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On 19 December 2023, the Dutch Senate approved the 2024 tax plan that amends the Dutch corporate income tax act and Dutch personal income tax act, in part by including a withholding tax on share buybacks, changes to the entity classification rules and (further) restrictions on the 30% facility (expat regime).
The Senate also approved the Minimum Tax Act 2024. The measures are considered to be substantively enacted (under International Financial Reporting Standards (IFRS)) for financial statements ending after 19 December 2023. For purposes of US Generally Accepted Accounting Principles (GAAP), it is enacted when the legislation is published in the State Gazette.1
This Tax Alert highlights the relevant legislative changes as a result of the 2024 tax plan and the Minimum Tax Act 2024, including two changes that have occurred in the parliamentary process leading to the approval of the 2024 tax plan. Discussions in the Dutch Senate that took place before the final vote did not result in any changes to the final Dutch legislation.
Minimum Tax Act 2024 (BEPS 2.0 - Pillar Two)
The Minimum Tax Act 2024, which is based on the EU Directive,2 will introduce a Qualified Domestic Minimum Top-Up Tax (QDMTT) and an Income Inclusion Rule (IIR), both for reporting years starting on or after 31 December 2023, and an Undertaxed Payments Rule (UTPR) for reporting years starting on or after 31 December 2024.3, 4
In October 2023, the Netherlands published a Memorandum of Amendment to the Minimum Tax Act 2024, which included a Safe Harbor for QDMTT and a Transitional UTPR Safe Harbor.
Alignment of legal entity and partnership classification rules with international tax standards
Under the current rules, a foreign entity/partnership is compared to the Dutch legal entity/partnership that it most closely resembles based on its legal characteristics. For Dutch tax purposes, the foreign entity is treated similarly to its comparable Dutch legal form (legal form comparison analysis). In addition, limited partnerships (comparable to a Dutch CV) may qualify as either transparent or nontransparent for Dutch tax purposes.
Under the new rules, the classification is determined using (a) a comparison method (main rule) that applies if there is sufficient comparison with Dutch legal entities/partnerships; and (b) two alternative methods ((i) fixed classification and (ii) symmetrical classification) if there is insufficient comparison. Furthermore, limited partnerships (comparable to a Dutch CV) will always be considered to be transparent. Following the adoption of the 2024 tax plan, these rules will enter into effect as of 1 January 2025 and, in limited cases, per 1 January 2024. For more, see our more detailed Tax Alert.5
Dutch dividend withholding tax on share buybacks
Currently, certain share buybacks schemes are exempt from Dutch withholding tax (WHT), subject to meeting certain conditions and limitations. As of 1 January 2025, following the adoption of an amendment in the House of Representatives, the deemed distribution of reserves in share buybacks of Dutch tax resident listed entities will be taxable against the dividend withholding tax rate of 15%.
Restriction Dutch 30% facility
Following the adoption of an amendment in the House of Representatives, the 30% facility is (further) restricted. Under the current rules, 30% of the taxable salary of incoming employees can be paid tax free for a maximum term of five years. As of 1 January 2024, the 30% facility is restricted as follows:
- First 20 months of employment: 30% of salary is exempt
- Next 20 months of employment: 20% of salary is exempt
- Next 20 months of employment: 10% of salary is exempt
Transition rules should apply for current 30% facilities (through 2026). Already, the 30% facility was subject to restriction due to earlier-enacted amendments. As of 1 January 2024, the salary basis to which the 30% is applied is capped and set at the public sector pay cap (in 2023: €223,000 (adjusted annually)).
For additional information with respect to this Tax Alert, please contact the following:
Ernst & Young Belastingadviseurs LLP, International Tax and Transaction Services, Amsterdam
- Dirk Stalenhoef
- Eric Westerburgen
Ernst & Young Belastingadviseurs LLP, International Tax and Transaction Services, Rotterdam
- Michiel Swets
- Ronald van den Brekel
Ernst & Young LLP (United States), Netherlands Tax Desk, New York
- Dirk-Jan (DJ) Sloof
- Martijn Mulder
- Rodin Prinsen
- Özlem Kiliç
- Bas van Stigt
- Frederique Kramer
Ernst & Young LLP (United States), Netherlands Tax Desk, Chicago
- Sebastiaan Boers
- Daan Hoogwegt
Ernst & Young LLP (United States), Netherlands Tax Desk, San Jose/San Francisco
- Job Grondhout
Ernst & Young Tax Services Limited (Hong Kong), Netherlands Tax Desk, Hong Kong
- Bas Sijmons
Ernst & Young (China) Advisory Limited (China Mainland), Netherlands/EMEA Tax Desk, Shanghai
- Moya Wu
Ernst & Young (China) Advisory Limited (China Mainland), Netherlands/EMEA Tax Desk, Beijing
- Stephanie Wong
Ernst & Young LLP (United Kingdom), Netherlands Tax Desk, London
- Michiel Hoozemans
- Maarten Sonneveld
- Sander Erberveld
Ernst & Young Tax Co (Japan), Netherlands/EMEA Tax Desk, Tokyo
- Joris van Huijstee
Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor
For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.
