2022 in sight - Current tax tips for you and your organisation

This article was last updated on 1 December 2021.

2022 is approaching. What actions should you take before the end of this year or postpone until next year to take advantage of tax facilities?

We have made a selection of the most important tax tips and points of attention for you and your organisation. Our selection is based on the 2022 Tax Plan package up to and including the Memorandum of Reply to the Senate of 26 November 2021.. 

Tips based on previous and other pending legislative proposals are also discussed, and tips related to (temporary) approvals in the framework of the COVID-19 crisis. 

At the end of December 2021, after the voting in the Senate (‘Eerste Kamer’), it will be clear if all measures from the 2022 Tax Plan package will actually apply. We follow all developments closely and inform you about them.

Temporary restriction of advance tax credits

As a rule, dividend tax and tax on games of chance can be set off against the corporation tax owed. In the French Sofina case, the Court of Justice of the European Union concluded that the method of crediting French dividend tax is contrary to EU law. As this conclusion could, in certain circumstances, also be drawn in the Netherlands, a decree had been issued approving the refund of withholding tax to non-resident entities. However, as non-resident entities often owe little or no corporation tax, the difference had to be refunded. This decree will be temporarily restricted as of 1 January 2022. This limitation implies that in specific situations, settlement of advance tax payments is only possible up to the amount of corporate income tax to be determined.

It is therefore advisable for non-resident entities to check before 1 January 2022 whether a request for a refund of withholding taxes can still be made. For the sake of completeness, we note that the withholding taxes that have not been settled will be carried forward to later years. The period within which the tax inspector is authorised to adopt a (revision) decision on the advance tax payments to be rolled forward has been extended from five years to twelve years if corporate income tax on foreign profits is reclaimed.

Check tax and social security position of international employees

Do you live in Belgium, Germany or another country but normally work in the Netherlands? If so, working from home as a result of the COVID-19 crisis may affect your tax and social security position and the employer obligations. To provide some certainty, most EU and EEA countries adhere to a more relaxed policy due to the change in work pattern up until 31 December 2021. We advise you to check your tax and social security position as this policy differs somewhat from one EU/EEA country to another.

Moreover, based on bilateral agreements employees who live in Belgium and Germany have, under certain conditions, the right to choose whether the days they work from home should be taxed in their country of residence or their usual country of work. This choice can be made when filing the Dutch 2021 income tax return. These mutual agreements have been extended until 1 January 2022, however whether these agreements will be extended again is unclear.

Check foreign remuneration board members

In May 2020 it was announced that the tax treatment of foreign directors’ and supervisory directors’ fees paid to residents of the Netherlands would change. Currently, it is possible to request relief for double taxation for the remuneration received as a director on the basis of the exemption method. This policy will be revoked, as a result of which the double taxation relief will have to be applied based on the credit method. The announced change will lead to a higher tax burden on the income of many directors of foreign companies who reside in the Netherlands. The date on which the approval to apply the exemption method will be withdrawn is not yet known. It is possible that the change will take effect on 1 January 2022. For further explanation please read our article: ‘Dutch tax treatment of foreign remuneration board members: changes announced’.

Reimbursement of fixed (travel) expenses

Under conditions, in 2021 employers are allowed to continue to pay the fixed travel expense allowance tax-free, even if the employee works from home. The government has indicated that this measure will continue until 1 January 2022. We advise you to draw up a new policy for the reimbursement of travel expenses for 2022, anticipating more structural working from home. 

Home working allowances

Since employees are working from home more often due to the COVID-19 crisis, the government has decided to introduce an exempted ‘working from home’ allowance. As of 1 January 2022, you can therefore reimburse your employee’s extra costs for working from home up to a maximum amount of EUR 2 per day. Please note however that you cannot apply for both the working from home allowance and the travel allowance for the same working day. We advise you to have a clear view on your employment benefits before 1 January. For further explanation please read our article: ‘2022 Tax Plan: Tax free allowance for working from home costs’.

Optimisation of the work-related costs scheme

As a result of the COVID-19 crisis, the work-related expenses budget for 2021 has again been increased from 1.7 per cent to 3 per cent for the first 400.000 euros. Above the limit of EUR 400,000 of the wage bill, 1.18 per cent applies. Check whether you have correctly processed the reimbursements and benefits in kind given to your employees in 2021 for the work-related costs scheme. Also check whether you still have room left to make optimal use of the scheme, for example by exchanging gross wages for net wages. 

Check if the temporarily lowered rates of the Unemployment Benefits Act ("WW - AWf") have been applied in the payroll 

Following the withdrawal of the Job-related investment discount scheme (BIK), the legislator has used the reserved budget for the BIK to introduce a temporary reduction of the employer contributions under the Unemployment Benefits Act (AWf). This reduction of the AWf contribution was introduced as of 1 August 2021. In case of filing the wage tax returns every four weeks, the effective date the discount applied was as of 16 August 2021.

More specifically, up to 31 December 2021 the low rate of the AWf has been reduced from 2.7 per cent to 0.34 per cent. This rate applies to employees with an employment contract for an indefinite period of time. The high rate of the AWf, applicable to employees with a temporary employment contract, has been reduced from 7.7 per cent to 5.34 per cent. In other words, a total decrease of 2.36 per cent applies for both rates. Make sure to check whether the adjusted rates have been correctly applied in your wage tax administration and whether all administrative documentation necessary for the application of the lower AWf rate is available.. 

