Brexit has been a hot topic more than once in the last few weeks. The negotiations over a soft or hard Brexit raise a great deal of questions, also in relation to business here in the Netherlands.
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With its attractive economic climate, the Netherlands has become one of the most attractive EU-members to settle international business entities. These international companies may also benefit from the Dutch range in banks, as the Netherlands is home to some of the world’s most renowned banks. These are complemented by Dutch banks, such as ABN-AMRO, ING Bank and Rabobank.
Expats or companies residing in the Netherlands, need a bank account in the Netherlands to pay/receive salaries, rent etc. Yet, as a foreign entrepreneur, it can be quite challenging to open a bank account in the Netherlands, since there are some hurdles along the way.
On Tuesday, September 18, 2018, better known as Prinsjesdag, Minister of Finance Hoekstra presented the Tax Plan for 2019. The Ministry for Finance has based these fiscal plans on 5 concrete goals: reducing the burden on workers, creating an attractive climate for setting up business, making the Netherlands greener, implementing satisfactory enforceability and the tackling of tax avoidance or evasion. You can read all about what these proposed changes could mean for you and/or your company here.
Double-bracket system box 1
The current Dutch income tax system in box 1 is based around 3 brackets. The cabinet wants to simplify this by making the transition to a double-bracket system, with a lower rate of 36.95% and a higher rate of 49.5% per cent. However, the Dutch Tax Authorities are retaining the previous triple-bracket system for those entitled to the basic state AOW pension.
This transition will be made on a step-by-step basis and will be accompanied by a gradual change in tax rates. Specifically, the lower rate will increase from 36.65% in 2019 to 37.05% in 2020. The higher rate, on the contrary, set at 38.10% in 2019, will subsequently drop to 37.8% in 2020 and to 37.05% in 2021. The threshold will stay at € 20,384 throughout this period. This means that you will pay tax at the lower rate on income up to and including this amount. If your income exceeds this threshold, you will be taxed at the higher rate on the remainder of your income. This higher rate applies to income up to and including € 68,507. For taxable income over this threshold, a combined rate of 51.75% will apply in 2019.
Rate increase box 2
As of 2020, the tax rate in box 2 will gradually increase. In 2019, as in 2018, the Tax Authorities intend to levy 25% tax on profits from shares. That rate will see subsequent increases of 26.25% in 2020 and 26.9% in 2021. In order to lessen the pain, the government is planning less tax on profits for entrepreneurs who own more than 5% of the shares in a company.
Economizing on loss carry forward box 2
In addition, the 2019 Tax Plan contains the proposal to shorten the loss carry forward period in box 2 from 9 to 6 years.
General tax credits
The cabinet is also proposing an increase in general tax credits. Consequently, in 2019, the maximum amount of tax credits available to those on incomes up to € 50,000 per year will go up by € 140. In 2020, this will rise by a further € 103. Yet another increase, in 2021, will see the total increase come to € 350. The cabinet is hoping that this will improve buying power.
A measure on rates pertaining to tax base-reducing items
Furthermore, Minister Hoekstra has also made it known that the cabinet wants to phase-out a number of tax base-reducing items. This is not a new proposal, but it is now being fast-tracked. As a result, as of January 1, 2020, there will be a lower maximum rate for deductible costs related to personal residences, and entrepreneur’s and personalised deductions. As for profit exemption for SME’s, the measure will, however, only apply when the total amount of joint profit, less the entrepreneur’s deduction, is positive. This is also the case for the Posting exemption when the combined result from activities is positive. By 2023, the lower rate for these items will drop to 36.95%.
Decrease in notional ownership value
For private residences valued between € 75,000 and € 1,060,000, the notional ownership value percentage will decrease by .15% between now and 2023. Similarly, the notional ownership value percentage for private residences with a value under € 75,000 will decrease on a step-by-step basis, albeit at a lower percentage. Finally, there is a decrease of .24% for residences that come under the deployment scheme and that have a value up to € 1,060,000.
