Do you market new innovative products based on your own R&D? Then you may be eligible for the Innovation Box. The Innovation Box reduces corporate tax for profits from innovative activities. As of 2018, an effective tax rate of 7% applies instead of the maximum rate of 25%. The tax authorities implement the Innovation Box.
If you want to use the Innovation Box, you will need to submit an R&D statement and in some cases also a patent. This scheme is only of interest to companies subject to corporate tax, such as private limited companies. Contact ICS for more information about the potential benefits of the Innovation Box.

The small-scale investment allowance (Kleinschaligheidsinvesteringsaftrek or KIA)

Do you invest in business assets? Then you can deduct an amount from the profit with an investment deduction. You are then eligible for a small-scale investment allowance (KIA). The amount of KIA depends on the amount invested.

Who is eligible?
You may be eligible if your company is established in the Netherlands and you are liable to pay income tax or corporate income tax;
You invest in company resources for your company.

In 1 year you invest a certain amount in new or 2nd-hand business assets. In the table of the Tax Authorities, you will find the percentages for the investment deduction.

Divestment addition
Do you sell or donate your assets within 5 years of your investment? And is the total value more than € 2,300? If so, you must repay part of the deduction via the divestment addition.

How can you apply?
You can apply the small-scale investment deduction to your income tax or corporate tax return.

Energy investment allowance (EIA)

If you invest in certain energy-saving assets and sustainable energy, you may deduct part of the investment costs from your taxable profit via the EIA scheme. This means you pay less income tax or corporate tax. Contact the tax specialists at ICS to find out if you are eligible to do this.

Environmental investments

It is sometimes possible to benefit when you make investments to limit damage to the environment. Investments that are on the Environmental List provide an additional deductible item on the Environmental Investment Allowance (MIA) or you can write off accelerated (Random depreciation of environmental investments (Vamil)). This reduces your income tax or corporate tax. The MIA / Vamil scheme applies to, among other things, environmental measures in industry, agriculture and transport.

How to apply for Dutch EORI number

In the Netherlands, economic operators are identified by Customs by their EORI number. In other words, those who have to deal with Customs from a business perspective, for example by preparing a customs export or import declaration for goods, must be known to customs. This also applies to companies that have a Customs export or import declaration drawn up by, for example, a Customs agent, freight forwarder or logistics service provider. This declaration is made with an EORI number.

When do you need an EORI number?

An EORI number is required if you actually have contact with Customs. This is the case when a Customs declaration is independently filed, it is filed on your behalf, or you apply for a permit. This number (compiled or applied for by Customs) is activated when it is included in the Customs declaration. An EORI number is therefore essential for import- and export firms based in The Netherlands.

How can I look up an EORI number?
You can check another person's EORI number online via this link. This handy tool allows you to look up the EORI number of another person and check whether it is valid and actually exists.
Check EORI number

The Eori number code
The main component of this number already has a company in-house, namely the RSIN or BSN.
The EORI number consists of the letters NL + the RSIN (or BSN) and includes a 9-digit number in addition to the two letters NL. If the RSIN (or BSN) consists of less than 9 digits, this must be completed with zeros before the RSIN (or BSN) to the number of 9 digits (for example NL000123456). This whole forms the EORI number.

How can I apply for an EORI number?
Our tax specialists can assist you with requesting an EORI number for your firm. Our firms has completed dozens of successful EORI number applications for foreign entrepreneurs. Contact us for more information on requesting an EORI number.

EORI number at headquarters and branches
The EORI number is only linked to the head office (legal unit). The business units (branches) do not receive an EORI number. Branches use the EORI number of the head office. This also applies to branches from the other Member States.

EORI number at headquarters in another Member State
A company with a recognized permanent establishment that is not established in the Netherlands can obtain a Dutch EORI number. This should be evident from the fact that the Foreign Department of the Dutch Tax Authorities has assigned a tax number. It is then a self-contained entity.