Corporate income tax

Consider forming or ending a fiscal unity for corporate income tax

Depending on your situation, the formation or termination of a fiscal unity for corporate income tax purposes can be advantageous for your company. Advantages of joining a fiscal unity are, for example, that you only need to file one tax return for all joined companies, that transactions between the joined companies can take place without taxation and that losses and profits within the fiscal unity can be offset against each other without any restrictions. Depending on the situation of your company or organisation, sometimes independent tax liability for the various companies can be advantageous. Your organisation can then, for example, use the rate step-up for all companies for the first 395,000 euros of profit on which 15 per cent corporate income tax is levied (2022). On the excess, your company pays 25.8 per cent; a rate advantage of 10.8 per cent. A fiscal unity can use this rate step-up only once, namely for all joined companies together rather than for each company separately. In addition, there are a number of rules that apply above certain thresholds, as a result of which independent taxpayers may be better off. These include interest deduction limitations (see also the tightening of the earnings stripping measure below) and the proposed rules for loss set-off. Ending a fiscal unity can also be administratively practical if you expect to sell a company from the fiscal unity in 2022. On the other hand, there are the well-known benefits of being part of a fiscal unity.

Prevent loss forfeiture

Currently as a main rule, losses can be carried forward six years. After that period, losses that have not yet been set off are forfeited. It is possible to prevent loss forfeiture as of 2021 by taking measures in 2020, for example by releasing a reinvestment reserve. The principle of sound business practice also offers some scope. The government has proposed unlimited loss carry-forward, as a result of which loss forfeiture would no longer be an issue from 2022 onwards. In addition, there will be a limit on the amount of losses (both forward and backward) that can be set off in a year, namely up to a maximum of 50 per cent of the taxable profit in a year. However, up to EUR 1 million in taxable profit, you will be able to offset your losses in full. Read more in our article 'Loss relief becomes limited to 50% of the annual profit’.

Temporal limit with regard to set-off of dividend withholding tax with corporate income tax

The set-off of dividend withholding tax and gambling tax against corporate income tax will be limited up to the amount of corporate income tax due before the set off. Taxes that cannot be set off in a year are carried forward to future years without time limitation. The term within which the tax authorities can adopt a (revised) decision regarding withholding taxes to be carried forward, is extended from five to twelve years in the event of an additional claim from CIT on foreign profits.

Withholding taxes

Interest and royalty tax

From 2021 onwards, interest and royalty payments you make will, in certain cases, be taxed in the Netherlands at a rate of 25 per cent (withholding tax, 25.8 per cent from 1 January 2022). The withholding tax relates in particular to interest and royalty payments made to group companies established in low-tax jurisdictions. By considering this in advance, you may be able to avoid this and make your corporate structure more future-proof. A similar type of withholding tax will become due on dividend payments from the Netherlands in 2024.

As of 2021 hybrid entities no longer liable for tax at source with non-qualifying underlying parties

Hybrid entities are no longer liable for tax at source if none of the underlying parties (whether via a collaborating group or otherwise) has a qualifying interest in the hybrid entity. This change is intended to have retroactive effect up to and including 1 January 2021.

Gift tax

Take advantage of the temporary increase in gift exemption in 2021

The existing gift exemptions for children and other recipients will be increased by EUR 1,000 but only for the year 2021. With this crisis measure, the exemption from gift tax per child for 2021 amounts to EUR 6,604 for gifts from parents and the exemption for other recipients for 2021 to EUR 3,244. Through this increase in the exemption from gift tax, private donors such as family and/or friends can help an ailing entrepreneur to get through the COVID-19 crisis.

Pensions

Ensure that the pension scheme is transposed to the new system on time

The legislation accompanying the new Pension Agreement will enter into force on 1 January 2023. This is a year later than anticipated. As of 2022, you will have to make important choices about your employees' pension scheme. You are obliged to change all pension schemes to a defined contribution scheme in accordance with the new legislation. You will also have to adapt current defined contribution schemes.

As an employer, you are responsible for completing a draft transition plan by 1 January 2025 at the latest. This is a decision containing a description of the new pension scheme, the necessary compensation scheme and possibly the valuation of old pension rights. In most cases, the employer is also obliged to set up a compensation scheme. The choices made must be substantiated both qualitatively and quantitatively. The changes should be completed by 1 January 2017. 

Take into account the bill for the division of pension in case of divorce

In 2019, a bill has been introduced for a new regulation on the division of pension in the event of divorce. The plan is to break the pension tie between ex-partners by converting the right to a partner's pension and old-age pension into an independent pension entitlement on his/her own life by default. Spouses can deviate from the statutory regulation in prenuptial agreements or a divorce covenant. The bill provides a limitation of what deviating arrangements spouses can make. This bill may have consequences for existing prenuptial agreements, for example if these agree to follow the current 'standard' Pension Equalisation Act. After the bill enters into force, such equalisation will no longer be possible. The new rules were to apply to divorces as from 1 January 2021, but this effective date has been postponed for the second time. The intended date of entry into force is currently 1 July 2022.