Adjustment to interest tax
In the 2019 Tax Plan, the cabinet is proposing no tax on interest for tax returns filed on time.
Transitional measure 30% ruling
As previously reported, the duration of the 30% ruling will henceforth reduce from 8 to 5 years. This change is not accompanied by a transitional measure. This five year period is thus not just applicable to new appointments from 2019, but also to existing transitional 30% ruling.
Increase in volunteers’ scheme
When organisations wish to appoint volunteers, they do not have to deduct any tax or premiums on indemnification for that voluntary work. That is, nonetheless, only so if this indemnification remains under the set threshold. From 2019 on, this threshold will be increased to € 170 per month and € 1,700 per calendar year.
Increase in labour deduction
From 2019, Dutch tax payers with a yearly income between € 20,000 and € 60,000 will be entitled to an increase in the labour deduction.
Tax credits for foreign tax payers
The government views the inhabitants of the European Union, European Economic Area, BES islands and Switzerland as non-qualifying foreign tax payers. By EU law, these are entitled to a tax share of the labour and income-dependant combination deductions. This also applies to those foreign tax payers who run a company permanently established in the Netherlands. Although the Dutch Tax Authorities have already applied this entitlement, it will officially become law on January 1, 2019.
The rate for the first corporate income tax bracket applies to profits up to and including € 20,000. That rate will be 20% in 2019 and decrease to 16% by 2021. Profits in the second bracket will be gradually taxed less as well. By 2021, the corporate income tax rate for the second tax bracket will drop to 22.5%. That is 1.25% more than the cabinet stated last year.
Abolition of Dividend tax
It is no secret that the Rutte cabinet wants to abolish dividend withholding tax. Whether it happens or not has always been the question. Minister Hoekstra finally had his say on Prinsjesdag 2018: dividend withholding tax is indeed being abolished, but not before 2020. In this way, the Netherlands hopes to remain/become an attractive location for international companies to set up.
Introduction of withholding tax
The abolition of dividend withholding tax will go hand in hand with the introduction of specific withholding taxes. By levying withholding tax on dividends going to jurisdictions with low taxation rates, the governments wants to stop cash flows to tax havens. Additionally, withholding tax will also apply to constructions set up with tax avoidance in mind.
The Dutch VAT system, which contains 3 separate rates, will, from now on, have its lowest rate at 9% instead of 6%. This lower rate is applicable to shopping, as well as to certain services. Besides a small increase at the checkout, this will mainly have administrative consequences for entrepreneurs.
Extension of Dutch VAT-sports exemption
The VAT-sports exemption that the Netherlands has applied up to now will also be granted in the future to non-profit sports associations holding sports-related events for non-members.
The cabinet is also proposing to revise interest tax on inheritance tax interest. Interest tax would thus not be applicable to (current) inheritance tax assessments. That will, however, only be the case when the request to make a provisional and/or actual return is filed on time.
The Dutch government wants to take a more severe approach to environmental pollution by, amongst other things, levying a heavier tax on natural gas. More ecologically-aware tax payers, in contrast, will be rewarded. The cabinet is planning to impose less tax on electricity. Furthermore, landlords who renovate a residence for rental with a view to energy-saving will also benefit from a reduction in tax. Additionally, those going to work by bicycle benefit in the 2019 Tax Plan. The government has simplified the fiscal scheme through which it will be possible in the future to make use of company bicycles.
Do you still have questions about the 2018 Tax Plan or taxation in general? Then do not hesitate to contact us.
On September 11, only a week before this year’s Prinsjesdag, the Dutch Lower House adopted two parliamentary motions. Along with consenting to an investigation into trust sector domiciliation, the Lower House has also agreed to examine if foundations will have to file annual accounts from now on.
Leaving Silicon Valley
Silicon Valley has long been the de facto location for budding startups to set their roots and grow into multimillion-dollar businesses, but it may not be the capital of blockchain technology. As of July 2017, 62 out of the 105 total U.S. companies valued at over $1B are located in California. To put that into perspective, New York has the second highest amount with only 15 businesses.