EORI number at headquarters in a third country
A company established in a third country must have an EORI number if, for example, it wants to make a customs' declaration. The EORI number will also be issued in the Member State where it is intended to do this for the first time.

EORI number and representation
A company established in a third country without a recognized permanent establishment in the Netherlands can have a Customs declaration made in the Netherlands. This can be done by an authorized Customs agent or forwarder based on an Indirect Representation Authorization. The EORI number of this Customs agent or forwarder is mentioned in the declaration.

Considering to start an import or export company in the Netherlands?

Are you interested in opening an import or export company in the Netherlands? Or looking to learn more about the Dutch customs and goods shipment regulations?

The Netherlands is considered as a gateway to Europe, especially for trade and logistics. The Rotterdam Europoort (Gateway to Europe) harbour is one of the largest harbours in the world, and the biggest logistical harbor in Europe.

If you operate a business in the Netherlands, there is a strong chance that you will need to submit your annual financial accounts with the Dutch Chamber of Commerce (KVK). You must do so if you are responsible for:

A public limited company (NV);
A private limited company (BV);
A mutual insurance association;
A cooperative association;
A general or limited partnership (VOF or CV resp.) where all the managing directors are foreign nationals;
A foundation that is responsible for one or several companies with a certain amount of turnover.

What are the annual account publishing requirements?

The Dutch authorities take the publishing of annual accounts very seriously and it is essential to meet the deadline. Your annual accounts must be submitted to the Chamber of Commerce (KVK) within 8 working days after they have been formally adopted. If you have been able to adopt the annual accounts in time, it is possible to offer your provisional accounts. Your accountant or auditor will be able to advise you about the deadline as this varies according to the legal set-up of your company, but it will definitely be within a year from the start of the financial year. If you miss the deadline, you will probably have to pay a fine. There is also the chance that you may be held personally liable for company debt in the event of bankruptcy - even if your company is structured to prevent this occurrence.

The way in which you publish your annual accounts largely depends on the size category of your company - micro, small, medium or large. If your company is classed as small or micro you are advised to file your own accounts online which is a straightforward process. If you use an intermediary, they must use the Standard Business Reporting software (SBR) when submitting returns online.

These accounts are public records. If you are interested in viewing any businesses annual accounts, you can order them online via the Chamber of Commerce.

Foreign legal entities

Foreign legal entities are also obliged to submit their annual accounts in the Netherlands:

If they are from countries not part of the EU with a branch in the Netherlands if they are required to submit yearly accounts in the country of domicile.
Foreign legal entities that may be registered in their country of origin but do not have an active relationship with that country and solely operate in the Netherlands.

Circumstances when you do not need to file your annual accounts
There are several situations where you don't need to submit your annual accounts. This mainly applies to daughter companies (subsidiaries) and small private limited companies for the purposes of pensions or annuities. Nonetheless, you will be obliged to publish a declaration of consent or an accountant's report. In extraordinary circumstances, such as bankruptcy, theft or fire, you can ask for an exception to the obligation to file your annual accounts.

Contact our accounting and tax specialists for more information.

Did you know that the Netherlands is one of the five countries in Europe that fall within the world's top fifteen corporate tax havens? And did you know that some of the 2021 changes to the corporate tax rates will make it an even more favourable location for companies? Let's look at what the changes could mean for you and your business.

Changes in corporate tax rates as of 2021

The corporate tax rate on profits onto € 245,000 will remain at 15% in 2021.

Tax rate adjustment
As of January 1, 2020, no corporate tax is charged on corporate income tax if an entrepreneur submits the return for the first day of the sixth month after the period over which the tax is levied (which is usually June 1) and the return filed is correct.

Announced corporate tax measures from 2021
The cabinet also plans to introduce three more measures for corporate tax. These measures will be included in the 2021 Tax Plan.

Increasing the 'rate' of the innovation box
If companies make a profit from certain innovative activities, they have to pay less corporate tax on this profit. The 'rate' of this innovation box is now 7%. This will increase to 9% from 1 January 2021.

