On balance, more companies saw profits stabilize or increase, but the overall size of the profit increase decreased again last year. This has primarily been caused by the strong increase in personnel costs. 27% of the total SME revenue was spent on staffing costs.

These are the findings of the new SRA report 'Overview of Sectors in 2018: the hard data of Dutch companies'.

Increase in personnel costs

In 2017 the increase in personnel costs was measured at 8%. This compared less favorably to previous years (6% in 2016, 3% in 2015 and 2% in 2014). Salary costs increased by 9% (compared to almost 6% in 2016) and social insurance costs increased by 10% (6% in 2016). Salary costs increased in industry and healthcare especially, as relatively expensive personnel are present in these sectors. The hospitality sector is more focused on cheaper employees and has therefore limited the increase in costs. On balance the construction industry has seen a strong growth in personnel costs compared to other sectors.

Personnel costs influence profits

In general, increasing personnel costs have ensured that SME profits have lagged behind the increase in revenue. The growing staff shortage means that we can expect these costs to continue to increase in 2018. Personnel costs do not only refer to employee salaries. Indirect costs must also be considered, especially the social insurance that employers are required to pay. Personnel costs form one of the most determining factors in the competitivity of companies. If salary costs continue to grow in 2018 without compensatory reductions in taxes and social insurance premiums, SMEs can expect the decrease in profitability to continue.

Stronger position

Financially speaking, the SME sector has had a good year. Solvability has improved significantly, and shareholder equity increased in total by 17.5%. The healthcare sector, industry, logistics and commercial service providers have all seen a strong growth in equity. The abolition of internal pensions probably also played a part because part of those pension provisions went to equity. On balance, short-term debts rose by 3%, indicative of additional investments being made. On balance, income and expenses decreased by almost 15%, due to the lower interest costs of loans.

Differences in regional performance

In 2017 revenue growth was positive across all regions. The rankings were topped by Overijssel, Gelderland and Flevoland, with the Southern provinces of Zeeland, Noord-Brabant and Limburg collectively seeing a lesser increase in revenue. Profit figures in Limburg were good, due to a lower than average growth in company costs. Personnel costs increased most in Overijssel, Gelderland and Flevoland (+9%). In the four largest cities (+2,7%) the increases in personnel costs were remarkably small.

Recovery of industry and the automotive sector

Industry and the automotive sector displayed a remarkable and convincing recovery in 2017. Construction continues to perform well, with a revenue growth that accelerated to 12.7%. Profits slowed down, but they are still above average. The healthcare sector also had a good year. Companies in logistics saw a slowdown in revenue, but their profitability improved strongly. The retail sector and specialist service providers clearly lagged behind.

No interest on tax

For tax assessments on death inheritance from 1st January 2017 these problems mean there is currently no interest on tax. This was confirmed in a letter to the Second Legislative Chamber by Secretary of State Snel from the Ministry of Finance. According to Mr Snel, these measures will apply 'as long as necessary'.

Tax assessments have been delayed

The setup of a system to assess inheritance tax has also been delayed. This also applies to demands for tax on gifts received in 2017. The date that you will receive such demands will depend on whether you have applied for an exemption for your own home. For housing, there is an additional exemption of € 100,000 under the terms of the rules on gift tax.

If you have requested such an exemption, you will receive a definitive assessment no later than 2021. If you have not requested this exemption you will receive the definitive assessment at the end of 2019. 
You will first receive a provisional gift tax assessment, based on your own declaration.

Online declaration

The delay regarding gift tax assessments was caused - among other things - by the fact that online declarations can now also be made. Automation problems have also emerged here.

If you would like more information about the processing of inheritance and gift tax assessments, please contact us.

Minister Van Nieuwenhuizen: "The Netherlands is a trading nation. A great deal of freight transport crosses our borders with our neighbors to the south.  Digital waybills make crossing the border easier, safer and cheaper for freight. This will also save € 80 million per year in administration costs for Dutch companies."

Important! This trial must be part of a wider initiative towards the use of digital waybills throughout Europe.

Until now a paper document was always required regarding the loading of a delivery truck. It has not previously been possible to use a digital waybill (e-CMR) in The Netherlands. To participate in this trial, freight companies must work with software from a recognized provider. The trial must be part of a wider initiative to use digital waybills throughout Europe. It is of great importance to the Dutch transport industry that other countries such as Germany, Italy and Austria accept digital waybills in the future.

Cheaper and safer

In The Netherlands alone some 40 million waybills are used each year. The transfer to a digital waybill system would save transport firms and their clients around € 4,50 per waybill. The chance of making errors on a digital waybill is also lower than with paper. The information is stored centrally and can be requested and accessed at any time.

Environmental sustainability and more insight into cargo

Switching to digital waybills is great news for the environment as it will save around 600 trucks full of printed paper each year. It also enables possibilities for track & trace, with which customers can see the location of their shipment at any given moment. In this way they can adjust their planning appropriately. Another advantage is that emergency services can quickly identify the contents of trucks. In the event of an emergency they can immediately ascertain if there are hazardous materials present.

Source: Rijksoverheid.nl

New Legislation

The 'joint ownership of property' principle that applied to any marriage enacted prior to January 1st 2018 declared that all assets and debts would be automatically shared by both partners of the marriage. The new legislation changes this. Now, after a marriage has been enacted, the following items fall outside the joint ownership of property principle:

• Commercial enterprises that either partner owned prior to the marriage
• Gifts or inheritances that either partner receives during the marriage

Shareholder directors are not required to declare their commercial interests

This new legislation has significant consequences for shareholder directors. If the company ownership or shares were registered prior to the date of marriage, these assets shall remain the sole property of that partner and need not be shared with the other. Different rules and conditions apply to this. Shareholder directors should seek expert advice before making their marriage vows. 