However, with the power of decentralization, blockchain-based startups are proving that you can find success outside of the Silicon Valley bubble. Cities around the world, whether it be through looser regulations, strong financial ties, or some unknown factors, have started vying for the title of “capital of blockchain” and are emerging as meccas for young cryptocurrency companies. Although a forerunner hasn’t emerged yet, there are a few regions beginning to develop as hot spots for this new innovation.
Flying under the radar, Chicago is quickly building itself to be a world leader in cryptocurrency. The Chicago Mercantile Exchange (CME) and Chicago Board Options Exchange (CBOE) were two of the first U.S. financial exchanges to support Bitcoin futures trading.
Lesser known, the Illinois government was one of the first to embrace blockchain technology by forming the Illinois Blockchain Initiative (IBI). The IBI is a dedicated approach to:
Create non-onerous legislation surrounding the technology,
Perform blockchain pilot programs within government organizations, and
Develop the blockchain ecosystem in Chicago.
The Chicago Blockchain Center (CBC) is spearheading objective number three. The CBC hosts developer workshops and meetups as well as supports local startups through incubation. All of this combined has led to the growth of a large blockchain community in the Windy City.
In fact, Chicago is a leader in venture-backed blockchain startups. Chicago companies have raised over $69 million to date – more than three times the amount of Austin, Denver, and Seattle combined.
Notable Companies/Projects: Bloq, CFX Markets
Fielding refugees from San Francisco’s inflated housing market, Austin is carving a niche for itself with blockchain startups. Having no income tax and a natural Libertarian attitude, the state capital is primed for crypto-minded entrepreneurs.
The city has hosted the Texas Bitcoin Conference since 2014 but more famously brings in hundreds of thousands of attendees for South by Southwest (SXSW) each spring. Although not focused on cryptocurrency, SXSW this year included several speakers and panels focused on blockchain and its impact on other industries.
As one of the fastest-growing cities in the U.S., it wouldn’t be surprising to see Austin solidify itself as the place to settle down a cryptocurrency headquarters.
Notable Companies/Projects: Factom, Wanchain
New York City, USA
Although many have fled due to the implementation of its BitLicense, New York is still a hotbed for blockchain innovation. With deep roots in financial markets, it’s only natural that the Big Apple is home to some of the most well-known crypto companies and exchanges.
Beyond New York’s sheer population dominance over other cities, it also hosts one of the largest blockchain conferences in the world – Consensus. This year, the conference has even expanded to an entire “Blockchain Week”. CoinDesk and the New York City Economic Development Corporation have partnered to organize the week’s events with the goal of making NYC a global blockchain capital.
With massive amounts of investment capital and the Winklevoss twins leading the charge for self-regulation, New York City could easily become the new capital of blockchain.
Notable Companies/Projects: Gemini, Blockstack, Consensys
A country rather than a city, Singapore is a strong magnet for companies looking to ICO. The Monetary Authority of Singapore (MAS), has stated time and again that they have no plans to regulate the industry and instead provide ample support.
They’ve embraced the new tech in an experimental project, Ubin. The project is in partnership with R3, and the goal is to “explore the use of Distributed Ledger Technology (DLT) for clearing and settlement of payments and securities.” Although not directly affecting regulation, Ubin helps members of the MAS further understand blockchain and the value it can bring.
The MAS has even gone further by allocating $150 million towards FinTech projects in the country.
Singapore also is home to FinTech Festival – the largest FinTech conference in the world. Over 30 thousand people from around the globe participate in the festival, bringing loads of talent to the small nation.
Notable Companies/Projects: Digix, TenX, Zilliqa
Already commonly called ‘Crypto Valley’, Zug is the current leader for the capital of blockchain title, and it’s clear why. Switzerland has historically been fairly lenient when it comes to banking and financial regulations.
On top of that, Zug has some of the lowest taxes in the nation and has taken a business-friendly approach to cryptocurrency. The government supports citizens paying in Bitcoin for some services and also uses Ethereum in a digital ID system.
