Brussels, 07/02/2007 (Agence Europe) - On Wednesday, the European Commission decided to open an in-depth investigation into the planned reduction of taxes in the Netherlands on net interests earned on intra-group loans, as part of a regime entitled the “Groepsrentebox”. At the same time, the Commission has decided not to raise any objections to a plan to reduce tax rates on interest resulting from short-term deposits, as long as these are aimed at acquiring at least 5% of the shares of the company. This latter measure would benefit equally all companies subject to Dutch corporate tax, and would therefore be compatible with the single market.
In July 2006, the Netherlands noted a proposed tax break regime with an annual budget of €475 million, the aim of which was to reduce the differences in fiscal treatment between two instruments of intra-group financing, namely equity and debt. Currently, when a company injects capital into another company, the interest generated is hit by corporate taxation at the normal rate of 25.5%. The same is true for the companies which receive a capital injection: the dividends paid for injections of capital are not tax-deductible, whilst those paid on loans can be deducted at the normal corporate taxation rate of 25.5%.
The "Groepsrentebox" regime provides two measures, which are, in principle, accessible to all companies subject to Dutch corporate tax. The first provides for the tax rate on interests generated as a result of the intra-group financing to be brought down from 25.5%, the normal corporate taxation rate, to 5%. If the balance between the interest received and interest paid is positive, it will be taxed at a standard rate of 5%. If the balance is negative, it will be 100% tax-deductible. Although this measure appears to be open to all companies, it would, de facto, benefit only groups and not individual companies. Furthermore, by dint of a combination of a tax break on the one hand,and a reduction in tax deductibility on the other, the measure appears to be tax neutral for Dutch groups and attract only multinational groups. For this reason, the Commission considers at this stage that the measure may confer a selective advantage on certain companies, in violation of the rules of the treaty on state aid.
The second measure which will be brought in by the "Groepsrentebox" regime provides for a 5% reduction on tax on interest generated by short-term deposits, as long as these are then used to acquire at least 5% of the shares of the company. This measure would be applicable to all companies de facto, particularly those which are not part of the group. For this reason, the Commission concluded that this second measure would not give a selective advantage to any particular companies and was, therefore, in line with the rules of the EC treaty on state aid. (ol)