No Match Found
The Netherlands has a competitive statutory corporate income tax rate compared to the rest of Europe: 19 per cent on the first 200,000 euro and 25.8 per cent for taxable profits exceeding 200,000 euro. In addition, the Dutch tax system has a number of attractive features for international companies. Add that compliance processes are clear and supported by technology, and you can see why the Netherlands has an excellent fiscal climate.
The Dutch tax ruling practice has a 30-year track record and has given many international groups clarity on their tax position when setting up successfully in the Netherlands. This of course in the perspective of transparency and paying one's fair share. And thanks to the Netherlands’ stable government and highly accessible and cooperative tax administration, companies can feel confident that the Netherlands maintains its attractiveness for foreign investors, minimises impediments for business and guarantees cooperation and transparency from Tax Authorities.
One of the specific features of the Dutch tax system is the possibility to discuss the tax treatment of certain operations or transactions in advance. Upfront clearance can be obtained from the Dutch Tax Authorities. The Dutch Tax Authorities conclude Advance Pricing Agreements (APA) as well as Advance Tax Rulings (ATR).
An APA is an agreement with the Dutch Tax Authorities specifying the intercompany pricing that the taxpayer will apply to its related-company transactions. The APA system is designed to help taxpayers voluntarily avoid or resolve actual or potential transfer pricing disputes in a proactive, cooperative manner.
An ATR is an agreement with the Dutch Tax Authorities determining the tax rights and obligations in accordance with the law in the taxpayer’s specific situation.
Both an APA and ATR are binding for the taxpayer and the Dutch Tax Authorities. To obtain an APA or ATR, certain substance requirements must be met. In general, the Dutch Tax Authorities will be able to handle requests for APA’s, ATR’s and other requests (e.g. a request for a tax facilitated merger, a VAT registration or a (VAT) fiscal unity) within a reasonable amount of time.
In accordance with EU law the Dutch Tax Authorities are obliged to exchange information regarding rulings and transfer pricing arrangements with the Tax Authorities of other EU member states automatically. The Dutch Tax Authorities use a standard form that taxpayers have to complete when concluding a cross border ruling or transfer pricing arrangement. All EU Tax Authorities are obliged to exchange this information. The exchange of information increases the transparency for corporate taxation within the EU. It is expected that in the future similar information may be exchanged with the Tax Authorities of non-EU member states as well.
The main characteristics of the Netherlands’ policies on the issuing of tax rulings with an ‘international character’ are as follows:
Another specific feature of the Netherlands is that the Dutch Tax Authorities allow businesses, under certain conditions, to apply for an enhanced relationship (‘horizontal monitoring’). This is a form of cooperative compliance in which the organisation signs a Horizontal Monitoring covenant with the Dutch Tax Authorities. It provides a timing benefit and certainty: it prevents unpleasant tax surprises when it is too late to do something about them. But horizontal monitoring encompasses more than just complying with laws and regulations: the organisation must be able to demonstrate it is in-control of its tax processes and tax risks, via a so-called ‘Tax Control Framework’.
The Dutch Tax Authorities will adjust the methods and intensity in which they perform their monitoring to the level of tax control of the taxpayer. As a result, audits performed by the Tax Authorities will shift from reactive (tax audits over past years) to proactive (providing ‘assurance’ upfront). Under horizontal monitoring, the company’s relationship with the Dutch Tax Authorities is based on mutual trust, understanding and transparency.
The main benefit of Horizontal Monitoring is that relevant tax risks and positions can be dealt with when they occur. The company is required to act with a transparent attitude towards the Dutch Tax Authorities, and they will in return provide a quicker response with respect to tax issues that are brought to their attention by the company. This proactive assurance prevents unpleasant surprises afterwards. Apart from this, it helps with accurately determining the tax cash flow, deferred and current taxes, and ascertains that the company has as little uncertain tax positions as possible. This saves the company both time and costs. In 2020 the Tax Authorities introduced their reformulated Horizontal Monitoring. Top 100 taxpayers in the Netherlands will get an individual approach and monitoring plan. Individual Horizontal Monitoring will be possible for companies who require an audit on their annual accounts (2 out of 3 criteria must be reached; > 250 employees, > 20 million euro assets and > 40 million euro revenue) and which have a tax self assessment including tax strategy, a tax risk analysis and a monitoring and testing plan in place. For small and medium enterprises, a general covenant is possible through their qualified service provider. PwC is one of the qualified service providers in The Netherlands.
Horizontal monitoring can be applied to all taxes including corporate income tax, value added tax, customs, wage tax and social security. PwC has developed a special tax management maturity model (T3M) to help companies determine their existing level of tax risk management and the path towards the intended maturity level of their tax risk management. T3M is inspired by the common standards on general and financial risk management, such as COSO, and in line with the latest report of the OECD on ‘Building better Tax Control Frameworks’.
As a member of the OECD, the Netherlands is an active participant in the Anti-Base Erosion and Profit Shifting (BEPS) project of the OECD. The Netherlands supports the goals as set by the OECD in this respect and adheres to the outcomes of the BEPS project. The Netherlands also adheres to actions of the OECD in relation to transparency in tax matters. In addition, the Netherlands has signed and ratified the Multilateral Instrument (MLI), albeit with limited reservations to certain provisions, and has brought all of the Netherlands’ tax treaties within the scope of the MLI except for the few tax treaties that were being negotiated or not yet in force at the time of the MLI signature.
In line with the joint declaration by France, Germany, Italy, the Netherlands and Spain of 9 September 2022 based on which these countries committed to implement Pillar 2 by 1 January 2024, the Netherlands submitted the draft legislative proposal ‘Minimum Tax Act 2024 (Pillar 2)’ to public consultation in October 2022. By doing so, the Netherlands takes the next step in implementing Pillar 2 as of 1 January 2024.The draft legislative proposal is almost entirely in line with the (then) compromise text of the Pillar 2 Directive. Entities established in the Netherlands that are part of a (multinational or large domestic) group with a consolidated group turnover of at least EUR 750 million will fall within the scope of the new legislation. Certain sectors, such as investment funds and pension funds, are exempted from the scope of Pillar 2.
Pillar 1 is one of the OECD initiatives, and aims to allocate new taxing rights to market jurisdictions, even in absence of physical presence, via the introduction of a new set of tax rules potentially operating on top of the existing ones.
Pillar 1 will apply to MNEs with profitability above 10 per cent and global turnover initially above EUR 20bn. The Pillar 1 rules are expected to be introduced by a Multilateral Convention (MLC).
In addition, the MLC will also contain provisions requiring the withdrawal of all existing digital service taxes and relevant similar measures with respect to all companies, as well as a commitment not to enter into such measures in the future.
The Netherlands does not levy a digital service tax.
The Netherlands generally supports the proposal for the EU Directive laying down rules to prevent the misuse of shell entities for tax purposes (the Unshell Directive, also referred to as ATAD III). According to the Unshell Directive proposal, entities at risk need to report that they meet certain indicators of minimum substance to the tax authorities. Failure to do so (or in an adequate manner) means that the entity shall be considered to be a shell. The Directive proposal prescribes concrete tax consequences for situations involving a shell entity.
The Unshell Directive proposal has not been welcomed by all EU Member States and it is unclear when and under which form it will be agreed upon. All EU Member States need to agree on the Directive proposal to be adopted. Although the proposal states that the rules shall apply as per 1 January 2024, it is almost certain that this will not be the case, pending the negotiation of the Directive in the EU.
The EU adopted the Anti-Tax Avoidance Directive (ATAD I), which contains several measures to combat tax avoidance. The ATAD I includes measures regarding the limitation of interest deductibility and exit taxation, a general anti-abuse rule (GAAR), a Controlled Foreign Company (CFC) rule and rules addressing mismatches between EU member states arising from the use of hybrid instruments or entities. These rules were transposed into all EU member states laws and apply, in principle, from 1 January 2019 onwards.
The Netherlands has implemented ATAD I by introducing a CFC rule and an earnings stripping rule and slightly reforming its exit taxation rules for corporate income tax (CIT) purposes.
The earnings stripping rule limits the deduction of the on balance interest cost to 20 per cent (previously: 30 per cent) of the taxpayer’s EBITDA with a threshold of 1 million euro and a carry forward rule. In conjunction with the introduction of the earnings stripping rule, the Dutch interest limitation rules regarding excessive participation debts and excessive acquisition debts were abolished as of 1 January 2019.
The CFC-regime targets corporate taxpayers that hold a direct or indirect interest, either stand-alone or with affiliated companies, of more than 50 per cent in a subsidiary, or owns a permanent establishment, in either a) a low-taxed country (i.e. less than 9 per cent but only if listed by the Dutch Ministry of Finance on an annual basis) or b) a jurisdiction included in the EU list of non-cooperative jurisdictions.
The ATAD’s GAAR was not implemented because the Dutch Ministry of Finance considered the GAAR to be effectively present by means of the standing Dutch fraus legis doctrine.
The exit taxation regime for CIT purposes was slightly altered, by providing that an exit levy must be paid in full within the 5 years following the exit but no later than at the moment of realisation, e.g. the sale of the asset(s).
