Corporation tax is mainly charged to legal entities of which the capital is partially or fully divided into shares. Examples are the Dutch NV (public limited company) and BV (private limited company). Other bodies, such as associations and foundations, may also be liable for corporation tax in some situations. Bodies established in the Netherlands are taxable for their total worldwide income. Bodies that are not established in the Netherlands are only taxable for their Dutch income.
The corporate tax rates are as follows:
|Profit from||Profit up to & including||Rate|
|More than €200.000||25.0%|
The foreign profits and losses of a body with a permanent foreign establishment fall outside the Dutch corporate tax base under a full exemption.
The participation exemption applies if a Dutch body owns 5% or more of the authorized share capital of another company. The results from the participation are exempt from taxation. The participation exemption prevents double taxation within a group.
Innovation-related profits will effectively be taxed at a rate of only 7% (innovation box). In addition, taxpayers within a group may form a tax entity, allowing losses from one group entity to be set off against the profits from other group entities. Taxneutral restructuring may also be possible.
In the next few years, the rates will decrease to 16% / 21% by 2021.
A natural person who derives income from business activities may qualify for tax allowances for entrepreneurs in certain circumstances. The maximum tax rate is 51.95%. The tax allowances for entrepreneurs include self-employed persons’ deduction, research and development allowance, old-age tax reserve (FOR, fiscale oudedagsreserve), discontinuation relief, and SME profit exemption. In addition, a starting entrepreneur is also entitled to a relief for new businesses. The SME profit exemption (MKB-winstvrijstelling) means that entrepreneurs will be entitled to an additional exemption of 14% of the profits following deduction of the above entrepreneur’s allowances (tax allowances).
A permanent establishment of a foreign legal entity in the Netherlands is considered to be an established corporate facility and will be taxed in the Netherlands in the same way as a Dutch legal entity.
Income tax is levied over the income of natural persons.
Natural persons residing in the Netherlands are subject to taxation for their total world income. Natural persons who do not reside in the Netherlands are only subject to taxation for their Dutch income.
The tax base:
The income tax depends on the type of income. The different components of taxable income are classified in three ‘closed’ boxes; each at a specific tax rate.
Box 1: Taxable income from work
The tax rate in box 1 is progressive and can accumulate to a maximum of 51,95%.
Box 2: Taxable income from a substantial interest (>5%)
The tax rate in box 2 is 25%
Box 3: Taxable income on net wealth
As from 2017, the fixed return on investments as mentioned above is calculated according to the following schedule:
|Net wealth||Fixed return on investment|
|Up to and including||2.87%|
|More than € 75.000 but less than € 975.000||4.60%|
|More than € 975.000||5.39%|
The tax rate in box 3 is 30%.
Capital gains of natural persons are not taxed. Possession of investments, including property, is taxed in box 3 (see the chapter on personal income tax). A fixed percentage is calculated on the value of the capital (assets minus liabilities) as at 1 January.
Capital gains tax is levied on profits from business activities, results from other activities, and income from a substantial interest.
Owners and users of property located in the Netherlands pay property tax. The property tax is levied by the municipality in which the property is located.
On average, a property tax of 0.12% of the value of the property is levied, but the rate varies depending on the municipality.
Among others, agricultural lands, nature areas, and churches are exempt from property tax.
The European Union (EU) VAT Directive is implemented in the Netherlands through the “Wet op de omzetbelasting 1968”. VAT is referred to in the Netherlands as “omzetbelasting” or “BTW”.
Dutch value added tax (VAT) applies to the sale of goods and services during the conduct of business in the Netherlands, the import of goods to the Netherlands, and to intra-EC acquisition of goods in the Netherlands.
The type of business entity is irrelevant for tax liability purposes. Small businesses either do not have to register or enjoy VAT relief. This arrangement applies only if the taxable person is a private individual or a non-legal entity, and their annual net VAT liability (VAT output minus VAT input) must remain below a threshold of EUR 1.345 or EUR 1.883.
There is no registration threshold for foreign legal entities who are required to register for VAT purposes in the Netherlands.
Dutch VAT legislation provides an option for VAT grouping. VAT grouping is usually voluntary, but can be mandatory under certain conditions. A VAT group is assigned a new VAT identification number. However, members of the group keep their own individual VAT numbers which must be used for intra-EC transactions.
It is possible to register directly for VAT puposes in the Netherlands. However, a foreign taxable person must appoint a fiscal representative if they wish to apply for the deferred payment license (the socalled “Article 23 license”) for import.
One of the simplification measures in the Netherlands is the “simplified triangulation rules”. This is a solution for registration obligations in foreign EU countries for specific cross-border ABC transactions.
The distance sales threshold for supplies from other Member States to non-taxable customers in the Netherlands is € 100.000. For supplies shipped from EU countries to Dutch non-taxable customers, it is possible to voluntarily opt for VAT in the Netherlands before the threshold is exceeded.
An exemption can be applied to the import of goods into the Netherlands, if it is followed by an intra-EC supply.
Even more popular is the so called “Postponed accounting on importation”. With a specific license, importers avoid payment of VAT at the time of importation and instead pay the VAT due in their Dutch VAT return. Any VAT paid can be reclaimed (if the importer is entitled to a full deduction) in the same VAT return.
A seller of goods or services is liable to pay tax for all goods or services sold. If the seller is a foreign entity, the tax liability is often shifted to the buyer if the seller is not established in the Netherlands or does not have a fixed place of business in the Netherlands.
In the Netherlands there are also several domestic, obligatory reverse charge rules, for example in case of constructive work in relation to immovable property and shipbuilding.
The standard VAT rate in the Netherlands is 21%.
A reduced rate of 6% applies to, for example: the supply of food and beverages, passenger transport, accommodation facilities e.g. hotels, services which offer physical exercise
e.g. gyms, entrance fees for cultural and entertainment events and institutions, pharmaceuticals, books etc.
The 0% rate applies to, for example, export and intra-EC supplies.
The Netherlands provides exemptions (without right of deduction) for the following supplies and services: health and medical care, social welfare, general education and vocational training, financial and insurance services, lottery and gambling, etc.
The standard VAT return is filed quarterly. A domestic taxable person may have to file a monthly VAT return, either on request or if quarterly returns are frequently filed late.
All VAT due must be received in the tax authority’s bank account by the last day of the month following the reporting period. The same deadline applies for the VAT return.
A European sales listing must be submitted on a monthly basis if the intra-EC supply of goods exceeds, for example, € 50.000 in the current quarter. The European sales listing for services can be submitted on a quarterly basis.
If the threshold is exceeded, a separate monthly Intrastat (CBS) return must be submitted to the Central Bureau of Statistics (CBS) by the tenth day of the month following the reporting month. The threshold for arrivals in the Netherlands is € 1.000.000 per year and € 1.200.000 per year for dispatches from the Netherlands.
Local municipal levies are, among others: the property taxes, sewerage charges, dog licence fees, tourist tax, and waste collection fees. Companies may also be liable for advertising tax.
The Netherland has concluded double taxation treaties with a large number of countries. The number of treaties is close to one hundred, which makes the Netherlands attractive as a country in which to set up business.
If the Netherlands has not concluded a treaty for cross-border situations, certain conditions for unilateral prevention of double taxation may apply.
For Dutch corporation tax purposes, related companies are required to do business at arm’s length conditions: the terms and conditions must be similar to those that independent parties would apply. If the terms and conditions applied by related companies are not at arm’s length, the tax consequences of the transaction may have to be adjusted. This could result in, for example, adjustment of the taxable profit and taxation of payments that are considered to be dividends. In general, records of the transactions should be maintained.