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Freshfields Risk & Compliance

| 4 minutes read

Tax measures in The Netherlands: what's next?

The Netherlands government introduced several tax measures (PDF) related to the COVID-19 outbreak. The measures mainly focus on improving the liquidity of businesses, such as a deferral of taxes on request for a period of up to six months, and the option to apply for a reduced provisional tax assessment (that could lead to an immediate tax refund if the new provisional tax assessment is lower than the tax already paid).

In addition, a so-called ‘corona reserve’ has been introduced, which provides that businesses subject to corporate income tax may already take their expected Covid-19 related losses for 2020 into account in calculating their 2019 corporate income tax base. This immediately leads to a tax reduction for financial year 2019 (which is generally payable in 2020). As this is a liquidity (and thus timing-only) measure, the COVID-19 related losses that are effectively carried back to 2019 cannot be used to also reduce the 2020 tax base. This is particularly relevant to take into account in pricing M&A transactions with an effective date in 2020, as a seller may in such case effectively enjoy the benefit of post-effective date (COVID-19 related) tax losses.

Now that the pressure on the cashflows of businesses has been relieved, it is time to look ahead, and identify potential tax instruments that the Netherlands could introduce aiming at economic recovery, instead of liquidity only, also by looking back to the measures taken after the financial crisis in 2008-09.

Tax havens 

The Netherlands distinguishes between individual and general support measures. The support package for KLM Royal Dutch Airlines is an example of individual support, while general support measures include the measures mentioned above. The Netherlands announced that it will not grant individual support to companies with a link to tax havens. As opposed to other jurisdictions, however, The Netherlands has opted not to introduce such requirement for general tax measures.

Furthermore, opposition parties have tried to introduce additional conditions for the various support measures, such as:

  1. a repayment obligation for multinationals of the support they received once they start being profitable again; and 
  2. a raise of corporate income tax for profitable companies in 2021. 

However, these proposals have been rejected and are not expected to be reintroduced any time soon.

Loss offset 

In order for tax losses in a certain financial year to be carried back or carried forward for set-off against profits in another financial year and to actually result in tax refunds, the losses must be formalized by means of a final tax assessment. This is a process that in practice generally takes a long time. In order to avoid that the taxpayers had to wait too long before they would receive a tax refund, the Netherlands government introduced a measure in 2008 that would allow taxpayers to request a provisional loss carry-back based on a provisional tax assessment (ie no need to wait for a final tax assessment) amounting to a maximum of 80 per cent of the declared loss. In addition, the possible loss carry-back period was extended from one year to three years. After the financial crisis, the loss carry-back period was reduced to one year again.

As a reaction to the COVID-19 related crisis, the Netherlands government introduced the corona reserve (as set out above) with a similar accelerated possibility for carrying back losses to 2019, but without extending the loss carry-back period. The State Secretary for Finance explicitly confirmed that the loss carry-back and carry-forward possibilities will not be broadened any further.


In 2008, VAT reductions were used to support the housing market. VAT on new-built houses, for example, was temporarily reduced from the standard 19 per cent to the lower (then) 6 per cent rate. The government has introduced certain VAT reductions relating to healthcare, such as the supply of medical personnel, facemasks, and digital sports lessons. We would not expect government to expand the VAT reductions to other products/sectors.

Accelerated depreciation

Businesses that invested in certain assets in 2009 or 2010 were certain conditions allowed to depreciate those assets at an accelerated depreciation rate of 50 per cent per year.

No similar measures have been introduced as of now, but we are expecting that, if the Netherlands chooses to reintroduce this measure, the accelerated depreciation rate will be limited to sustainable investments/assets. One thing that has been gaining momentum in politics, is the view that the recovery of the economy should go hand in hand with sustainability.

Political developments

Before the COVID-19 outbreak, the Netherlands Lower House set up a committee of experts to investigate whether measures were required to come to a fairer taxation of multinationals and, if so, which measures may be taken whilst remaining an attractive and competitive jurisdiction for establishing head offices. 

The committee’s report came out in April 2020, and suggested a number of measures, including a further restriction on loss carry-backs and carry-forwards and deduction limitations for certain shareholder costs and royalties. 

As COVID-19 has led to other priorities for the Ministry of Finance and it is contrary to the current COVID-19 policy to increase the tax burden of corporations at this time, it is expected that COVID-19 will in any case slow down the process of introducing any such measures.

After already having announced to come up with proposals to ‘fix certain gaps’ in respect of the Netherlands dividend withholding tax legislation, on 10 July 2020, opposition party GroenLinks submitted a legislative proposal to introduce a conditional exit tax for dividend withholding tax purposes in case of certain cross-border migrations/reorganizations, most likely triggered by recent public commotion around Unilever and Royal Dutch Shell (allegedly) considering to move their head office from The Netherlands to the UK. The proposal is intended to apply with retroactive effect to make it impossible for taxpayers to pre-empt the formal ratification of the proposal. It is currently difficult to assess whether this proposal will have sufficient political support to be passed. Although COVID-19 may somewhat slow down this process for the reasons set out above, it is a time sensitive matter given the current discussions around a possible migration of Unilever and Royal Dutch Shell.

Finally, political parties may see some of the measures as a way to win votes in the lead-up to the general elections in March 2021; the outcome of the elections may to some extent determine if the developments above will gain the necessary traction in years to come.


tax, covid-19, europe