Dutch tax rules
The Netherlands has been a hub for international business at least since the 17th century As a consequence, The Netherlands has one of the most extensive tax treaty networks in the EU.
To avoid double taxation and reduce withholding taxes on dividends, interests and royalties, The Netherlands has concluded tax treaties with more than 90 countries.
Certainty in advance
To promote international business, investors can obtain certainty in advance about their future tax position. The possibility of obtaining an Advance Tax Ruling or an Advance Pricing Agreement (in the case of transfer pricing) is one of the most attractive features of Dutch tax law.
An Advance Pricing Agreement provides certainty in advance on the fiscal acceptability of the price that is paid for the provision of goods or services, between a Dutch and a foreign group company.
An Advance Tax Ruling is an agreement on the tax characterization of international corporate structures, such as certainty in advance on the application of the participation exemption.
Other benefits of the Dutch tax regime
Other attractive features of the Dutch tax rules include:
- VAT is not paid upon import but deferred until the quarterly tax return, when it can simultaneously be deducted
- Relatively low statutory corporate income tax rate of 25% (20% for first 200,000 Euro)
- The possibility to carry forward losses for nine years and to carry them backwards for one year
- Favorable participation exemption regime (avoiding the taxation of capital distributed to a Dutch parent company)
- No statutory withholding tax on outgoing interest and royalty payments under Dutch tax rules
- Fiscal unity regime providing for a tax consolidation of companies within a group and therefore free offsetting of profits and losses among group members
- Innovation box resulting in an effective corporate tax rate of 5% for qualifying profits
- R&D allowance for qualifying R&D wage costs (WBSO)
- Tax deduction facility for R&D operating costs and investments in R&D assets (RDA)
- Transfer pricing practice in accordance with OECD Transfer Pricing Guidelines
- Favorable tax treatment for expats (30% tax ruling)
Tax residence in the Netherlands
In order to have access to the Dutch tax regime a company requires a residence in The Netherlands. The rules for tax residence are the subject of much international debate, but to effectively claim residence a company has to have substance, which means that at least most directors are resident in the Netherlands. Other indications are
- The business address is in the Netherlands
- Bookkeeping takes place in the Netherlands
- The company has qualified personnel in the Netherlands
- Dutch directors must have full control of bank accounts