On December 15, 2011, the Minister and State Secretary of Finance presented a bill on the implementation of a bank tax to the Lower House. The bill is expected to raise tax revenue of EUR 300 million annually. The tax’s objective is to create a sounder financial system and control risks. The Cabinet hopes that the bill will be able to take effect mid-2012.
Nature and main features of the tax
The bank tax is a new national tax levied on the total of the liabilities less the qualifying capital, and the debts falling under the Deposit Guarantee Scheme. An efficiency exemption of EUR 20 billion applies. It has been proposed to adopt a split rate - a higher rate would apply to short-term debts than would apply to long-term debts. The bank tax is based on the bank levy that was introduced in the United Kingdom earlier this year. A number of other European countries have also implemented a similar tax or are intending to do so, for example, Austria, France, Germany, and Sweden.
Taxpayers
The bank tax applies to entities authorized to operate as banks in the Netherlands, in particular all licensed banks with a statutory seat in the Netherlands, including Dutch resident subsidiaries of foreign banks, branch offices situated in the Netherlands that hold a ‘European passport’, and branch offices situated in the Netherlands holding a bank license issued by the Dutch Central Bank (De Nederlandsche Bank, “DNB”).
If the financial data of one or more of these entities − that, in light of the above, qualify as a taxpayer − are reported in the consolidated annual financial statements of an entity resident in the Netherlands, the bank tax for the parent company will be levied on the entity that is regarded as the taxpayer. The financial data of all entities forming part of the consolidated base for financial reporting purposes, even those entities resident abroad, will be included in the consolidated annual financial statements.
Tax base
The tax will be levied on the balance sheet total reported in the separate or consolidated annual financial statements for financial reporting purposes, less:
1. the qualifying capital based on European directives, that is meant to absorb any losses;
2. the deposits that will be repaid pursuant to the Deposit Guarantee Scheme;
3. the liabilities relating to insurance activities, in particular specific supervisory legislation applicable to insurers based on Solvency II;
4. an efficiency exemption of EUR 20 billion.
Tax rate
The split rate that has been proposed is as follows: 0.022% on that part of the taxable amount relating to short-term debt, and 0.011% on that part of the taxable amount relating to long-term debt. The bill defines short-term debt as debts with a term of less than one year. Long-term debts are defined as debts with a term of more than one year. The British bank tax also makes such a distinction.
These tax rates are multiplied by a factor of 1.05 if the variable remuneration of at least one of the taxpayer’s directors amounts to more than 100% of that director’s fixed remuneration. The tax rate for that part of the taxable amount relating to short-term debt will then be 0.0231%, while the tax rate for that part of the taxable amount relating to long-term debt will be 0.01155%.
Tax reporting
The bank tax must be included in the corporate income tax return and be paid within one month after the moment the tax arose. The tax is, in principle, owed on the first day of the 10th calendar month after the balance sheet date. If the financial year is equal to a calendar year, the tax will be owed on October 1 of the following year. The bank tax cannot be deducted from the corporate income tax.
Double taxation relief
Double taxation relief for bank tax will have to be included in additional legislation as existing tax treaties do not provide for this. This could be done by way of bilateral agreements or unilaterally by amending the Decree for the Avoidance of Double Taxation 2011. The international proposals in circulation tend toward the country where the subsidiary or branch office is resident standing down. For the Netherlands this would mean that it would have to provide double taxation relief for bank tax if the assets of a Dutch resident subsidiary of a foreign bank were also included in the tax base of a foreign bank tax.