As an expansion to the legislation included in the ATAD I, the European Commission proposed rules addressing hybrid mismatches between EU member states and in relation to third countries (ATAD II). A hybrid mismatch leads to either tax deduction with no inclusion of the income or double deduction in cases involving entities, (financial) instruments, permanent establishments or the location of an entity. The Netherlands applies ATAD II as per book years starting on or after 1 January 2020. Please note that it is mandatory under Dutch law to have documentation on the ATAD II position on file.
In addition, the Netherlands has enacted legislation introducing ATAD II’s reverse hybrid rule. Under the new rules, an entity that qualifies as a reverse hybrid has become liable for corporate income tax from 1 January 2022 onwards.
The EU Directive on mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (DAC6) imposes mandatory disclosure requirements for certain arrangements with an EU cross-border element. It requires relevant advisors or taxpayers to report a wide range of cross border arrangements under certain conditions. Where such an arrangement falls within certain 'hallmarks' mentioned in the directive and in certain instances where the main or expected benefit of the arrangement is a tax advantage, the arrangement should be reported. DAC6 covers all taxes except value added tax and excise duties.
The Netherlands has already implemented DAC6 legislation. The Netherlands has decided not to go further than the EU Directive. For example, no additional hallmarks have been included in Dutch law and the scope of the legislation has not been extended to other taxes like VAT.
The first transactions had to be reported by 31 January 2021 at the latest. Failure to do so might result in an administrative fine of up to 900,000 euro (amount 1 January 2022).
If your company has an international structure, we recommend that you work with your adviser to determine how you will fit this mandatory exchange of information into your tax and compliance strategy. It is also important that you report in a timely manner, for example, if no external advisor is involved in a transaction subject to reporting requirements, or if the advisor in question makes use of a legal right to withhold information (lawyers, etc.).
DAC7 amends the EU Directive on Administrative Cooperation and introduces new reporting obligations that will apply to Digital Platforms Operators that make their platform available to Reportable Sellers. DAC7 is designed to ensure that EU member states automatically exchange the reported information on the Reportable Sellers on digital platforms, whether the platform is located in the EU or not. Digital Platform Operators are required to report to a Competent Authority in an EU member state. The Competent Authority in that EU member state will then exchange the information with the Competent Authority in the EU member state where the Reportable Seller is tax resident. Digital Platforms Operators that are not located in the EU will be required to register in an EU member state in order to comply with this Directive.
EU member states should have implemented DAC7 by 31 December 2022 and apply their transposing DAC7 legislation as of 1 January 2023. Digital Platform Operators will then be required to report on the year 2023 for the first time in 2024. Digital Platform Operators should already have seller due diligence procedures and controls in place as of 1 January 2023.
The Dutch government has approved on DAC7 in December 2022, so implementation is in place for 2023.
From 2021 onwards, interest and royalty payments to group companies established in low-tax jurisdictions are subject to a source tax (withholding tax). The rate in 2023 is 25.8 per cent (as it was in 2022), although it may be reduced by a tax treaty, if applicable. A conditional withholding tax liability will also be applicable to abusive situations, e.g. where payments are artificially diverted.
The rationale behind the introduction of the conditional source tax on interest and royalties is to prevent the Netherlands from being used as a gateway to low-tax jurisdictions and to reduce the risk of tax avoidance through the shifting of (Dutch) taxable income to such jurisdictions.
Low-tax jurisdictions are both jurisdictions with a statutory corporate tax rate of less than 9 per cent and jurisdictions on the EU list for non-cooperative jurisdictions.
From 2024 onwards, the Netherlands will apply a conditional withholding tax at a rate equal to highest corporate income tax rate (25.8 per cent as of 2022)
a) on dividend payments to shareholders established in low-tax jurisdictions; and
b) in situations of abuse, i.e. where artificial arrangements are employed to avoid the imposition of Dutch dividend withholding tax.
The rationale behind the introduction of the withholding tax is the same as that for the conditional source tax on interest and royalties.
As of 1 January 2021, additional substance requirements apply to service companies. A service company is a Dutch tax entity whose activities consist for more than 70 per cent of the direct or indirect receipt and payment of interest, royalties or rent from a foreign group entity. These substance requirements supplement the earlier substance requirements for service companies, and are EUR 100,000 in relevant labour costs and office space for at least 24 months. If these requirements are not met, information is exchanged with the country from which the interest, royalties or rent is paid (the source state). The result could be that the source state deprives the taxpayer of treaty benefits.
For several years, the European Commission has been investigating whether certain schemes/regimes and individual tax rulings between companies and local authorities are in breach of EU State aid rules. In some of these cases the European Commission has already issued final decisions concluding that these schemes and tax rulings constitute unlawful State aid. One of these final State aid decisions concerns a Dutch tax ruling. The Dutch government has appealed this decision with the General Court (that is the court of first instance within the EU). In its judgment, the General Court annulled the decision of the European Commission because, in the Court’s view, the European Commission did not demonstrate the existence of an economic advantage within the meaning of EU State aid rules. The European Commission accepted this decision by the General Court.
The European Commission has also investigated other Dutch tax rulings for which a final State aid decision is expected. The Dutch government has also taken the position that the Dutch tax ruling practice in general does not allow for State aid, considering that Dutch tax rulings do not deviate from Dutch tax law as the goal of Dutch tax rulings is to obtain certainty about the implications of the tax law in advance.
The OECD country-by-country reporting implementation package is primarily meant to be a (tax) risk assessment tool for the (international) Tax Authorities. Based on the OECD report, a multinational group with a turnover of at least 750 million euro will have to file a country-by-country report in the state where the ultimate parent company is a resident. The Tax Authorities will then exchange this information with Tax Authorities of other countries to which the information may be relevant and that have agreed to mutually exchange these reports.
Besides, the agreed OECD report prescribes that each individual company within such a group will be obliged to have a master file and a local file available in its administration. The master file contains information on the transfer pricing within the entire group while the local file contains information on all intra group transactions of the local company. All this information will be kept confidential, not accessible to the general public.
The Netherlands has enacted legislation implementing the OECD country-by-country reporting package which corresponds with the system and methods as prescribed in this reporting package. In addition, in the Netherlands companies with a consolidated turnover of at least 50 million euro are obliged to have a local file and a master file available.
As mentioned in the above only the ultimate parent company of a multinational group has to file a country-by-country report. A Dutch group entity of a multinational group with a turnover of at least 750 million euro must notify the Tax Authorities whether the ultimate parent company or surrogate parent company will file the country-by-country report. If not, it must notify the tax authorities which group company and its tax residence will file the report. This notification should be made at the latest on the final day of the financial year.
Further, a Dutch company that must file a country-by-country report, must file this report within 12 months after the end of the financial year. The master file and local file must be in the company’s administration within the same deadline that holds for filing the tax return.
Moreover, the Dutch Ministry of Finance published a Transfer Pricing (TP) Decree, which provides further guidance on the application of the arm’s-length principle and aims to incorporate changes following the OECD Base Erosion and Profit Shifting (BEPS) project and related amendments to the 2017 OECD TP Guidelines.
The Decree provides additional guidance on the position of the Dutch Tax Authorities in the post-BEPS era, among others, concerning the application of various BEPS provisions as included in the 2017 OECD TP Guidelines (e.g. TP methods, hard-to-value intangibles and valuation methods) into Dutch tax practice.
The Public CbCR Directive requires multinational groups or standalone undertakings with a total consolidated revenue of at least EUR 750 million, in that and the previous financial year, whether headquartered within the European Union or not, to publicly disclose the corporate income tax they pay in each EU Member State plus in each of the countries that are either on the EU list of non-cooperative jurisdictions for tax purposes (‘the EU’s blacklist’) or listed for two consecutive years on the list of jurisdictions that do not yet comply with all international tax standards but have committed to reform (the ‘EU’s grey list’). EU Member States will have to transpose the Directive into national legislation by 22 June 2023. The first financial year of reporting on income tax information will be the year starting on or after 22 June 2024 at the latest. EU Member States could also choose to apply the rules earlier. This is the case in Romania (that will apply public CbCR legislation as per 1 January 2023).
The Netherlands has published draft legislation to implement the Public CbCR Directive Directive.
In general, a Dutch resident company is subject to corporate income tax (CIT) on its worldwide income. However, certain income can be exempted or excluded from the tax base. Non-resident entities have a limited tax liability. In principle, only ‘Dutch source income’ is included in the CIT base of non-resident corporate taxpayers. For these companies, the income from Dutch sources includes e.g. income derived from a business enterprise in the Netherlands. This is the income attributable to a business or part of a business operated through a permanent establishment or permanent representative in the Netherlands.
In the Netherlands, corporate residence is determined by a company’s specific facts and circumstances. Management and control are important factors in this respect. Companies incorporated under Dutch law are deemed to be residents of the Netherlands.
To obtain a Dutch tax residency certificate or a tax ruling, minimum substance requirements are guidelines in ensuring that effective management and control of the company are based in the Netherlands. There are additional substance requirements for service companies , see under 'Additional substance requirements for service companies' under 'International developments'.
