Netherlands: Update on status of 2022 Tax Plan; amendments are adopted

Lower House of Parliament adopted elements of the 2022 “Tax Plan” package

Lower House of Parliament adopted elements of the 2022 “Tax Plan” package

The Lower House of Parliament on 11 November 2021 adopted elements of the 2022 “Tax Plan” package including an amendment that would be intended to address the “overlap” for levying corporate income tax with regard to “open limited partnerships” (open CV) and hybrid mismatch measures (ATAD2). 

The corporate income tax law in the Netherlands provides that part of the profit of an open CV accruing to the general partners is deductible. The hybrid mismatch measures provide that a payment that is not initially taxed in the Netherlands, but there is a corresponding deduction in the payor’s country (despite the fact that that country should have denied the deduction pursuant to ATAD2), must nevertheless be added to the profit of the entity in the Netherlands. Thus, part of the profit is deductible, while the other provision dictates that certain income must be taxed.

The amendment provides for an overlap rule and prescribes that a deduction is not to be permitted insofar as the share of the profit of the open CV accruing to the general partners relates to the adjustment of the Dutch profit pursuant to ATAD2.

The Lower House also adopted an amendment to a bill that would address mismatches in the application of the rules regarding the arm’s length principle. Read TaxNewsFlash

What’s next?

The adopted amendments are being incorporated into the bills, after which they will be debated in the Upper House of Parliament in the coming weeks. Unlike the Lower House, the Upper House cannot make any changes, but can only adopt or reject bills in their entirety (although the latter is unlikely). The Upper House is expected to vote on the bills in mid-December 2021.

Read a November 2021 report prepared by the KPMG member firm in the Netherlands

 

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