Main features of the Dutch tax system

Last updated: 29-09-2020

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 statutory Dutch tax rates are in line with the average European standard. 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 July 2019 the Dutch Ministry of Finance released a 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 has bilateral tax treaties with more than 90 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 (will change in 2021 for outbound interest and royalty payments to low-taxed countries and in case of abuse);
  • 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 to qualifying entities within the EU);
  • The Dutch ruling practice, 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 six 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, Innovation Box, Research and Development deduction, Energy and environmental grants, free depreciation and amortization);
  • The innovation box resulting in an effective tax rate of 7% for income in relation to a patent obtained in respect of self-developed intangible assets. The innovation box is also applicable to intangible assets for which no patent has been granted, but which intangibles result from R&D activities for which a so-called WBSO-declaration (for wage tax purposes) has been obtained. NB. Operational losses are - under certain circumstances - deductible at the standard corporate income tax rate.
  • Expatriate incentive, the 30%-regulation is 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;
  • No capital tax levy on the contribution of capital to a company and any later expansion of the capital;
  • Use of foreign functional currency, which allows companies to calculate their profits in a functional currency other than the EURO and thus avoid taxation of effectively unrealized profits.

What can we do for you ?

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Dealing with registration formalities
Dealing with tax compliance matters
Negotiation tax rulings
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