The Commission has opened an in-depth investigation into one part of proposed Dutch “Groepsrentebox” tax break scheme and has approved the other part.

In July 2006, the Netherlands notified a proposal for a tax breaks scheme called ‘Groepsrentebox’ aimed at reducing differences in the fiscal treatment between two instruments of intra-group financing, namely equity and debt.

According to the Commission press release, currently, when a company injects capital into another company, the dividend it receives is tax exempt, whereas when it lends money, the interest received is taxed at the general corporate tax rate of 25.5%. The same is true for companies that receive funds: dividends paid for capital injections are not tax deductible, whereas interest paid for loans can be deducted at the general corporate tax rate of 25.5%.

The ‘Groepsrentebox’ scheme sets up two measures, which are in principle open to all companies subject to corporate tax in the Netherlands: lower taxation of intra-group interest and lower taxation of short term deposits.

The Commission is investigating the Groepsrentebox under EC Treaty state aid rules into planned reductions of the Dutch tax rates for net interests received on intra-group loans.

Further information is available at http://europa.eu/rapid/pressReleasesAction.do?reference=IP/07/154&format=HTML&aged=0&language=en&guiLanguage=en.