The 10 Advantages of the Dutch Tax System
Historically, The Netherlands has been known as a European trade centre and as the maritime link between the Old Continent and North and South America, Asia, and Africa. In order to maintain its status, the country has been working to achieve an even better, friendlier business climate and attract international investors. The efforts are paying off, as currently Holland is the EU base of 2100+ companies from North America, and counting. Why is Holland such an attractive country for doing business? The reasons are many and one of them is the tax system, offering various incentives.
The 10 advantages of the Dutch tax system:
- The law in the Netherlands provides reductions of the withholding tax on dividends, royalties and interests paid to local companies and excludes from taxation the majority of capital gains obtained from share sales in source jurisdictions.
- Holland’s investment treaty network is among the most extensive in the world. It includes 96 jurisdictions and Dutch limited liability companies have access to it. The network protects investors from expropriation and guarantees that they will be treated in the same way as domestic or third country investors. In any corporate structure, a Dutch entity can provide protection from foreign government interventions through clauses for settlement of disputes that allow international arbitration using the Dutch judicial system.
- EU Directives provide a reduction of withholding tax on transactions between related firms.
- Full tax exemption for income coming from foreign subsidiaries that meet the regulatory requirements. The so-called participation exemption allows tax waiver for eligible capital gains and dividends if a local holding owns at least five percent interest and meets one of two requirements:
a) The subsidiary’s consolidated assets include <50 percent low-taxed passive investments.
b) By making investments in the respective subsidiary, the company aims to get a return, greater than the anticipated from the regular management of assets.
The subsidiary has to pay realistic taxes in accordance with Dutch standards (no less than 10 percent). The law also provides a tax exemption for income, coming from international permanent offices of Dutch companies and tax-effective profit repatriation.
- Special tax regime for innovation where profits from qualifying intangible assets are taxed at a rate of 5 percent.
- IP arrangements and financing (inclusive of hybrid debt) without retentions on royalty payments, interest and services, even if paid to a tax haven.
- Support for Dutch holdings establishing businesses on the territory of the EU.
- Deferred taxes for corporate restructuring.
- Option to establish a consolidated group/fiscal unity (if particular requirements are met for direct subsidiaries of companies incorporated in the Netherlands) allowing consolidated taxation.
- Possibility to defer taxes on gains from conversion or sale of intangible or tangible business assets, excluding passive investments.
Are you looking for tax advantages and exclusive benefits with respect to tax planning? The Dutch entities have plenty to offer. Furthermore, Holland is becoming an attractive jurisdiction for holdings. Learn about the opportunities the country offers by contacting our specialists in incorporation.