Tax accounting impact Tax Plan 2019


On 18 December 2018 the Dutch Senate has accepted the Dutch Tax Plan 2019. This means that the measures as included in the Dutch Tax Plan 2019 are considered to be substantively enacted under IFRS. The tax accounting impact of these measures should now be considered and taking into account for IFRS reporting purposes. The key takeaways (under IFRS) are outlined below per measure.


Tax rate change

The corporate income tax rate will be reduced in steps to 20.5 per cent in 2021 (2019: 25 per cent). The lower basic rate (in 2018 for taxable profit up to and including EUR 200,000) will eventually decrease to 15 per cent in 2021 (the steps are not known, previously this was 19 per cent in 2019 and 17.5 per cent in 2020).

Tax accounting impact

These proposed changes in (the future) tax rates are expected to be enacted at the same time, once the Tax Plan 2019 will be enacted. Once (substantively) enacted, this will impact the measurement of the deferred tax balances on the balance sheet and could potentially lead to complex scheduling issues of future reversals of temporary differences.

Remeasurement of existing deferred taxes could impact the effective tax rate (ETR) as follows:

a.  Remeasurement of existing deferred tax assets (DTAs) when applying a lower tax rate would lead to lower DTAs, which could lead to an increase of the ETR.

b.  The remeasurement of existing deferred tax liabilities (DTLs) would lead to lower DTLs which could lead to a decrease of the ETR.

Note that an assessment needs to be made of how the impact of the tax rate change on deferred taxes should be reported in the financial statements, either in P&L, equity or other comprehensive income (i.e. backwards tracing).

Limitation loss carry forward period

The carry forward period for net operating losses (NOLs) will be limited from nine to six years and applies to NOLs as of 2019. Furthermore, the restriction on the use of so called ‘holding and financing losses’ will be abolished and applies to NOLs as of 2019.

Tax accounting impact

a.  The proposed limitation of the loss carry forward period could impact the (future) recognition of DTAs for NOLs in case the underlying profits forecast exceeds the proposed six year carry forward period for losses. If so, this could lead to lower DTAs (and an increase of the ETR).

b.  The abolishment of the restriction to use holding and financing losses, could potentially lead to the recognition of future DTAs for these NOLs (i.e. decrease of the ETR).

Limitation deprecation on business used property

Companies which are liable for corporate income tax may only depreciate a building held for their own use until 100 per cent of the building’s WOZ value has been reached (value for the purposes of the Valuation of Immovable Property Act). This used to be 50 per cent of the WOZ value. A building that was bought and used before 1 January 2019 and has not yet been depreciated for three years may still be depreciated over these three years to 50 per cent of the WOZ value.

Tax accounting impact

The proposed limitation of depreciation could lead to future book-to-tax differences for which DTAs or DTLs may have to be recognized. Also, the determination of the tax base of the property should be closely assessed, as the tax base of an asset under IFRS is effectively the future tax deductible amount. The analysis should take into account the expected manner of recovery of the property (i.e. use, sale or a combination of use and sale). For newly acquired properties the initial recognition exception (which prohibits the recognition of deferred taxes) might be applicable.

Maintaining withholding tax on dividends

The dividend withholding tax remains. The proposed introduction of a new withholding tax on dividends for specific situations will be postponed; for this purpose, the relation to the current Dividend Withholding Tax Act will first be examined.

The conditional taxes at source on interest and royalties to countries with very low taxes are still planned to enter into force in 2021, as they do not coincide with dividend withholding tax.

Tax accounting impact

a.  With the introduction of the withholding tax on interest and royalty payments, consideration should be given on how the proposed (new) withholding tax is presented in the financial statements of the recipient, i.e. above the line or below the line. When applying the latter, this would increase the ETR.


Introduction of the earnings stripping rule

Proposed is the introduction of a generic interest deduction limitation in the form of an earnings-stripping rule as a replacement for the existing interest limitation rules (i.e. excessive participation interest and excessive acquisition loan rules).

Excess interest expenses (the balance between interest expenses and interest income, including foreign exchange results on the loans) will only be deductible up to 30 per cent of the adjusted Dutch fiscal profit (EBITDA). Excess interest expenses up to the threshold of EUR 1,000,000 can be deducted in any event. If part of the interest is no (longer) deductible during a year due to the application of the earnings stripping rule, this interest amount can be carried forward indefinitely. The carried forward interest can be deducted from the profits in future years if and to the extent that the interest does not exceed the earnings stripping rule in the respective years.

Tax accounting impact

a.  Consideration should be given if for the carried forward interest (i.e. possible future deduction of interest) DTAs should be recognised (i.e. decrease of the ETR).

b.  Applicability of the earnings stripping rule could lead to a different profitable forecast, which could impact the recognition of DTAs for NOLs.


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Tjeerd van den Berg

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Toqeer Raja

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Rolf Slager

Senior Director, PwC Netherlands

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