The standard CIT rate is 25.8 per cent (as it was in 2022). A lower rate of 19 per cent applies to taxable income up to 200,000 euro (2022: 15 per cent). If the criteria are met, fiscal investment funds are taxed at a CIT rate of nil per cent. Under conditions, certain investment funds are eligible to opt for an exempt status for Dutch CIT purposes.
Corporate income is determined annually in accordance with the principles of ‘sound business practice’. Profits and losses are attributed to the book years with reference to the basic principles of realisation, matching, reality, prudence and simplicity. Dutch tax law, however, also contains rules that expressly deviate from the concept of sound business practice. For example, tax laws may limit the annual depreciation of some assets but also offer the possibility of accelerated depreciation of other assets. In addition, there are many exceptions to the main rules as a consequence of special fiscal facilities, the most important one being the participation exemption.
The Dutch tax system provides several tax incentives, for example to stimulate certain investments. If the conditions are met, tax incentives are available for small-scale investments, investments in energy-efficient or environmental assets and for research and development activities. For more information see Tax incentives. The Netherlands also provides for an optional favourable regime for the calculation of profits from qualifying activities of seagoing vessels. Certain conditions have to be met.
The remuneration for activities performed should be at arm’s length, meaning that terms, conditions and pricing of transactions between affiliated companies should be similar to those applied between independent third parties. Dutch companies are obliged to produce and maintain appropriate transfer pricing documentation substantiating the transfer prices used. The documentation should, among other things, include a functional analysis (description of the functions, risks and assets), an economic analysis (including benchmarks) as well as transfer pricing policy documents and internal contracts. Depending on the situation, the documentation obligations also include a country-by-country report, a master file and a local file.
If a transaction between related parties is not at arm’s length, the taxable income may be adjusted by the Tax Authorities. Moreover, transactions that do not meet the arm’s length test may be deemed to be a contribution of informal capital or a deemed profit distribution (the latter may trigger dividend withholding tax). This could result in additional profit being taken into account in case of mismatches between a non-Dutch and the Dutch tax system (in line with international developments).
As of 1 January 2022, the Netherlands limits a downward adjustment of the taxable profit for taxpayers to the extent that, at the level of the other company involved in the transaction, no (or a too low) corresponding upward adjustment of the tax base is made.
This rule aims to eliminate the transfer pricing differences that arise as a result of a different application of the arm's length principle – particularly in international situations – which may result in part of the profit of a multinational escaping taxation.
In order to avoid double taxation, the Netherlands will under certain conditions (e.g. upward adjustment in another year, or transactions with a hybrid entity whose participations are subject to tax) still allow a downward adjustment.
In principle, interest expenses are deductible for corporate income tax purposes. However, various interest deduction restrictions do apply, such as the earnings stripping rule. The earnings stripping rule limits the deduction of the on balance interest cost to 20 per cent of the taxpayer’s EBITDA (up to and including 2021: 30 per cent) with a threshold of 1 million euro and a carry forward rule. Furthermore, there are specific interest deduction restrictions to prevent tax base erosion by interest deduction.
Generally, depreciation may be computed by using a straight-line or a reducing-balance method or on the basis of historical cost. However, Dutch tax law includes specific rules that can limit the depreciation of immovable property, goodwill and other assets.
On the other hand, the law provides accelerated and random depreciation of several specific assets. Accelerated depreciation applies to qualifying investments in assets that are in the interest of the protection of the environment in the Netherlands (the allowed percentage for accelerated depreciation is 75 per cent, the normal depreciation regime applies to the other 25 per cent of the investment). Accelerated depreciation is also available for certain other designated assets, for example, investments of starting entrepreneurs and seagoing vessels. Under conditions, the costs of the production of intangible assets may be taken into account at once.
In 2023, it is possible to depreciate at random up to 50 per cent of the production costs of certain assets. Depreciation at random is possible if the purchase obligation is entered into in 2023 or if the production costs were incurred in 2023. The remaining book value should be depreciated on a regular basis. The following assets are excluded:
A Dutch taxpayer may upon request and under certain conditions determine its taxable income in a currency other than euro. The request should be filed during the first book year of incorporation or prior to the start of a new book year in later years. Tax payments must always be made in euro.
The Dutch participation exemption regime aims to eliminate economic double corporate taxation of profit distributions paid by a subsidiary to its parent company. A corporate taxpayer is exempt from Dutch corporate income tax on all benefits, such as dividends and capital gains, connected with a qualifying shareholding, in general a shareholding of at least 5 per cent. Such benefits are also eligible for an exemption of Dutch dividend withholding tax if distributed by a Dutch resident entity. If a taxpayer fails the so-called motive test and the participation is actually or deemed to be held as a portfolio investment – then the participation exemption would still apply if:
There is no minimum holding period in relation to the applicability of the participation exemption. As an exception to the participation exemption regime, losses arising from the liquidation of the company in which a qualifying participation is held may be deductible for CIT purposes. The limitations and conditions applicable have been changed per 2021.
Expenses relating to the sale or purchase of participations are non-deductible.
For non-qualifying portfolio investment participations, an indirect tax credit system is applicable for foreign taxes instead of the exemption. Income and expenses relating to earn-out receipts and payments are not taxable.
The participation exemption includes a CFC-rule. The CFC-regime targets corporate taxpayers that hold a direct or indirect interest, either standalone or with affiliated companies, an interest of more than 50 per cent in a subsidiary or disposes of a permanent establishment in either a low-taxed, i.e. less than 9 per cent, or a non-cooperative jurisdiction that is explicitly listed by the Dutch Ministry of Finance.
A special regime applies with respect to profits, including royalties, derived from a self-developed intangible asset. Under the innovation box, the taxpayer may opt, under certain conditions, for the application of a lower effective tax rate on taxable profits derived from these intangible assets. The effective tax rate of the innovation box is a maximum of 9 per cent, by means of a reduction of the tax base.
The innovation box regime applies mostly to profits from innovative activities that take place in the Netherlands. The innovation box can be a very important facility. In combination with other facilities (see ‘Tax incentives’), it makes the Netherlands the ideal location for R&D activities.
A Dutch resident parent company and its Dutch resident subsidiaries may, under conditions, opt to be treated as one taxable entity for the Dutch CIT by forming a ‘fiscal unity’. Under the fiscal unity regime, inter-company transactions are eliminated and the business proceeds of the included companies are balanced for CIT calculation purposes. Companies with their place of residence in the Netherlands, both for Dutch tax law purposes and tax treaty purposes, may be eligible to opt for this regime. Under conditions, taxpayers that are resident abroad may also be included in a Dutch fiscal unity insofar as they run a business in the Netherlands through a permanent establishment.
The main requirements to apply for this facility are that the parent company holds directly or indirectly at least 95 per cent of the shares in one or more Dutch resident companies, the place of effective management should be located in the Netherlands and the entities should be subject to the same tax regime.
The advantages of the fiscal unity include:
Disadvantages of a fiscal unity may be that each company is jointly and severally liable for the corporate income tax debts of the fiscal unity. Furthermore, certain tax incentives might have a more limited application and the first corporate tax rate bracket and other thresholds are reached sooner.
A fiscal unity for corporate income tax purposes only comes into existence after a request has been filed with the Tax Authorities and can have a maximum retroactive effect of three months (provided that the conditions have been met during this term).
It is possible to form a fiscal unity between a Dutch parent company and its Dutch sub-subsidiary, excluding the intermediary holding company if the intermediary holding company is an EU/EEA resident company and other conditions are met. It is also possible to form a fiscal unity between two Dutch sister companies excluding their parent company, if the parent company is an EU/EEA company and other conditions are met. Also forming a fiscal unity with a Dutch permanent establishment of an EU company has been made considerably easier.
With effect from 1 January 2018 some changes were made resulting from ECJ case law which ruled the ‘per element approach’ applicable to the Dutch regime. The amendments result, among others, in disregarding the fiscal unity for the purpose of the provision on the interest on related party debts, the provision of the participation exemption regime on portfolio investment participations, the ‘anti-mismatch’ rule of the participation exemption regime and the provision on loss utilisation in cases of significant changes in ultimate ownership.
As of 2022, tax loss utilisation is no longer limited in time. On the other hand, a new limitation is introduced: only the first 1 million euro profit can be used for offsetting losses in full. Loss relief against any further profit will be limited to 50 per cent of such profit.
Specific anti abuse rules however may still completely prohibit the utilisation of net operating losses after a change of 30 per cent or more of the ultimate control in a company.
No cross-border relief is available with regard to foreign permanent establishments. Foreign source losses cannot be offset against Dutch source profits. An exception applies to ‘final losses’, losses realised upon the discontinuation of foreign business operations. Under certain conditions, the ‘liquidation and cessation loss regime’ allows final losses of foreign permanent establishments to be taken into account for Dutch CIT calculation purposes.