Liquidation and strike losses less deductible
Businesses may incur losses if a business operation abroad or a subsidiary ceases. In many cases, they may now deduct these losses from the profit they make in the Netherlands. This so-called liquidation and strike loss scheme is being adjusted. The possibilities for companies to deduct these losses are limited.

No more discount if corporate tax is paid in one go
Companies can now receive a discount under certain conditions if they pay corporate tax in one go. This discount will disappear from 1 January 2021.

Other tax components of the National Climate Agreement are also incorporated in the 2020 Tax Plan. These comprise a rise in tax on fossil fuels such as natural gas but lower taxes on electricity. Moreover, the majority of companies will be subject to a rise in renewable energy surcharge, while private households will enjoy a reduction in this surcharge. Additionally, the time-limited exemption from vehicle purchase tax for electric vehicles, which expires in 2021, is now to stay in place until 2025. However, the private use of electric company vehicle tax will gradually rise from four to eight percent.

Not only has the tax office changed certain regulations. The Dutch companies have changed as well in tax reporting requirements.

Dutch companies have never been more transparent in tax matters
Major steps have been taken by Dutch companies in the past five years to improve transparency and reporting on such a complex and controversial subject as taxes.

According to PwC's Bob van der Made, the report clearly shows that Dutch companies have never been more transparent in tax matters than they are now. The companies scored an average of 43 percent on the six good tax governance principles and Oikos. This is considerably higher than the measured 25 percent in 2015.

Van der Made said that the Tax Transparency Benchmark has 'undeniably contributed to this result since 2015 through the balanced and objective approach of this annual survey. The ranking has even now been considered by the management of some companies as a useful, annually recurring benchmark for where they stand with regard to tax transparency, sustainability strategy, socially responsible behaviour and tax governance.'

There is a clear need to catch up on country-by-country reporting and third-party tax assurance. In its final verdict, the jury also emphasized that most Dutch companies can still make significant improvements in the country-by-country reporting components (making it clear that the business activities correspond to the tax payments in the relevant countries) and third-party tax assurance. (This involves having the internal processes and implementation of the tax strategy checked by an accountant so that an independent party can supervise it).

According to Van der Made, the report made it clear that country-by-country reporting and third-party tax assurance are not self-evident for most companies. He also drew attention to the special recommendations in the report for various stakeholders, namely: policymakers, politicians and tax authorities, NGOs, tax advisors, investors and universities.

The Netherlands tax office (Dutch source).

On 1 January 2019, the new tax package came into force, including The Netherlands anti dividend stripping legislation. The latter is part of the EU Anti-Tax Avoidance Directive (ATAD 1) and, therefore, applies to all current EU member states.

Just over a year before, the Dutch Senate passed the 2019 tax package which was initially published by the Ministry of Finance with amendments on 15 October 2018. The tax package came into force on 1 January 2019 and comprises several alterations to the existing legislation surrounding Dutch corporate income tax:

Implementation of the EU Anti-Tax Avoidance Directive (ATAD 1), especially the Netherlands anti dividend stripping rule and controlled foreign company (CFC) laws;
A tapered lowering of the corporate income tax rate;
A reduction in the loss carry forward timescale and amendments to the laws concerning the depreciation of buildings.

The original proposals to put an end to the present dividend withholding tax and bring in a withholding tax on intercompany dividend distributions to low-tax jurisdictions and certain other circumstances, such as abusive situations were taken out.

Interest deduction limitation rules
Restrictions on interest deduction rules as called for by ATAD 1 were introduced as suggested in the initial proposal. The directive demands EU member states to launch an earnings stripping rule, under which excess (net) borrowing costs, such as currency exchange results and interest expenditure, will only be tax-deductible up to 30 percent of a taxpayer’s tax-based earnings before tax depreciation, interest, tax, and amortization (EBITDA). Any sum larger than this amount will be classed as nondeductible but may be carried forward to the next financial year, despite the fact that all interest is deductible up to the threshold of EUR 1 million (net). The Netherlands has formerly chosen to apply a EUR 1 million threshold, so that EUR 1 million of interest expense is always deductible, even if the amount is higher than the 30 percent threshold.

