• Service: Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 12/18/2013

Netherlands - Deductible “additional Tier I capital” (hybrid instrument) returns 

December 18:  The Dutch Deputy Minister of Finance on 16 December 2013 announced that banks will be able to deduct, for tax purposes, the returns realized on “additional Tier 1 capital” even if issued after 1 January 2014.

Hybrid capital instruments (i.e., additional Tier 1 capital) consisting of both equity capital and debt can, to a limited degree and subject to conditions, be included in the core capital.

Hybrid instruments are distinguished on the basis of their innovative character—i.e., whether or not specific conditions apply that act as an incentive for early repayment. For tax purposes, the Netherlands treats “additional Tier 1 capital” that is issued under the current capital requirements framework as debt, which means that returns on these instruments will be tax deductible.

Beginning 1 January 2014, the capital requirements directive will apply. As such, additional Tier 1 capital that is issued after 1 January 2014 can no longer be regarded as debt. The related interest will no longer be deductible.

However, in a letter dated 16 December 2013, the Deputy Minister indicated that banks will be able to deduct, for tax purposes, the returns on additional Tier 1 capital, even if issued after 1 January 2014, to be taxed at the recipient level.

Read a December 2013 report prepared by the KPMG member firm in the Netherlands: Tax treatment of additional Tier 1 capital

©2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

The KPMG logo and name are trademarks of KPMG International.

KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.

The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Direct comments, including requests for subscriptions, to
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.


Share this

Share this


Subscribe to receive the latest TaxNewsFlash email alerts (you must select the option for TaxNewsFlash)

Already a Subscriber? Login

Not a member? Subscribe now