The worldwide income of a resident corporate taxpayer is included in the Dutch CIT base, but the Dutch system usually subsequently provides for double tax relief. The Netherlands has concluded roughly 100 tax treaties for the avoidance of international double taxation. In case no treaty applies, the Netherlands often unilaterally provides for double tax relief. In addition, taxpayers may benefit from the favourable rules provided by EU directives and EU law. The Netherlands, like over 90 other jurisdictions, signed the OECD’s multilateral instrument (‘MLI’) to swiftly implement several measures to update its tax treaties and lessen possibilities for tax avoidance. Along with over 50 other jurisdictions, the Netherlands also ratified the MLI which means it may affect their mutual tax treaties.
Double taxation of foreign dividends (if not exempt under the participation exemption), interest, and royalties is relieved by a tax credit provided for in Dutch tax treaties or, if the payer of the income tax is a resident of a developing country, designated by Ministerial Decree unilaterally. If no treaty or unilateral relief applies, a deduction of the foreign tax paid is allowed in computing the net taxable income.
The Dutch tax law provides for double tax relief for Dutch resident corporate taxpayers deriving profits from foreign business activities. The taxpayer’s worldwide profits are determined according to Dutch tax standards and subsequently reduced by an amount equal to the ‘positive and negative business income items derived from foreign sources’ on a per-country basis. The eligible income items include, for example, the business profits attributable to a permanent establishment located abroad and the income from immovable property located in the other state.
In most circumstances, foreign dividends are exempt from Dutch CIT under the participation exemption, as previously discussed. As a consequence, foreign withholding tax cannot be credited, and constitutes a real cost for the companies concerned. However, if a Dutch company re-distributes such dividends, a credit of the foreign withholding tax may be granted against Dutch dividend withholding tax due on the distribution. The credit amounts to a maximum of three per cent of the gross dividend paid. Note that the Netherlands, as a tax treaty policy, aims to achieve an agreement on a low or nil withholding tax rate for dividends from a participation in a bilateral tax treaty.
As of 1 January 2022, offsetting of Dutch dividend tax and gambling tax against corporate income tax is limited to the annual amount of corporation tax due. Dutch dividend tax and gambling tax that cannot be set off will be carried forward for offsetting in the next year.
If, for any reason, you wish to migrate your company from the Netherlands, an exit tax is due on realised and unrealised profits (hidden reserves and goodwill). The taxable amount is calculated at the time of migration and is formalised in an assessment. If the new place of residence is within an EU/EEA Member State, the tax due may, on request, be paid in 5 annual instalments. The company has to comply with certain administrative requirements and may have to provide security in order to obtain the deferral. An initiative bill has been pending for more than a year-and-a-half that, under certain circumstances, would levy a dividend tax on migration from the Netherlands. It is uncertain if and when this proposed legislation will enter into force, and if so, if it will contain retroactive effect.
The system of value added tax (VAT) in the Netherlands is based on EU regulation and is essentially the same as that used in the rest of the EU. However, there still are some significant differences in details between various Member States of the EU, especially with regard to the VAT rates, formal VAT requirements and the applicable business context.
VAT is effectively a tax on consumer expenditure. So, in theory, the final burden of the tax should not be on business activity. This objective is achieved by an arrangement known as the input VAT deduction system. When a business buys goods or services, it usually pays VAT to the supplier (input tax). When the business sells goods or services, whether to another business or to a final consumer, it is usually required to charge VAT (output tax) unless the supplies are specifically relieved from VAT. If the business makes only taxable supplies, it must periodically total the input VAT it incurs and deduct this from the total output VAT charged, paying (or claiming) the balance to (from) the Dutch Tax Authorities. The result is that the end consumers bear the total cost of VAT on the final price of the goods or services they purchase.
VAT is charged on the supply of goods and services created in the Netherlands by a taxable person in the course of exercising a business, unless the supplies are zero-rated or exempt. A VAT taxable person is anyone performing business activities in the Netherlands. Furthermore, the intra-Community (i.e. within the EU) acquisition in the Netherlands by taxable persons or non-taxable legal persons, the intra-Community acquisition of a new means of transport by any person, and the importation of goods are also considered taxable events.
All the above-mentioned events are taxable if performed in the Netherlands, even when they are carried out by non-residents.
The Netherlands furthermore allows legally independent businesses that are closely bound to one another by financial, economic and organisational links to be treated as a single taxable person (fiscal unity/VAT group).
If the business is liable for VAT on its transactions in the Netherlands, it will have to register for VAT.
Special attention needs to be given to the VAT position of holding and/or financing companies.
Currently, the standard VAT rate in the Netherlands is 21 per cent. A reduced VAT of nine per cent applies to certain essential goods and services, for example food and drinks, passenger transport and certain labour-intensive repair and maintenance activities. A zero per cent rate applies to, for example, the export of goods.
As of 2023, the zero per cent rate applies to the supply and installation of solar panels and solar panels used as roofing materials. The zero VAT rate only applies if the solar panels are intended to be installed on or in the immediate vicinity of private dwellings or housing.
Additionally, various types of supplies are exempt from VAT, such as educational and medical services. The difference between zero per cent VAT (zero rate) and an exemption is that the VAT incurred on costs that are incurred for VAT exempt transactions cannot be settled with input VAT. Zero-rated transactions in principle allow for a full deduction of input VAT.
In contrast to some other EU Member States, the Netherlands has implemented a system that provides for the deferment of actual payment of import VAT at the time of importation. Instead of paying import VAT when the goods are imported into the EU, the payment can be deferred to the periodic VAT return. Under this system, the import VAT should be declared but this amount can simultaneously be deducted in the same VAT return. As a result, in principle there is no actual payment of VAT at import, thus avoiding cash flow disadvantages.
Contrary to some other European countries, form-free administration is allowed in the Netherlands. There are some general requirements regarding the content and readability of the administration, as well as the obligation to retain the administration for seven years (ten years when it relates to immovable property), but basically the entrepreneur is free to determine how the administration is organised, as long as data can be made available in a legible and comprehensible way upon request of the Dutch Tax Authorities. This makes it relatively easy for businesses in the Netherlands to comply with the Dutch administrative obligations compared to other EU Member States.
Another advantage is that the Netherlands has introduced legislation that allows for form-free e-invoicing. This means that, although the standard invoicing requirements have to be met, the way in which the electronic invoices are sent is up to the entrepreneur, as long as the authenticity of origin, the integrity and completeness of the content and the readability of the electronically stored invoices are guaranteed.
General VAT refund requests are processed within a couple of weeks in the Netherlands, which is advantageous from a cash flow perspective.
The Netherlands implemented four quick fixes aiming to improve the day-to-day functioning of the VAT system for EU cross-border B2B trade.
These Quick Fixes (QF) have consequences for the company’s administrative systems, VAT registrations, contracts, (electronic) documents and invoices.
Obtaining and validating the customer’s VAT ID number as well as filing correct recapitulative statements (EU Sales Listings) are a strict condition for the application of the zero VAT rate.
As a practical consequence, there is an increased need for businesses to include all VAT identification numbers of customers in their ERP systems. The reason is that they should be able to raise invoices stating the correct VAT-identification number of their customers and to submit EU Sales Listings with the correct information.
It is therefore important to validate these VAT identification numbers periodically (or even before each shipment) in the EU VIES-system. Proper documentation of these controls is also very important in this respect. In addition, the submission of a recapitulative statement (EU Sales Listing) with correct information is a hard condition for the application of the zero VAT rate. In the Netherlands, the supplier is allowed to repair any omissions.
A common framework for the documentary proof needed for application of the zero VAT rate to intra-Community supplies was introduced.
In case of transport by or on behalf of the supplier, the proof should consist of two supporting documents drawn up independently of each other, e.g.: a signed CMR in combination with the transport insurance policy for the respective supply of goods. When the buyer arranges for the transport, the supplier should also possess a written statement from the buyer/acquirer. If the supplier is in possession of the required evidence, it is presumed that the goods have been transported from one EU Member State to another. The Tax Authorities may rebut this presumption if they can demonstrate that transportation did not take place after all.
These new rules did not affect current (Dutch) practice. All proof that was previously considered sufficient evidence based on Dutch rules and CJEU/national case law is still accepted as sufficient proof of transportation. The EU rule was an add-on to the existing Dutch rules: it provides for a rebuttable presumption.
In case of call-off stock, a supplier moves goods to a warehouse/stocking location of a known customer to enable the customer to pick the goods from the stock at a later stage and trigger a VAT supply.
If a company transfers own stock to a warehouse in another EU Member State, the supplier must report a (fictitious) intra-Community supply in the Member State of departure and a corresponding intra-Community acquisition in the Member State of arrival. The subsequent removal of goods from that stock is a domestic supply in the country of the warehouse. By default, the transfer of stock and the subsequent supply require the supplier to register for VAT purposes in this EU country and to fulfill the relevant VAT obligations. Subject to conditions, the physical transfer does not constitute a fictitious intra-Community supply, so that the supplier does not have to register in the Member State of the customer. One of the conditions is that the customer calls off the goods within one year.
The rules on call-off stock provide for a uniform system because of which the transfer of call-off stock is treated equally in all EU Member States. The application of these call-off stock rules is not optional: it is a mandatory regime.
Cross-border chain transactions consist of successive supplies of goods between traders in more than one Member State, but with only one cross-border transport movement, usually from the first to the last party in the supply chain.
