The measures presented by the Minister of Finance become effective on 1 January 2015, unless otherwise stated.

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1 Princes Day In the Netherlands, Princes Day (Prinsjesdag) is the day the King delivers a speech to parliament laying out the government's plans for the coming year. It is also the day the Minister of Finance presents the Government s National Budget and the Budget Memorandum. This memorandum describes the most significant of the Government s proposals, which are categorised as follows: - Businesses - Employers - Cars - Financial planning - Other measures The measures presented by the Minister of Finance become effective on 1 January 2015, unless otherwise stated. BUSINESSES Budget for R&D relief lowered The budget for additional relief for Research & Development (RDA) will be reduced in The Government will also consider combining the RDA with the R&D remittance rebate to create an integrated provision within the scope of wage tax and national insurance contributions as of Foreign fines no longer deductible It is already an established rule that businesses cannot, for corporate tax purposes, deduct fines that have been imposed by a Dutch judge or government institution or by an EU institution. However, this rule is being extended to include fines imposed outside the EU. Such fines are no longer deductible. Nor will it be permitted to treat foreign fines imposed on employees as taxable wages, thus reimbursing the fine without the employee having to pay tax on them. Customary salary for directors-major shareholders [for wage tax purposes] Most comparable job replaces similar position The Dutch tax authorities will find it easier to determine the customary salary for directors-major shareholders for wage tax purposes. Currently, they have to find an ordinary employee with similar conditions to those of the director-major shareholder. From 2015, they can check against the salary of the employee who - apart from the lack of a substantial interest has the position most comparable with the role of director-major shareholder (DMS). Efficiency margin of customary salary reduced to 25% If the tax authorities can demonstrate that the salary for the activities of the DMS is more than the minimum amount of 44,000 (2014 and 2015), a higher customary salary may be set. Currently, this can be set at the level of the highest salary earned by other employees of the company or, if this is more, 70% of the salary for the most comparable employment. In 2015, the tax authorities can set the customary salary at 75% of the salary of the most comparable employment.

2 Note! A transitional scheme is in operation for This is necessary because the Dutch tax authorities have many agreements with withholding agents about the amount of salary to be applied to directors-major shareholders. Making new agreements takes approximately a year. Tax proposals to lessen government competition The Dutch Government has proposed modernising the Corporation Tax Act with regard to public enterprises. This new act should address the distortion of competition between private and public enterprises. Public enterprises are currently exempt from corporation tax. Under the new bill, government companies will be liable to pay corporation tax to the extent that they conduct business. Additionally, the legal form of the public enterprise will not affect its liability to pay tax. This law comes into force on 1 January Reduced VAT rate on renovations extended to 1 July 2015 Certain renovations and home repairs are currently subject to a reduced VAT rate of 6%. The work carried out must be on homes that have been occupied for at least two years. Initially application of the reduced rate on renovation work was allowed up to 1 January 2015, but this provision has been extended to 1 July Note! The provision applies only to the labour costs. Businesses must apply the normal VAT rate of 21% to materials used. Hospitals may now make a profit The scope of the VAT exemption for hospitals and other nursing and care institutions is to be widened to allow these institutions to make a profit. This VAT exemption covers not only the provision of care for in-patients but also on closely-related activities such as the supplying the patients with food, medicines and dressings. VAT refund can now be paid to another party VAT refunds can now be paid into a bank account that is not in the name of the company entitled to the refund. Approval from the state secretary has made this possible under certain conditions from 1 January EMPLOYERS Earned income tax credit amended The earned income tax credit is to be increased in The maximum earned income tax credit for 2015 is 2,220, which is a year-on-year increase of 123. For higher incomes, the earned income tax credit will be phased out to zero. The earned income tax credit is being phased out for incomes between 49,900 and 100,800.

