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Netherlands: 2011 Tax Proposals

(Sept. 23, 2010) On September 21, the Minister of Finance of the Netherlands presented to the Lower House of the Parliament the 2011 plan for Dutch taxes, to apply from January 1, 2011. Details of the plan affecting direct taxation include:

  • reduction of the corporate income tax rate for profits over €200,000 (about US$267,000) from 25.5% to 25%;
  • adoption of measures to combat trade in “empty” companies (e.g., those that are newly formed, without tax or other forms of liabilities) with compensation of losses and the shifting of loss-making activities to a formerly profitable empty company after its purchase;
  • reduction of the tax rate in the first bracket of personal income tax and wages tax to 1.85% ( to be set at 2% as of January 1, 2012);
  • extension from two years to three (i.e., until January 1, 2013) of the time period during which individuals who have purchased a new house but not sold the old one can deduct mortgage interest for both houses; and
  • increase of several levy rebates, e.g., the one for taxpayers over 65 years of age is increased by €50 (about US$67).

Measures that affect indirect taxation include:

  • temporary reduction, from 19% to 6%, of the applicable value-added tax rate on labor used in the renovation of dwellings over two years old, to be implemented July 1, 2011;
  • increased excise duty on cigarettes and tobacco as of March 1, 2011. For the most widely sold category of cigarettes, the increase amounts to €0.26 (about US$0.35) per pack and for tobacco, to €4.93 (about US$6.59) per kilogram;
  • amendment of the law on transfer tax on immovable property to combat complex structures aimed at avoidance of the tax. Dutch law provides that transfer tax is due when a company is sold and at least 30% of the company's value is related to immovable property, whether situated in the Netherlands or elsewhere; and
  • suspension of the planned phasing out of the luxury tax on motor vehicles, but continuation in 2011 of “the very successful measures” to promote the sale and use of cars with low rates of carbon dioxide emissions. More by this author