For VAT, this transport movement can only be assigned to one of the supplies in the chain and hence the zero VAT rate for intra-Community supplies can be applied only to one leg of the supply chain. The other supplies in the chain normally lead to ‘local’ VAT and to VAT-registrations in the respective Member State(s).
The zero-rated intra-Community supply is by default assigned to the supplier in the supply chain who arranges the transport or has the transport arranged in their own name.
Yet if such suppliers (intermediaries/middlemen) are not the first company in the supply chain, and provide a VAT identification number of the Member State in which the dispatch commences, they are considered to perform the zero-rated intra-Community supply themselves. Under those circumstances, the supply to the intermediary is a local supply and the supply by the intermediary is the zero-rated intra-Community supply.
From July 2021, under the new EC VAT regime, platforms are facing complicated VAT rules and far-reaching administrative and data retention obligations. Under certain conditions, the facilitating platform will be deemed to be the supplier of the goods itself. The new VAT rules for E-commerce facilitate the reporting of the VAT in so-called One-Stop-Shop VAT returns. Specific set-up is required in the system to facilitate the reporting obligations.
Due to its excellent logistical infrastructure, the Netherlands is often chosen as a primary logistic hub for the EU. If your business imports goods into the Netherlands from outside the EU, the goods will have to be declared for customs purposes and may be subject to customs duties and VAT. The EU is a customs union, which means that the EU is treated as a single territory for customs purposes and that in principle the same rules and rates apply in each Member State. This means that, once goods are in ‘free circulation’ (i.e. all duties paid and import formalities completed) in one Member State, such as the Netherlands, they can move freely between all other Member States, without further payment of customs duties or further customs formalities.
However, although the rules are the same throughout the EU, the interpretation and/or application may differ in the various EU countries. As a result of the long tradition of being a trading country with an open and business friendly environment, the Dutch Customs Authorities are known for their flexible solutions in terms of customs supervision. This does not mean that lower duties are levied or no controls are performed, but it does mean that the Dutch Customs Authorities typically try to perform their controls and supervision in such a manner that it has little impact on the company’s operations.
There are essentially three areas that determine the amount of customs duties payable on goods imported from outside the EU. These are:
The amount of customs duties depends on how the goods are classified in the EU Combined Nomenclature (the EU list of codes and duty rates for customs purposes), as this determines whether goods are subject to ad valorem customs duty rates (i.e. a set percentage of the value) or to specific customs duty rates (e.g. a set amount per volume) or no customs duties at all (i.e. a zero rate).
Upon application, the Dutch Customs Authorities will issue a decision on the classification of the product. A Binding Tariff Information (BTI) provides security on the classification as it binds both the holder of the BTI as well as the Customs Authorities in each EU member state. We can assist with determining the classification of your goods and subsequently with the preparation and substantiation of the BTI application.
Where goods are subject to ad valorem customs duties, the EU customs valuation rules are based upon the WTO valuation rules and likewise require that as a basic rule a transaction value method is applied. This means that the price actually paid or payable is the basis for the customs value, i.e. the value is based upon a buy-sell transaction. The transactions between related parties are basically acceptable as a basis for transaction value. However, the Customs Authorities may request that the arm’s length nature of the prices is demonstrated. Only where such transaction value is not available or cannot be applied, alternative methods may apply.
When using a buy-sell transaction as the basis for the customs value, certain cost elements may need to be added in case these are not included in the price paid, e.g. freight and insurance to the EU border, assists, R&D costs or royalty payments. Certain elements e.g. inland freight or inland installation may, in certain circumstances, be excluded, in case these are included in the price paid. In case goods are subject to more than one transaction at the moment they enter the EU, only one of these transactions can be used as the basis for the customs valuation. The importer is not free to choose which transaction he applies as the basis for the customs value. Since the EU interpretation of the rules may also qualify a purchase order as the (beginning) of a transaction, determining the correct basis for the customs value is not always that straightforward.
The EU has many free trade agreements and preferential trade arrangements in place with a large number of countries. These allow goods that, on the basis of the specified strict rules, qualify as originating from such a country to enter the EU at a reduced or zero customs duty rate. In recent years, the EU has concluded various new free trade agreements, of which the ones with Japan, the UK, Singapore and Vietnam are the latest.
However, the EU may also apply trade defence measures upon importation of goods, such as anti-dumping, anti-subsidy (also known as countervailing) or safeguard measures, which generally take the form of additional duties. These are often applied to goods originating from specifically listed countries. Careful consideration must therefore be given to the customs implications of any sourcing or production decisions.
Unlike the US the EU does not have a general refund system for customs duties paid. This means that when goods are imported and subsequently re-exported the customs duties paid upon importation will not be refunded. Therefore, in order to avoid unnecessary payment of customs duties for products that are not destined for the EU market, various suspension arrangements can be applied, e.g. for transportation (customs transit), for storage (customs (bonded) warehousing) or for processing (inward processing). Some of these arrangements may also be applied for postponing the payment of customs duties and import VAT. For the application of such suspension regimes typically authorisations are required, which may only be available for EU established companies.
There is also a range of customs reliefs that an importer may use, provided that the criteria are met. For example, a relief of customs duties for goods returning to the EU after being exported.
Furthermore, simplified procedures are available for customs formalities upon import, transit and/or export. These simplified procedures often allow a more flexible handling of the (logistical) operations, with customs supervision being performed in the company’s administration rather than with a physical customs check/supervision. The simplifications can also relate to self-issuing certificates of origin for exports, or origin statements on commercial documents such as invoices (authorised exporter). Based on such origin certificates or origin statements, the imports in the country of destination may be subject to reduced customs duty rates.
Excise duty is a consumption tax payable on certain consumer goods that have been specified in a European context. Excisable goods include: beer, wine, spirits, tobacco and mineral oil products. The amounts of duties payable may be substantial and the rules regarding excise formalities are complex. These complex formalities for excise goods not only relate to the import of such goods, but also concern transport between EU Member States. It is therefore important to seek advice before imports or transports to another Member State commence.
Also for companies that have previously imported excise goods or transported them between EU Member States it is important to seek advice. The formalities are expected to change due to the new Excise Regulation that will come into force in 2023. In this respect, it is especially important to note that the transport of goods for which excise duties are paid, will require an authorisation as of 13 February 2023.
The Netherlands taxes its residents on their worldwide income; non-residents are subject to tax only on income derived from specific sources in the Netherlands (mainly income from employment, directors’ fees, business income, and income from Dutch immovable property).
The facts and circumstances determine an individual’s residence. In case of a dispute, the Dutch tax courts will examine the durable ties of a personal nature with the Netherlands. An expatriate is generally considered a resident of the Netherlands if, as a married person, his/her family accompanies him/her to the Netherlands, or if, as a single person, he or she stays in the Netherlands for more than one year.
Qualifying non-resident taxpayers of the Netherlands (i.e. individuals who reside in the EU, EEA, Switzerland or the BES islands (Bonaire, St. Eustatius and Saba) and who earn 90 per cent of their worldwide income in the Netherlands) are also eligible for personal/familial deductions, tax credits, et cetera, which are normally only available to Dutch tax residents.
Under the provisions of the 30 per cent ruling (see ‘Extraterritorial costs and the 30 per cent ruling’), employees who are considered resident taxpayers may opt to be treated as partial non-residents. ‘Partial’ in this respect implies that they are treated as residents for box 1 and as non-residents for box 2 and box 3 purposes (please find the explanation of the boxes underneath).
In the Netherlands, worldwide income is divided into three different types of taxable income, and each type of income is taxed separately under its own scheme, referred to as a ‘box’. Each box has its own tax rate(s). An individual’s taxable income is based on the aggregate income in these three boxes:
Box 1 refers to taxable income from work and home ownership. It includes entrepreneurial and employment income and home ownership of a principal residence (deemed income).
Box 1 has a progressive rate.
|Income (EUR)||Tax rate (%)||Social security (%)||Total (%)|
|0 - 37,149||9.28||27.65||36.93|
|37,149 - 73,031||36.93||None||36.93|
Regarding box 1, we will only discuss income from employment and home ownership, as these are most relevant for employees of foreign companies doing business in the Netherlands.
If an employee is on a Dutch payroll, wage tax will be withheld from its salary. The amount withheld and paid by the employer is applied as a prepayment of income taxes for the employee. Within an employment relationship, all benefits in kind are, in principle, considered taxable income. Such benefits include accommodation allowances, private use of the company car, employee stock options, home-leave allowances, and pre- and post-assignment bonuses. Employer-paid reimbursement of relocation costs relating to the acceptance of new employment is not taxable. The same applies for employer contributions towards approved pension schemes, as the future pension terms will be taxed.
Income and benefits from equity based remuneration is generally taxable at the moment the benefit vests (shares) or is exercised (stock options). However, a new regime applies as of 1 January 2023 for employee stock options. In case shares are not tradable after the exercise of a stock option, the taxable moment will be deferred as a main rule until the shares become tradable. An employee can elect (in writing) to keep exercise as the taxable moment. So in principle the taxable moment will be the moment that the share options become tradable.