3 R&D remittance rebate unchanged In 2014, the Government increased the income limit of the R&D remittance rebate (also known as the R&D wage withholding tax reduction) from 200,000 to 250,000 and reduced the first tax band from 38% to 35%. The rebate is available for salaries paid to employees performing R&D activities. In 2015, the income limit and the rate for the first and second bands remain the same. Therefore, a reduction of 35% can be applied to the first 250,000 of R&D labour costs and 14% to any excess in For starting companies, the reduction on the first 250,000 is 50%. The maximum annual reduction per employer (or fiscal unit) is 14 million. R&D Remittance Reduction Income limit 200, , ,000 Annual ceiling 14 m 14 m 14 m 1 st tax band 38% 35% 35% 1 st tax band for start-ups 50% 50% 50% 2 nd tax band 14% 14% 14% Life-course savings scheme The life-course savings scheme was closed to new participants on 1 January Until 2011, employees could make tax-exempt payments into a special account in order to save for a career break. In 2013, savers were given the opportunity to withdraw their entire life-course credit balance and pay tax on only 80% of their savings. Participants who came under the transitional scheme but did not make use of it in 2013 get another opportunity to do so in The 80% ruling applies to the amount of the life course credit balance as at 31 December The remainder will be taxed in full. Note! This provision is valid for one year only; it expires on 1 January Work-related Cost Scheme mandatory in 2015 The option regime for the taxation of work-related expenses has come to an end. From 2015, each employer must apply the Work-related Cost Scheme (werkkostenregeling or WKR). The discretionary tax-free margin has been reduced to 1.2% from 1.5% (2014) of the wage bill for tax purposes. This is to compensate for the various amendments taking place in 2015, such as setting up the necessity criterion and the exemption for discounts on sector-specific products. Setting up the necessity criterion From 2015, a specific exemption for benefits in kind and allowances is available only if these meet the necessity criterion. This open standard lets the employer use reasonable judgement to determine what

4 tools and equipment are necessary for the employee to fulfil his or her tasks properly (i.e. there must be a clear need) and to provide the employee with these tools and equipment without them being designated as remuneration. For the time being, the necessity criterion applies to tools, computers, mobile communication devices and similar equipment. This resolves the problems that arise in distinguishing between the business usage requirements for the portable computer, the tablet with a diameter greater than 7 inches and the smaller tablet, the smartphone and the mobile phone. Note! Although the employer may judge whether something is necessary for an employee to carry out a task, that permission does not extend automatically to employees who are also executive or non-executive directors of that same organisation. The employer must then make a plausible case that the allowance for or provision of these necessary items is customary. Simplification of the settlement system Within the scope of the WKR, the employer no longer has to check if the discretionary tax-free margin has been exceeded every tax return period. Once the calendar year has ended, the employer need carry out just one test to see if the discretionary tax-free margin has been exceeded. Any tax due under the WKR must be declared and settled at the same time as the tax return of the first period of the following calendar year. It is, however, still possible to pay the tax earlier in instalments. Group scheme A group scheme has been introduced within the WKR so that withholding agents that operate as part of a group can make use of any unused portion of the discretionary tax-free margin within that group. The requirement is that the parent company has at least 95% ownership of the subsidiary or subsubsidiary. A group of companies has until the due date to decide whether or not to apply the group scheme. This is when it submits the tax return for the first period of the following calendar year. Note! The group scheme does not take into account any company joining or leaving the group in the calendar year. If these companies exceed the discretionary tax-free margin, they are solely liable for the declaration and payment of any tax due. Exemption sector-specific products The scheme for staff discounts on sector-specific products that existed in the 'old' (pre-wkr) regime was introduced almost intact on 1 January To qualify for the staff discount exemption, the benefit may not be greater than 20% of the product's market value and no more than 500 per employee per year. Note! Contrary to the old scheme, it is no longer possible to roll over unused elements of the staff discount to the following calendar years.

5 Workplace facilities From 2015, a number of workplace-related facilities qualify as specific exemptions. There is no longer a need to distinguish between facilities that have been supplied, lent or made available. It has not yet been announced which facilities are covered by this scheme. Exemption from Payroll Tax Withholding (Implementation) Act The Government has indicated that it will submit the legislative proposal on the Exemption from Payroll Tax Withholding (Implementation) Act (Beschikking Geen Loonheffingen or BGL) to the House of Representatives of the Dutch Parliament in the near future. TAX MEASURES FOR CARS No more valuation report on imported used cars for tax purposes When importing used cars, the valuation report may not be used as the basis for the car's valuation. Valuation reports will continue to be permitted for vehicles that are severely damaged (more than normal wear and tear) and for rare vehicles which do not appear on the price lists. When importing a car, the amount to be paid for motor vehicle tax (purchase tax) is now determined by the statutory depreciation table or a generally accepted list of current values. Note! This new scheme also applies to the import of used motorbikes and delivery vans. Note! The vehicle is considered a lorry or truck if the part intended for the transport of freight is larger than or equal to the part intended for the transport of people. Therefore, not every vehicle with a double cabin is necessarily a lorry or truck. More changes anticipated More changes to schemes that cover cars are expected. The vehicle statement that contains the changes was not published on Princes Day. This will be sent to the House of Representatives in the autumn. The measures must then come into force on 1 January FINANCIAL PLANNING Interest rate on negative equity deductible over 15 years The drop in house prices has left many home owners with a residual debt. Residual debt, otherwise known as negative equity, occurs when the value of a mortgage is higher than the selling price of the house, leaving the home owner with an amount owing to the mortgage lender. The interest payable on this residual debt (eigenwoningschuld) can be deducted for tax purposes. Since home owners with residual debt are less inclined to move, the Government has decided to extend the maximum period for deducting interest and costs on residual debt from 10 years to 15 years as of 1 January According to the Government, this measure will lead to a reduction in monthly expenses for the 'old' house and enhance the purchase of another house.

