The Netherlands - 2018 Tax Bill Adopted

On 19 December 2017, the Dutch Senate adopted the 2018 Tax Bill as part of the 2018 State's Budget. Hereafter we will describe the main amendments to the Dutch tax laws.

1. CORPORATE INCOME TAX

Interest Deduction Limitation – sharpening of the counter evidence rule

The deduction of interest is in general denied if a Dutch company borrows monies from a group company and uses the monies to invest in the capital of group companies or to reduce its equity. The interest is nevertheless deductible if the company can demonstrate that the transaction as well as the debt financing were entered into for sound business reasons (double business motive test).

On 21 April 2017, the Dutch Supreme Court ruled that a taxpayer already met this test if it could demonstrate that the intra-group debt was indirectly owed to a third party (back-to-back), irrespective of whether the taxpayer was able to demonstrate that the transaction was also based on sound business reasons.