The 30 percent EBITDA rule comes into effect on the basis of a fiscal unity and no exception applies to groups. In 2020, a specific minimum capital rule will be introduced for financial institutions, such as insurance companies and banks.

Linked with the introduction of the earnings stripping rule, other rules were simultaneously abolished from 1 January 2019, in particular, the acquisition financing rule and the excessive participation financing rule.

Case study: interest deduction restrictions

My investor in USA is loaning me 100.000 USD for operating my business in Europe? Can I expense the interest payment pre-tax? What are the things to look out for? Any special considerations on interest rate?

With regard to interest deduction restrictions, a new regulation was introduced from 1 January 2019, the EBITDA rule. The EBITDA rule is a so-called generic interest deduction limit. This means that the EBITDA rule does not make a distinction between money borrowed from a third party (bank) or money borrowed from a group company (as is the case with another existing interest deduction limitation, the profit drainage rule is the case). The EBITDA rule limits the deduction of net interest in a financial year to the highest of:

1) 30% of income before deduction of interest, taxes, depreciation of assets and depreciation of loans / goodwill (tax EBITDA); and

2) EUR 1,000,000.

 Net interest is the interest costs and equivalent costs of the taxpayer minus the interest income and equivalent income. The amount not deductible in a year can be used in later years if there is room for that in that year. There is no time limit for the utilization of these losses.

 So if you have a loan of EUR. 100.000,- the interest will never be higher the EUR 1.000.000, so the interest will normally be deductible.

There could me other limitations for interest deductions, but for that it is important to know if your investor has shares in de Dutch BV (and if so which percentage%). Also, it can be important what you will do with the loan.

Is a local Dutch director required to incorporate a Dutch BV?

No, it is not a requirement to have a local Dutch director to set up a Dutch BV. In fact, most of our clients are non-Dutch residents. 

If you are a small or medium company, or you have a clear goal for your Netherlands business activities. It is likely not so relevant to consider the substance requirements for corporate income tax. We have not seen a case with our clients where substance requirements affected the corporate income tax.

If you expect a profit of above €250.000 per year, we recommend a consultation with one of our tax advisors to determine the best way of structuring your company for tax, director compensation and dividends. 

Your VAT situation is determined upon application for a VAT number, sometimes this is automatically accepted. Sometimes you need to answer additional questions. In all cases of actual VAT liable activities in the Netherlands, have we seen our clients been granted a VAT number.

Legal information on substance of a Dutch BV (Where is the Dutch BV officially tax resident?)

Article 2 of The Netherlands corporate Income tax Act states that a BV incorporated in the Netherlands is always ruled to have its residency in the Netherlands. That means that the Dutch BV always has to file corporate tax returns in the Netherlands and publish its annual accounting.

The exception is in cases two countries are claiming the same tax. This can happen in certain specific scenario's whereby a company is incorporated in the Netherlands because of lower taxes, while the activities are still performed in the country of residence of the Director. To settle these disputes and provide clarity on the matter, the Netherlands has made agreements with many countries in the form of Double Tax Treaties. 

The Netherlands' tax office is of the general opinion that any corporation incorporated in The Netherlands, is resident here for the corporate tax. We call this the 'principle of territoriality'. Therefore, the seat of the company is always deemed to be based in The Netherlands, even in double tax treaty disputes.

We have not seen any cases before amongst our clients where double tax treaties and substance is relevant for corporate tax. If you earn more than €250.000 per year, we in any case advise a consultation with our tax advisors. Our tax advisors can consult you about: Director fees, tax optimization, the best corporate structure for you, double tax treaties, dividend tax and much more.

Then why do I hear about the Dutch director substance requirements?

Certain Dutch firms cater their services aimed at multinational corporations and companies which use the Netherlands as a holding company or intermediary holding. The holding can be of intellectual property, royalties or shares. One of the primary purposes of such structures often is the usage of the extensive tax treaties the Netherlands has with other countries.