The rules regarding ‘excessive’ remuneration, brings ‘lucrative investments’ (carried interest arrangements) under taxation in box 1. The income from a lucrative investment, both income and capital gains, will in principle be considered ‘income arising from other activities’ and, as such, be taxable in box 1. Under certain circumstances the income may be taxed in box 2 (lower tax rate of 26.90 per cent in 2023).
Mortgage interest payments in relation to the financing, renovation, or maintenance of the primary residence may be deducted from box 1 income. To determine the net amount of the deduction, deemed income of, generally, 0.35 per cent of the value of the property is taken into account. An increased rate of 2.35 per cent applies when the value exceeds 1,200,000 euro . This increased rate applies to the portion exceeding 1,200,000 euro. The interest paid on mortgage loans concluded on or after 1 January 2013 can only be deducted if the full mortgage loan is paid off on a periodical basis within 30 years. Starting from 1 January 2014, the maximum effective tax rate against which the mortgage interest is deducted is lowered. In the year 2023 the mortgage interest paid can be deducted against a (maximum) tax rate of 36.93 per cent.
Qualifying taxpayers are entitled to ‘levy rebates’. In addition to the general levy rebate, several other levy rebates may be claimed, depending on the personal situation of the taxpayer (e.g. the single parent rebate).
Box 2 refers to taxable income from a substantial interest.
Box 2 income is taxed at a rate of 26.9 per cent in 2023. As of 2024 Box 2 will comprise two brackets. The first bracket will tax Box 2 income of up to EUR 67,000 per person at a rate of 24.5 per cent and a rate of 31 per cent will apply on the rest of Box 2 income in the second bracket.
A Dutch resident that holds at least five per cent of the shares or a class of shares of a company, or that holds rights to acquire a five per cent interest in a company, has a ‘substantial interest’. The benefits derived from this substantial interest are taxable in box 2. These benefits include dividends and the gain on the sale of one or more of the shares or rights. Taxation in box 2 will apply to a non-resident only if he holds a substantial interest in a Dutch-based company.
Box 3 applies to (deemed) taxable income from savings and investments.
Box 3 income is taxed at a flat rate of 32 per cent over the (deemed) return on your savings and investments (see table below for the fixed returns).
As from 1 January 2023, new transitional legislation over the tax treatment of savings and investments has entered into force until the introduction of new legislation that is announced for 2026.
During the transitional period, your actual assets will be categorised under one of 3 categories, namely (i) bank deposits (savings), (ii) other assets and (iii) debts. The value under each category on 1 January will be deemed to yield a fixed percentage. The weighted average yield over all categories will be applied to the total assets above a personal exemption of EUR 57,000 (2023) in order to determine the taxable benefit that will be subject to tax at a flat rate of 32 per cent (2023).
Non-residents are subject to taxation in box 3 only on the net value of a limited number of Dutch assets, including Dutch real estate not used as the primary residence (which is allocated to box 1), and Dutch profits rights unrelated to shares in box 2 or an employment (which is allocated to box 1).
Please refer to the below table for an overview of the fixed percentages for recent years. The fixed percentages for 2022 and 2023 with regard to bank deposits and debts have yet to be announced.
all other assets
|2022||To be determined||5.53%||To be determined|
|2023||To be determined||6.17%||To be determined|
The Dutch government has announced the intention to reform the box 3 system. The intention is to no longer tax income from savings and investments based on a deemed return, but on the basis of the actual return that the savings and investments generate, meaning that the actual annual value increase and regular income will be taxable. This new system may take effect as of 1 January 2026 at the earliest.
Residents and most partial non-residents are entitled to relief from double taxation under tax treaties or under unilateral relief provisions.
As of 2023 it is no longer possible for directors, that are Dutch tax resident taxpayers, to claim a tax exemption based on an approval of the Dutch Secretary of Finance if the applicable tax treaty only provides for a possibility to claim a tax credit.
The Netherlands has an extensive compulsory social security system, to which both the employer and the employee must contribute. As the social security contributions are capped, the Dutch social security system is relatively inexpensive in comparison to other European social security systems.
The system can be classified as follows:
The actual costs incurred by employees who are hired/assigned from abroad may be reimbursed tax-free provided that these expenses can be proven. These extraterritorial costs basically include all costs that the employee would not have incurred had the employee not been assigned to the Netherlands. Costs that qualify as extraterritorial costs include, among others, costs related to double housing, language courses, residence permits, and home leave.
If certain conditions are met, a foreign employee working in the Netherlands may be granted a 30 per cent ruling. Under this ruling, a tax-free reimbursement amounting to 30 per cent of the income from active employment can be paid to the employee. Apart from the base of the 30 per cent ruling the employer can reimburse the school fees for an international school for the kids of employees tax-free in full.
The 30 per cent reimbursement is intended to cover all extraterritorial costs. If the 30 per cent ruling is applied, the actual extraterritorial costs cannot be reimbursed tax-free in addition to the 30 per cent reimbursement.
However, if the actual extraterritorial costs are higher than the 30 per cent reimbursement, you can choose to reimburse these higher actual costs tax-free if proof of the costs is available.
There are several requirements to qualify for the 30 per cent ruling:
An application for the 30 per cent ruling must be filed within four months after starting the Dutch employment. If this period is exceeded, the ruling, if granted, will only apply as of the month following the month in which the application was filed. The 30 per cent ruling may only be applied if the employee is included in a Dutch wage tax administration.
There have been a few developments with regard to the 30 per cent ruling in recent years:
From 1 January 2024 onwards, the application of the 30 per cent ruling will be capped. From that moment onwards employers can reimburse a maximum of 30 per cent of income up to the ‘WNT norm’, also known as the ‘Balkenende standard’ tax free. Based on the amount of the 2022 WNT norm (216,000 euro), the tax-free remuneration amounts to 64,800 euros per year. If an employee does not work in the Netherlands the entire year, the amount will be calculated pro rata. A transitional regime applies. For employees who benefitted from the 30 per cent ruling during 2022, the cap will apply as of 1 January 2026 instead of 1 January 2024.
The 30 per cent ruling lapses at the end of the next wage tax period following the wage tax period in which the Dutch employment was terminated. The 30 per cent ruling cannot be applied on post-departure income. Hence, the 30 per cent ruling can, in principle, not be applied on bonuses and equity income that becomes taxable after having left the Netherlands in most situations.
The example shows the difference in effective tax rate between applying the 30% ruling and reimbursement of the actual tax-free costs for an employee with an income of 75,000 euro and 10,000 euro actual extraterritorial costs.
|With 30% ruling||Without 30% ruling|
|Paid by employer||€ 75,000||€ 75,000|
|Less: extra-territorial costs||€ 22,500 (30% of remuneration)||€ 10,000 (actual costs)||-/-|
|Wage for income tax||€ 52,500||€ 65,000|
|Less: Income tax||€ 9,653||€ 14,287||-/-|
|Less: National insurance tax||€ 9,808||€ 9,808||-/-|
|Plus: Levy rebates||€ 4,355||€ 2,875||+|
|Net income||€ 59,893||€ 53,780|
|Effective tax rate||20%||28%|
Entrepreneurs who have their residence (or a permanent establishment) in the Netherlands and who employ personnel, are obliged to withhold and pay payroll taxes. Entrepreneurs who do not have their residence in the Netherlands but do have employees that are taxed in the Netherlands for their employment income, can choose to become a withholding agent for the payroll taxes in the Netherlands.
Withholding agents for the payroll taxes are obliged to withhold wage tax and the national insurance contributions from the employee’s wage and bear the cost of the employee’s insurance contributions and the income-related contribution pursuant to the Health Care Insurance Act (jointly: payroll taxes). Please note that the social security premiums are only due in case the employee is covered by the Dutch social security system.
The wage tax and national insurance contribution are a withholding tax on the income tax of employees. The insurance contributions and the income-related contribution pursuant to the Health Care Insurance Act are costs for the employer. For 2023, the (expected) maximum premium for the employee’s insurance contributions is approximately 7,887 euro for an employee with a permanent employment contract and 11,235 euro for an employee with a temporary employment contract. The maximum income-related contribution pursuant to the Health Care Insurance Act is 4,473 euro.
The wages are understood to mean everything the employee receives pursuant to the employment contract although some items may be tax exempt (under the general work-related cost scheme or specific exemptions). Employers who provide reimbursements or benefits in kind to employees will have to assess the wage tax implications. When no specific exemption applies (specific exemptions apply for example to entitlements to Dutch pension benefits and certain jubilee bonuses), the reimbursement or benefit in kind is individual wage for the employee or can be included in the work-related cost scheme.
Under the work-related cost scheme, the employer can provide reimbursements and benefits in kind tax-free. The work-related costs budget will be temporarily increased for 2023 to 3 per cent for the first 400,000 euro of the total fiscal wages, and 1.18 per cent for the remaining amount of the taxable wage bill. For 2024 this is reduced to 1.92 per cent for the first 400,000 euro of the total fiscal wages.