Bitcoin Suisse, the financial service provider behind numerous high profile ICOs (Status, OmiseGo, SingularityNET) also calls Zug home.
Entrepreneurs in the area have formed the Crypto Valley Association to help foster growth of the ecosystem. This association collaborates with partners around the world and works with the local government to create fair blockchain regulations. Even so, the canton is far from having all the answers on how to regulate this new asset class. It’s a good sign, though, that government officials are openly working with the people that it affects most.
Notable Companies/Projects: Bitcoin Suisse, Xapo, ShapeShift, Monetas, Tezos
Decentralizing the Capital of Blockchain
These are just a few of the regions making a name for themselves in the blockchain space. With the decentralized nature of the industry, it’s entirely possible that one single “capital of blockchain” never surfaces. And, that’s a good thing.
In the end, we’re all on the same team. Projects should continue to collaborate across borders to ensure the success of the entire industry. Because when blockchain wins, we all win.
For further information about blockchains and the public policy regarding cryptocurrencies, please contact us via firstname.lastname@example.org.
This article by Steven Buchko was originally published at CoinCentral.com.
If you are an international entrepreneur thinking of expanding in Asia, then we suggest that you consider Singapore. This cosmopolitan metropolis has successfully managed to reconcile traditional Asian characteristics with a modern Western appearance. Thus, while Singapore still highly values the welfare of the community, it is, with the aid of digital progress, winning the centuries-old battle for new chances and a better life. Furthermore, this modernization has ensured considerable improvements in working life. Here, we set out the advantages for you of doing business in Singapore.
Languages in Singapore
Along with the local dialects, Malay and Tamil, the Singaporean population also speaks Mandarin and English. Through this, the country can act as a gateway to both China and the West. Above all, all government institutions, courts and schools, as well as the business world, use English as the main language. Consequently, there is no question of a language barrier.
Business in Singapore
Love of country
It is not difficult to become enamoured with Singapore, with its beautiful nature and sophisticated facilities. If you are in the presence of Singaporean clients, never forget to mention the beauty of their country. Singaporeans are very patriotic. Therefore, criticism will not be appreciated if you are asked for your opinion about their country, which often happens at the start of a meeting. Watch out, however, that your praise doesn’t become too familiar. Similarly, digressions about family matters, religion and/or politics are not appropriate.
One of the great advantages of Singapore is the extreme importance that its people attach to order and punctuality. You will not be made to wait for a business associate. You can also assume that the meeting will proceed pleasantly, as Singaporeans will never raise their voice or show that they are in bad humour when they do business. This friendly atmosphere is confirmed with the exchanging of business gifts. These gifts symbolize the hope for successful business contacts and an amicable relationship. The line between being colleagues and friends is thus thin. When a business meeting concludes, it is, for example, customary to eat together to strengthen the personal connection. After that, you should continue your discussion for at least an hour.
In doing business in Singapore, one also sees the productive intertwining of traditional values and modern ideals coming to the fore. Thus, the clear hierarchical structure is an unmistakeable testament to Asian culture. The boss enjoys the most respect and authority. Nevertheless, in this aspect, Singapore appears to be more progressive than many “modern” Western countries. After all, there is no glass ceiling in Singapore. Through this, women have no difficulty in assuming important roles in company life.
If the productive trade climate or the versatile culture and nature have still not been able to convince you to do business in Singapore, then maybe the government can change your mind. The local government, in particular, offers various subsidies and tax provisions to native and foreign companies that set up in Singapore.
If setting up a business in Singapore is only the beginning for your international adventurers, we advise you to consider incorporating a Dutch affiliate. The Dutch entity then operates as a gateway to Europe. Moreover, besides economic, cultural and practical advantages of the Netherlands, this offers you undeniable fiscal opportunities. Not only does the Dutch-Singaporean tax treaty grants you the opportunity to avoid double taxation, taxes in the Netherlands itself progressive as well.
Therefore, do not hesitate to contact us for more information about international business or doing business in Singapore and/or in the Netherlands. We are only too glad to be of assistance.