Questions regarding this new legislation and how it affects marriage should be directed to our Private Client Services advisors.

What value?

The bitcoin’s value fluctuates enormously. Fluctuations of dozens of percent per day are no exception. For your income tax return, however, only the value on the reference date of box 3 is important. For the coming return for 2017, this is the rate on 1 January 2017. This was around €950 (for the exact value, please contact your stockbroker). The fact that the current value is many times higher is only important for your 2018 return.

Please note! Bitcoin transactions are in principle anonymous. However, you are obliged to declare your possession of them. If you fail to do so and the tax inspector discovers your possession of bitcoins, an additional assessment will be imposed on you plus a hefty fine.

Checks on possession

The probability that the Tax and Customs Administration will trace your possession is by no means small because the tax authority has a whole range of control methods at its disposal. For instance, in almost all cases you will pay for your purchase of bitcoins through a bank. In the Netherlands, banks are required to give the tax authority access to transactions like these. And there are also agreements about this with foreign banks.

Purchases of a considerable sum

Additionally, the tax authority has insight into purchases of a considerable sum. So if, for example you spend part of your bitcoins profit on a new car, the tax authority can ask you to explain how you financed it. If undeclared income or hidden assets, like bitcoins, is suspected, you can also be sent an additional assessment and be fined.

New withholding tax obligation for Dutch “holding cooperatives”

The Dutch government has announced that it intends to bring the treatment of Dutch cooperatives more in line with the treatment of Dutch NVs and BVs. In order to achieve this objective the Dutch government has proposed changes to bring certain Dutch cooperatives under the scope of the Dutch dividend withholding tax rules if both of the following conditions are met:

1. the cooperative is a “holding cooperative” if its actual activities in the year preceding the profit distribution consisted primarily (i.e., for 70 percent or more) of the holding of participations or the direct or indirect financing of related entities or individuals, and
2. the members of the cooperative have “qualifying membership rights”. In assessing whether there is a qualifying membership right, the membership rights of a member and the entities and individuals related to that member will be taken into account.

Non-holding or “real” cooperatives (cooperatives running a business enterprise and/or with a large group of members) will remain exempt from dividend withholding tax.

Broadened Dutch dividend withholding tax exemption

In conjunction with the new withholding tax obligation that would apply to Dutch “holding cooperatives”, the consultation document also includes a proposal to broaden the scope of the domestic dividend withholding tax exemption. The exemption would apply to distributions made by BVs/NVs and holding cooperatives (“Dutch entities”) to parent companies that are tax resident in the EU/European Economic Area or in a third country that has concluded a tax treaty with the Netherlands. In both instances, the interest in the Dutch entity would have to be an interest that would qualify for the Dutch participation exemption or participation credit if the recipient were resident in the Netherlands.

New Anti-abuse rule

It should be noted that the proposed expanded exemption will be subject to a new anti-abuse rule. The dividend withholding tax exemption will not apply if, cumulatively:

1. the shares, or in the case of a cooperative, the membership rights, are held with the main purpose, or one of the main purposes, to avoid Dutch dividend withholding tax by another individual or entity, and
2. the holding of the shares or membership rights is part of an artificial arrangement or transaction, which will be the case if there are no valid business reasons reflecting economic reality.

What to do?

If the proposed measures are adopted, they will likely apply as from January 1, 2018. Thus, potentially affected taxpayers should assess the effect of the proposed changes, which could be beneficial given the broadened exemption but also could be detrimental given that holding cooperatives are now within the scope of Dutch dividend withholding tax and of the anti-abuse rule (which will also be applicable to BVs/NVs).

Feel free to contact us in case you want to receive information about the proposed changes in the Dutch dividend withholding tax, or if you need advice on your specific situation.

Maximum is raised

Previous, the penalty for not filing the Country-by-Country Report was EUR 20.500. After the passing of the new bill this penalty is raised to a maximum of EUR 820.000.  Also non-filling of the notification by a local group entity within the statutory deadline can be penalized up to the amount of EUR 820.000. The maximum  amount can be imposed after multiple violations.

Multinationals

Multinational companies with an ultimate parent (the "Ultimate Parent Entity") that is tax resident in the Netherlands with an annual consolidated group revenue of at least EUR 750 million are required to submit a Country-by-Country Report with the Dutch tax authorities. The Country-by-Country Report contains an overview per country of aggregate information relating to the amount of revenue, profit (or loss) before income tax, income tax paid, number of employees, etc.

Also the tax jurisdiction of each group entity (the "Constituent Entity") and the nature of the main activities of each Constituent Entity needs to be provided. By the exchange of such information between the different tax authorities, the multinational companies will have less opportunities to avoid taxes.

Information required

Group entities which are a tax resident in the Netherlands, and are part of an multinational company with a minimum consolidated group revenue of EUR 750 million must notify the Dutch tax authorities. The following information is generally required in notification forms regarding local group entities on behalf of which a Country-by-Country report has been or will be filed:

1. name of the reporting entity;
2. address;
3. tax identification number; and
4. fiscal year covered.

Is your company able to produce a Country-by-Country Report today? Do you have the information you need to comply with Country-by-Country Reporting? Are the required data aggregation processes up to speed? To avoid a penalty these questions need to be answered positively.

Feel free to contact us in case you want to receive information about Country-by-Country Reporting, or if you need advice on your specific situation.