around the ordering of credits for the underlying tax of CFCs is introduced.

9.6. RETT exemption for buyback of residential real estate
The tax plan includes a new RETT exemption for buybacks of residential real estate from individuals under a sales regulation clause. The proposed RETT exemption applies under the certain conditions (a.o. a maximum real estate value of EUR 400k).

9.7. Landlord levy (verhuurderheffing)
It is proposed to reduce the rate of the landlord levy (verhuurdersheffing) from 0.527% to 0.485%.



10. Loss compensation rules (NOLs)

Last year, the following changes to the loss relief rules were enacted and will become effective for book years starting on or after 1 January 2022:
Indefinite carry forward term (currently, the term is 6 years);

  • Indefinite carry forward term (currently, the term is 6 years);
  • The set off of losses exceeding EUR 1m will be limited to 50% of the taxable profits in a given year. Profits up to EUR 1m can be set-off in full.

The new rules apply to all new losses, as well as to existing (post-2013) losses that are still available for set off in 2022 or later years.

The effect of these changes is that taxpayers will have more time to set off their tax losses against taxable profits, but taxpayers with annual profits in excess of EUR 1m and large amounts of carry forward losses will need more time to use their losses in full.



11. Dutch and foreign entity classification rules

Earlier this year, the Dutch government started a public consultation to change the rules with respect to, inter alia¸ the classification of Dutch and foreign limited partnerships as transparent/non-transparent entities.

Pursuant to the current Dutch rules, a Dutch CV or a non-Dutch limited partnership is considered non-transparent (to the extent of the limited partners’ interests) if no prior written consent is required for the admission and substitution of the limited partners. As the Dutch rules deviate from most foreign systems, they are considered the source of many hybrid mismatches.

Initially, the Dutch government intended for the current rules to be changed as of 1 January 2022, but this process has been delayed. A formal legislative proposal is now expected to be released in the winter of 2021/2022.

It has already been announced that the initial plan to also change the transparency rules for funds for mutual account (fonds voor gemene rekening) will not be pursued in the legislative proposal, following criticism during the public consultation.

12. DAC7

A legislative proposal implementing the new information exchange obligations for online platforms in the Netherlands pursuant to EU directive DAC7 is expected in spring 2022.

News overview