Dutch interest box approved by EC
It has taken 3 years, but last Wednesday the European Commission has decided that the Group interest box as presented by the Dutch government is not state aid. The box can now be imposed to all concerns and the corporate income tax on income from the box can be lowered to 5%.
The box means that interest paid on loans within one group of companies will be fiscally deductible against 5% and received interest income from such loans will be taxed against 5%.
The EC has taken a long time to reach its decision as it considered initially that the measure could be seen as state aid, because it was optional and advantageous only for certain companies. The measure has, in the meanwhile, been adjusted into a mandatory measure and the definition of the group has been amended. The Dutch state secretary sees the measure as a good manner to align the fiscal treatment of equity and debt.
The group interest box will be part of a larger package of fiscal changes in the Netherlands, of which at the moment two possibilities are being studied: the first one is a limitation of the deductibility of interest for acquisitions which are financed mainly with debt, the second one is a general limitation of the deductibility of interest to 30% of the business result. Companies have been invited to react until 1 August.
The interest box should take effect as from 1 January 2010, although the finalization of the other measures of the envisaged package could result in a later effective date.
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