The European Commission on July 8 announced its finding that a Dutch plan to apply reduced tax on revenue from intragroup loans under a scheme known as the group interest box does not constitute state aid.
The current version of the group interest box regime was proposed by
Under the proposed regime, both interest received from affiliated entities and interest paid to affiliated entities (group interest) is taxable at a reduced effective tax rate of 5 percent. The group interest box also applies to:
- income and expenses from foreign exchange fluctuations on group loans;
- short-term investments held for purposes of future acquisitions;
- derivatives to hedge interest or currency risks; and
- financing components of, for example, lease agreements.
The group definition for purposes of the group interest box is derived from the international accounting standards, and the group interest box, if it is introduced, will be mandatory for all Dutch corporate taxpayers.
The approval by the European Commission may facilitate the legislative process to enact the group interest box (as included in the consultation document) as of January 1, 2010.
Please note that the proposed group interest box forms part of a wider package of measurements as included in the pending consultation document on a Dutch tax reform. A legislative proposal in this respect is expected to be issued later this year.