6 Double interest rate deduction remains possible Those who have bought a home but still own their old home can, under certain conditions, deduct the mortgage interest on both the new home and the old home. Either the former home which is up for sale must be unoccupied or the future home must be unoccupied. A temporary scheme ensures that double mortgage interest deduction is possible for a maximum of three years (instead of two). This scheme was to have ended on 1 January 2015, but it is now available on a long-term basis. Note! Once the rental period of the former home ends, the mortgage interest becomes deductible again up to a maximum of three years after you have left the home. This temporary measure was also converted into a long-term scheme on 1 January End of selection scheme for foreign taxpayers Up to 1 January 2015, a foreign taxpayer could decide to have his income taxed as a domestic taxpayer. From 1 January 2015, that choice no longer exists: a person either qualifies or does not qualify as a resident for tax purposes in the Netherlands. Qualifying foreign taxpayers are inhabitants of EU Member States, the European Economic Area (EEA), Switzerland or the BES islands (Bonaire, St Eustatius and Saba) who earn 90% or more of their income in the Netherlands. If someone does not qualify for a whole year as a resident for tax purposes in the Netherlands, he or she will not receive any tax credits for that year. In order to prevent this, the rules have been adapted. The earned income tax credit will now be awarded in proportion to the period in which the person is considered a resident or non-resident tax payer. Note! The prorated earned income tax credit requires the systems of the Dutch tax authorities to be amended. This will take at least a year. Therefore, a transition scheme will operate in 2015 whereby the whole earned income tax credit is granted to those who are resident taxpayers or qualifying non-resident taxpayers for only part of the year. Conditions for surrendering a net annuity From 1 January 2015, tax-exempted pension contributions are no longer allowed for earnings that exceed 100,000. However, employees and self-employed persons without staff (zzp'ers) may make additional voluntary contributions to their retirement provision by means of a net annuity. There will be no tax exemption on these additional contributions. However, because any saved amounts will come under Box 3 in the personal income tax return, an exemption from the capital levy that applies to assets in Box 3 can be requested. The changes also mean that, in the event of long-term incapacity to work, it is now possible to surrender a net annuity before the retirement date without incurring deemed investment interest tax. A (partial) surrender of a net annuity must be included in Box 3 and taxed accordingly, in effect reclaiming any Box 3 benefit. However, a rebuttal scheme will apply if this fixed approach proves to be disproportionately harsh. Note! A separate exemption is being introduced to Box 3 for net pensions (contributions paid from net wages). This closely matches the rules of the Withholding Tax for Defined Contribution Schemes Act.

7 OTHER MEASURES Lower tax for energy generated sustainably If a cooperative (or an association of owners) generates renewable electricity from sustainable resources and provides it to its members, those members are entitled, under certain conditions, to a reduced energy tax rate. From 1 January 2015, this option is also open to businesses who participate in the cooperative or homeowners' association. Note! If the share of one or more businesses in the cooperative exceeds 20%, the right to a discounted rate lapses. Bank competent to check Personal Identification Number (BSN) The 'single bank account measure' has been effective since 1 December 2013, requiring the Dutch tax authorities to pay refunds on income tax and allowances to a single bank account that is in the name of the rightful claimant. However, as of 2016, banks will be mandated to periodically check the correctness of the registered data in their own systems by means of the account holder's Personal Identification Number (BSN). This is in an effort to improve the prevention of fraud. Tax interest scheme widens its scope If it later emerges that the levy (and collection) of tax has contravened EU law and, for this reason, a taxpayer becomes entitled to a tax refund, that taxpayer is also entitled to interest. This rule has been stipulated by the Court of Justice of the European Union and is now laid down in law. An appropriate amount of interest reimbursement is offered by paying late payment interest in such situations. The interest starts accruing on the day following the day on which the tax is paid or on which the tax return has been submitted or remitted, and finishes on the day before the repayment day. The measure takes immediate effect. Tip! The dividend tax has also been brought under the scheme for tax interest. That means that the tax authorities must pay tax interest if they do not settle the refund arrangement within eight weeks of a request being made. * * *