Furthermore, under the regime a number of specific benefits can be provided tax-free, without being included in the work-related costs budget. In case the work-related costs budget is exceeded, the employer has to pay a final levy of 80 per cent on the amount in excess.
It is important to note that under the work-related cost scheme, the scale of the reimbursements must not substantially deviate (30 per cent) from what is considered usual in similar circumstances. Besides, certain benefits cannot be provided tax-free under the work-related cost scheme, because they are compulsory individual wage for the employee. This applies for instance to the private use of a company car.
A relatively new specific exemption is the homework allowance which was introduced as of 2022. Organisations may reimburse home-working costs under this specific exemption. This exemption applies for a fixed amount of maximum 2.15 (2023) euros per day worked from home. This allowance of 2.15 euros per day worked from home may also be given if an employee works from home for only a part of the day. However, it is not possible to apply both the exemption for a homework allowance and the exemption for commuting costs (to the fixed place of work) for one and the same working day. It is possible to grant the allowance in the form of a fixed allowance per period, as is currently possible for commuting costs.
In order to apply this specific exemption, it is important to have insight into the number of days that an employee usually works from home. This is all the more important as the exemption for home-working costs and the exemption for commuting costs cannot apply for the same working day. In case you have made specific agreements with your employees regarding the number of days they work from home, then an incidental deviation from the agreed ratio does not have to lead to an adjustment of the fixed allowances. In case of a more structural change in the agreements, the fixed allowance for home working costs and commuting costs (to the fixed place of work) should be adjusted.
New regulation has entered into force as of 1 January 2022. Large Dutch corporations, including listed and unlisted bv’s and nv’s, are legally required to aim for a balanced distribution of men and women in the Management and Supervisory Board. As part of this recent law, a quota has been introduced by which at least one-third of the Supervisory Board of listed corporations must consist of women and at least one-third of men. The quota applies to new appointments only. Consequently, if the composition of the supervisory board is not balanced, every appointment must contribute to a better-balanced board.
Furthermore, organisations are required to set ‘appropriate and ambitious’ targets to improve the gender balance in the top and sub top management.
The transfer tax on non-residential properties and acquisitions of properties by legal entities and private parties that are not going to live in these properties for the long term is 10.4 per cent based on market value (2023.) Some exemptions are available, e.g. for mergers, split ups and reorganisations.
The real estate transfer tax on dwellings is subject to a lower rate of two per cent, if the acquirer will actually occupy the home for permanent living.
Homes to be acquired for rental purposes are subject to the general transfer tax rate of 10.4 per cent based on market value (2023).
Furthermore, the acquisition of the mere economic ownership of a home is subject to the general transfer tax rate of 10.4 per cent based on market value (2023).
Apart from the mentioned two per cent rate on dwellings, an exemption is available for ‘starters’ on the housing market. This exemption is applicable to any adult younger than 35 years of age when purchasing a dwelling for which the exemption is claimed. The exemption is only applicable on homes with a maximum purchase price of 440,000 euros (2023). Furthermore, this exemption is subject to the condition that the acquirer will actually occupy the home for permanent living. Someone can only claim this exemption for the acquisition of a home once per lifetime. In some cases persons who have already purchased a home previously, but without using the exemption, can still claim the exemption for a successive acquisition if they are still younger than 35 years of age at the moment of the successive acquisition.
As per 2022 a new exemption has been introduced for situations in which a dwelling has been sold in the past under repurchase condition and the property is indeed repurchased. Housing corporations and property developers use these type of conditions (‘verkoopregulerend beding’) in the case they sell dwellings to low income households often at reduced prices. If the purchasers want to resell the dwelling, by this condition they cannot sell it to any market party at a higher market value, but must resell the property to the housing corporation or developer at a set price. For such repurchases an exemption of real estate transfer tax is available.
The acquisition of shares in an entity that owns real estate may also be subject to transfer tax if that entity is characterised as a ‘real estate entity’. The threshold for qualifying as a real estate entity is met if, at the time of acquisition of the shares or in the preceding year, more than 50 per cent of the assets of the entity consists of or has consisted of real estate situated within and/or outside the Netherlands, and at least 30 per cent consists of or has consisted of real estate situated within the Netherlands.
Dividends from Dutch corporations are generally subject to a 15 per cent Dutch dividend withholding tax. In general, in a business-driven structure this does not apply to a Dutch cooperative. Dividend withholding tax on dividends received by taxpayers or corporate entities is creditable against the personal income tax and the corporate income tax due (if the income is not exempt under the participation exemption and limited to the annual amount of corporation tax due).
Dividends paid to corporate entities in other EU/EEA countries are often exempt from dividend tax due to the EU Parent/Subsidiary Directive or EU/EEA law. This exemption also applies to dividends paid to corporate entities in countries with which the Netherlands has a bilateral tax treaty. The exemption for the withholding of Dutch dividend withholding tax is subject to targeted anti-abuse rules, which are interpreted in accordance with the OECD BEPS Project.
A ‘holding cooperative’ might be obliged to withhold dividend withholding tax if, in the preceding year, at least 70 per cent of the actual operations of a holding cooperative domiciled in the Netherlands consist of holding activities. Cooperatives that have membership rights comparable to shares remain obliged to withhold dividend tax regardless of their qualification as a holding cooperative. Also see the paragraph ‘Conditional source tax on dividends’ under International developments.
As per 1 January 2021, the Netherlands has a conditional withholding tax on outbound interest and royalty payments to affiliated entities in countries which levy no tax on profits or at a statutory rate of less than 9 per cent, countries on the EU list of non-cooperative jurisdictions, and in tax abuse situations. The withholding tax rate is equal to the highest corporate income tax rate, being 25.8 per cent. A similar conditional withholding tax for dividends will be introduced per 1 January 2024. Also see the paragraph ‘Conditional withholding tax on interest and royalties’ under Tax compliance and the paragraphs ‘Conditional source tax on interest and royalties’ and ‘Conditional source tax on dividends’ under International developments.
Apart from the taxes already mentioned, some other taxes are part of the Dutch tax system. The most important are:
The Netherlands is a very attractive place for performing research and development (R&D) work and for investment. The Dutch tax system features several tax incentives to stimulate innovation and business activities.
Apart from the innovation box (see ‘Innovation box regime’), the Dutch tax system stimulates R&D activities by providing for a reduction of wage tax due on the wages of employees engaged in R&D of technologically new products.
A company can reduce the costs of its R&D activities by making use of the scheme for reducing the payroll tax and national insurance contributions to be remitted (Wet bevordering speur- en ontwikkelingswerk: WBSO). The WBSO rebate for R&D covers salary costs and other costs and expenses related to R&D. The subsidy accrues to the employer when the employee is credited for the normal amount of wage tax. For the year 2023, the regular reduction of the payroll tax and social security contributions amounts to 32 per cent of the first 350,000 euro in R&D costs (first bracket) and sixteen per cent of the excess R&D costs. The rebate is limited to the total amount of wage tax due. For start-ups, the reduction may amount to 40 per cent of the first bracket.
To obtain the relief under the R&D incentive programme, taxpayers must file an electronic/online application with RVO.nl, a department of the Ministry of Economic Affairs. If approved, the taxpayer will receive an R&D declaration. The budget for this subsidy is fixed, so the amount of the subsidy is dependent on budget availability. Note that, subject to certain conditions, self-developed and utilised software falls within the scope of the R&D incentive.
Investments in certain business assets may qualify for an additional deduction for tax base calculation purposes. Not all business assets are eligible, some are explicitly excluded.
An investment in a new energy-efficient asset may qualify for an additional deduction (EIA) if the amount exceeds 2,500 euro and the asset satisfies the requirements on the Energy List 2023. The EIA amounts to 45.5 per cent of the qualifying investments. A similar tax incentive is available for investments in new environment-improving assets. Such an investment may qualify for an additional deduction (MIA) if the amount exceeds 2,500 euro and the asset satisfies the requirements on the Environment List 2023. The MIA is set at 45, 36, and 27 per cent (dependent upon eligibility) of the amount of the qualifying investments. The taxpayer must report the qualifying investment within three months to RVO.nl. Both for EIA and MIA, limitations to the maximum amount of benefit apply.
If conditions are met, entrepreneurs are permitted to apply an arbitrary depreciation scheme. In contrast to a regular scheme, a higher or lower depreciation rate may be selected annually depending on which would be the most suitable at the time.
Arbitrary depreciation is available to, among others, investments in business assets that are in the interest of the protection of the Dutch environment and that meet certain requirements. In addition, in 2023 it is possible to depreciate at random up to 50 per cent of the production costs of certain assets. Depreciation at random is possible if the purchase obligation is entered into in 2023 or if the production costs were incurred in 2023. For more details, refer to the paragraph 'Depreciation' under Corporate income tax.
A company incorporated under Dutch law or a foreign company tax resident in the Netherlands is required to file a corporate income tax (CIT) return annually.
The Dutch Tax Authorities will issue a preliminary CIT assessment at the start of a financial year. For financial years that do not coincide with the calendar year, other timing considerations than those discussed below are relevant.
