Doing business in The Netherlands - Main features of the Dutch tax system

The Netherlands has a competitive corporate tax regime that stimulates entrepreneurship and foreign investment in the Netherlands. For foreign multinationals trading globally the Dutch tax system allows an easy transition into the European community.

The Dutch tax rates statutory are in line with the average European standard. We refer to the page Worldwide tax rates. The Dutch tax system is however generally perceived as one of the most competitive in the European market.

The Dutch authorities have an open mind for foreign investment and have broad experience with facilitating foreign investments in the Netherlands.

The Rotterdam Tax Office contains a special department which functions as first "checkpoint" for foreign investors. This department has within the limits of the law far reaching authorities to facilitate new (large) investments in the Netherlands.

Apart from that, the Dutch tax system offers the possibility to obtain certainty in advance about the Dutch tax treatment of certain activities or corporate structures. In April 2001 the Dutch Ministry of Finance released policy, which regulates the possibility to obtain Advance Tax Rulings (for holding activities, etc) or Advance Pricing Agreements (for transfer pricing issues). We refer to the page Investing in the Netherlands - Dutch ruling practise.

The Netherlands also has a far-reaching tax treaty network (it concluded bilateral tax treaties with more than 80 countries) which provides extensive benefits to Dutch tax residents.

The Dutch VAT system and a sophisticated system of bonded warehouses facilitate the tax- free transition of goods through the Netherlands.

For qualifying expatriates a special facility can apply, which in summary, allows the employer to pay 30% of the expatriates salary tax-free (the so-called 30% regulation).

The most important features of the Dutch tax system are:`

• Extensive treaty network reducing withholding taxes on dividends, interest and royalties, frequently even to nil percent
• Unilateral double taxation relief in case of absence of a tax treaty
• The absence of a withholding tax on outbound interest and royalty payments
• EU membership, as a result whereof EU Directives are incorporated in Dutch law (like the Parent Subsidiary Directive and Royalty Interest Directive based on which no withholding taxes can be levied on dividend payments, interest payments and royalty payments within the EU)
• The Dutch ruling practise, as a result whereof certainty in advance can be obtained on future transactions, investments or corporate structures
• The participation exemption regime, which provides for an exemption of dividends received from and capital gains realized on the shares in qualifying Dutch or foreign subsidiaries which provides for one of most competitive holding regimes in Europe 
• Fiscal unity regime, which provides for a tax consolidation of companies within a group by filing a consolidated tax return, with as main feature that losses of one company can be set of against profits of another company
• Transfer pricing guidelines, which are based on the arm’s length principle for intra-company pricing as contained in the OECD model tax treaty and the OECD Transfer Pricing guidelines 
• Loss compensation facilities, which can provide for a nine years carry forward and a one year carry back of tax losses
• Creation of tax free reserves
• Fiscal incentives, available for specific activities and projects (i.e. tonnage regime for shipping companies, Research and Development deduction, Energy and environmental grants, free depreciation and amortization)
• Expatriate incentive, the 30%-regulation, a ruling allowing an employer to provide a qualifying seconded employee with a tax-free allowance of 30% of total salary 
• Investment deductions, which provide for certain energy and environmental friendly investments for an extra tax deduction on top of normal depreciation
• Foreign functional currency, which allows companies to calculate their profits in a functional currency other than the EURO

What can we do for you ?

Advice on corporate tax issues

Advice employee tax and wage tax issues

Advice on VAT issues

Advice on international tax implications

Introduction suitable other professionals (like lawyers, accountants, etc.)

Monotering and co-ordinate the engagement of other professionals

Dealing with registration formalities

Dealing with tax compliance matters

Negotiation tax rulings

Issuance of legal opinions