This is a thought leadership article by PrimeGlobal member firm Joanknecht discussing the restrictions to loss relief in corporate income tax in the Netherlands. 

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It was already announced on Budget Day that a letter of amendment to the 2021 Tax Plan package would have changes for the loss relief rules in corporate income tax. This letter of amendment has since been published. The loss relief restrictions are based on recommendations by the Advisory Committee on the Taxation of Multinational Enterprises (Adviescommissie belastingheffing van multinationals) and aim to prevent companies with profitable activities in the Netherlands from not paying corporate income tax year after year.

Loss relief rules – what will change?

Currently, losses in corporate income tax can be carried forward for up to six years. This time limit will expire on 1 January 2022. To counterbalance, the size of the losses that can be taken into account in a year will be limited. The losses in one year up to an amount of € 1 million will be fully offset against the taxable profit of that year. 

Loss amounts above € 1 million can only be offset against 50% of the remaining taxable profit. The possibility for a loss carry-back in the corporate income tax, which is currently set at one year, remains unchanged. However, the loss carry-back will not be exempted from the proposed restrictions.

Insofar as a loss in a certain year cannot be fully carried back or forwards as a result of the restriction, this can be taken into account in a subsequent year subject to the same restrictive measure.

From when do the new rules apply?

The changes will be applicable to all losses that can be offset which arise from 1 January 2022, or those losses that can still be carried forward under the current rules at the end of 2021. According to the Dutch Cabinet, this is justified because the changes are both beneficial and restrictive for taxpayers and the existing losses that can be offset will not disappear.

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