A first preliminary CIT assessment is normally issued in January of the relevant year. Generally, the taxable amount in this first assessment is based on either the average of the two preceding years’ taxable income or on a preliminary tax return submitted by the taxpayer. The payment date is mentioned in the assessment. Normally, these assessments must be paid within six weeks after the issue date of the assessment or in eleven monthly instalments, starting at the end of the second month of the current year (i.e. February to December). However, the amount due on the assessment can also be paid in one lump sum payment. A taxpayer will then receive a discount on the amount payable. We note that it is being considered to abolish the payment discount.
Please note that at any time the taxpayer has the possibility to request the Dutch Tax Authorities to issue a revised preliminary CIT assessment. Such a request can be filed electronically and is normally accepted, after which a revised preliminary assessment will follow.
Following the end of a financial year, a CIT return should be filed within five months, with a possible extension of five months (before 1 June respectively 1 November of the subsequent financial year in case of a financial year equal to the calendar year). If the CIT return is prepared by a professional tax firm like PwC, under certain conditions a longer extension for filing the CIT return can be obtained, up to a total of sixteen months after the end of a financial year. This means that for financial years that end on 31 December 2022, an extension for filing the CIT return may be granted up to 1 May 2024. The maximum extension of eleven months (in addition to the standard five months) after the end of the financial year also applies to companies with a financial year that is not equal to the calendar year.
After the tax return has been filed, a revised preliminary tax assessment is often issued. Once the Dutch Tax Authorities have examined the CIT return, the final CIT assessment will be issued. The final assessment should be issued within a period of three years as from year end plus the period of the extension granted for filing the tax return. An objection against the final CIT assessment must be filed within six weeks after the date of the assessment.
Tax is payable within six weeks of the date of assessment. Interest is payable on any difference between the final assessment and the preliminary assessments. The interest is calculated from six months following the financial year up until the payment date of the final assessment. It is advisable to ensure that a correct preliminary tax assessment is imposed, given the high level of tax interest payable of 4 per cent up to 31 December 2021. As of 1 January 2022 the rate amounts to 8 per cent.
In situations where the final assessment shows a lower amount of tax due than the preliminary assessment, please note that ordinarily no interest is refunded to the taxable entity. In light of the above, it is important to make sure the preliminary assessments are estimated as close to the expected final assessments as possible.
The Dutch Tax Authorities can issue an additional assessment after the final assessment is raised within five years after the fiscal year has ended, if new data become available of which the tax inspector could not reasonably have been aware at the time the final assessment was made. This period of five years is prolonged by the period with which the filing of the tax return has been extended. With regard to income from abroad, such additional assessments are allowed within twelve years. An additional assessment may involve interest and a penalty of up to 100 per cent of that assessment. This penalty is not tax deductible.
The country-by-country report needs to be submitted to the Dutch Tax Authorities within twelve months after the end of the financial year. Furthermore, Dutch companies forming part of a multinational group with a consolidated turnover of at least 50 million euro must retain a master file and a local file as part of the administration, irrespective of the tax jurisdiction of its ultimate parent company. These need to be in the administration of the Dutch companies in the timeframe set for filing the tax return.
A Dutch group entity of a multinational group with a turnover of at least 750 million euro must notify the Dutch Tax Authorities whether the ultimate parent company or surrogate parent company will file the country-by-country report. If not, it must notify the Dutch Tax Authorities which group company and its tax residence will file the report. This notification should be made at the latest on the final day of the financial year.
Although the ATAD II does not provide for a specific documentation requirement, under Dutch ATAD II legislation, a taxpayer must include in its records all data that is relevant to determine whether a payment falls within the scope of ATAD II. If a taxpayer takes the position that a payment does not fall within the scope of ATAD II, documentation that supports this position must also be included in the relevant file. If the taxpayer does not have this information on file, the burden of proof will shift to the taxpayer who must then demonstrate that the ATAD II rules do not apply.
Dividend payments, distributions treated as dividends and interest on certain profit participating loans paid by resident companies to residents or non-residents are subject to dividend withholding tax.
The tax is withheld by the distributing company at the moment the dividends are put at the disposal of the recipient. The distributing company must file a dividend withholding tax return and pay the tax withheld to the Dutch Tax Authorities within one month of the distribution. In most cases a dividend withholding tax return has to be filed even though no dividend withholding tax is due.
In some situations and subject to several conditions, if a Dutch entity has received a dividend from a subsidiary that is resident within the Netherlands or a country that has concluded a tax treaty with the Netherlands and that was subject to withholding tax in that jurisdiction, it is possible that Dutch dividend withholding tax due on subsequent dividend distributions by the Dutch entity to its shareholders is lowered by three per cent (of the distribution by the Dutch entity).
Additional assessments can be imposed by the tax inspector within five years after the calendar year in which the tax liability incurred or the dividend withholding tax refund was made. In case of an omission in the dividend withholding tax return filed or in case the dividend withholding tax is not paid or not paid within the stipulated period, a penalty may be imposed.
As of 2021, interest and royalty payments to group companies established in low-tax jurisdictions will be subject to a withholding tax. If such interest and/or royalty payments have been made during the year, an interest/royalty withholding tax return should be filed with the Dutch Tax Authorities ultimately one month after the end of that calendar year.
The tax period is usually a calendar quarter. However, the taxpayer can request the Dutch Tax Authorities to file a monthly VAT return. If the taxpayer is in a refund position, this could lead to a cash flow advantage. The taxpayer can also request filing a yearly VAT return provided that some specific conditions are met. The tax authorities can oblige you to file a monthly VAT return in case of late filing or late payment.
VAT returns are due by the last day of the month following the tax period to which they relate for companies established in the Netherlands. For foreign companies with only a VAT registration in the Netherlands, the returns are due by the last day of the second month following the tax period to which they relate. Taxable persons filing an annual return are automatically allowed to defer filing until 31 March of the following year. This applies even if no business has been conducted in the Netherlands during that period or if there is no right to refund of Dutch VAT.
As VAT returns must in general be filed electronically there is no need for rescheduling these dates because of weekend or bank holidays. VAT returns can be filed 24/7. The VAT payable regarding a tax period ultimately has to be paid when the VAT return has to be filed.
Adjustments can be made to a submitted VAT return by lodging an objection within six weeks after filing the VAT return (in most cases within six weeks after the ultimate date of payment of the VAT due). Furthermore, an additional VAT return can be submitted within five years after filing the VAT return. However, in the latter case, no formal appeal is allowed if the changes are rejected by the Tax Authorities. A special electronic form exists for filing additional VAT returns. A special form is required if the correction of VAT payable to the Tax Authorities is more than 1,000 euro.
A recapitulative statement needs to be submitted if the taxpayer supplied goods or services to an entrepreneur in another EU country and, in the case of the supply of goods, these goods are dispatched from the Netherlands. Taxpayers transporting their own goods to another EU country must also submit these statements. The period for which the taxable person must submit a recapitulative statement depends on the actual situation (the amount of supplies and/or acquisitions and the type of transactions). The following situations are possible: monthly, bimonthly, quarterly and annually.
In the Netherlands the threshold for monthly listing of intra-community supplies of goods (the so-called ‘Opgaaf ICP’) is 50,000 euro. An entrepreneur must therefore submit the ICP declaration on a monthly basis, if he supplies more than 50,000 euro of goods to other EU countries in a quarter. The ‘Opgaaf ICP’ for services can be filed on a quarterly basis. If a taxable person is allowed to file annual VAT returns, it is possible, provided certain conditions are met, to apply for annual submission of the statements. The statements are generally due by the last day of the month following the applicable reporting period.
Intrastat declarations have to be filed for dispatches of goods to other EU countries if these dispatches exceed 1,200,000 euro per year and (separately) for arrivals of goods from other EU countries if these exceed 1,000,000 euro per year. The Intrastat declarations must be filed monthly and are due on the tenth day of the calendar month following the period to which they relate.
Tax returns must be filed after each calendar year, in principle before 1 May. Extensions may be possible.
Generally speaking, if taxpayers have sizeable income that is not subject to wage tax withholding, they may be required to make advance payments of estimated additional income tax. If the employee has income tax deductions that are not considered in the Dutch payroll (e.g. the mortgage interest deduction), it is also possible to file a preliminary tax refund form in order to claim monthly income tax refunds during the calendar year.
Payroll taxes are calculated for each wage period, i.e. the period for which the employees receive their wage (usually monthly or four-weekly). The employer is required to timely and correctly file the payroll tax returns per wage period. The payroll tax return consists of a collective section (general information concerning the employer) and an employee’s section (detailed information concerning each employee. As of 2019 in this section the foreign home address of the employee needs to be included in order to implement the correct levy rebate).
The Tax Authorities use the detailed information for purposes including the award of benefits and the pre-completed income tax returns. Consequently, it is important that the details are up-to-date, correct and complete. For this reason the employer must always adjust or supplement any misstatements or shortcomings in payroll tax returns.
The amount due on each payroll tax return has to be paid within the deadline given by the Tax Authorities.
The most important long-term asset of almost any business is its qualified personnel. As mentioned before, the Netherlands is internationally renowned for its high-quality labour market. In addition, Dutch employees are flexible and have an excellent work ethic.