For example: A company, like Starbucks.
Starbucks might decide to collect the dividends from all their worldwide subsidiaries through a holding company in The Netherlands. Since the Netherlands has the most extensive double tax treaty system in the world. Thereby avoiding costly double-taxes when distributing the dividends.

If your firm is not relying on such a double tax treaty. You are likely unaffected for the corporate income tax if you are a non-Dutch resident director.

Many tax advisors have little experience with the day-to-day reality of small- and medium-sized entrepreneurs. Where the substance regulations rarely effect them. The tax legislation is aimed mostly at letter-of-the-law situations where real abuse of the tax treaties occurs, such as with certain multinational companies with tax structures that lack meaningful substance.

In short, if you want to be 100% sure that your company is taxed in The Netherlands, the level of substance and activities in The Netherlands would need to substantiate that. However, you are unlikely to be affected by the substance requirements, unless you make significant profits.

Substance requirements for big corporations (Tax treaty protection)

Some big firms rely for a Dutch entity only on a tax treaty. To be 100% sure that the Netherlands tax substance is sufficient, stock listed and large multinational firms, royalty holdings and similar corporations tend to hire a Dutch director for a minimum of 50% of the board of directors.

In our experience, in 99% or more of the cases, smaller companies, trading companies and others are unaffected by the 'substance' requirement to have a local director. We have worked with over 1000+ companies of all sizes.

If you are in doubt if your firm has to find a local director. It is perhaps best to for a consultation with one of our tax advisor on topics such as  ''Double tax avoidance'', ''Transfer pricing'', ''At Arms Length principles'', and ''Advanced Tax Rulings''.

Other cases a Dutch resident director might be helpful

It may prove useful to have a Dutch resident director for applying for a local bank account or a local VAT number. In by far the most cases where actual business activity takes place in the Netherlands, this will prove successful without a local director.

Substance for VAT

The VAT regulations (to apply for a VAT number) is not covered by the same regulations as the corporate income tax. The tax inspectors will make their own decision based on each individual company. In our experience, this should not prove a problem in case you have actual VAT-liable activities and operations in the Netherlands.

Relevant aspects an inspector will consider for the VAT application:

• What is the company activity? (For example, buying agricultural goods in the Netherlands and shipping them all over the world).
• Where does this activity take place? (Are goods or services sent to or from Dutch suppliers, or to or from Dutch customers?)
• What substance does the company have in the Netherlands? (Staff? A warehouse? Suppliers? Customers? An office? Servers for its website? Etc.)
• Where is the company operated from? (Does it have a (virtual) office in the Netherlands?)
• Where is the director located? (Does it make sense for this company to be operated remotely?)
• Is the company activity considered a risk category for VAT fraud?
• Why is this company based in the Netherlands?

Foreign VAT number registration in The Netherlands

If your company is considered not to be based in The Netherlands, for the VAT. You will be able to obtain a VAT number for foreign (controlled) companies. What this mean and how does this affect your company?

Your foreign VAT number can be registered under the address of your foreign holding company, or the address of your director. 

The foreign VAT number will be treated the same in the following situations:

• Selling goods and services in The Netherlands and Europe
• Buying goods in The Netherlands and Europe for trade

The foreign VAT number will be treated differently in the following situations:

• The foreign VAT number will be treated differently when buying services for your Netherlands company. 
• The foreign VAT number will be treated differently when you are buying (for example) a company laptop.

The result is that your suppliers need to invoice you at 0% VAT when providing you with services.

The income included in Box 2 for foreign taxpayers includes the eligible Dutch income (calculated in the same way as for residents) from local companies, except in cases where the shareholding belongs to an enterprise’s equity.
Fiscal partners are subject to special requirements.

The income that must be declared in Box 2 includes the capital gains and/or dividends (main income items) obtained by a foreign taxpayer with substantial interests (>5% shareholding) in a resident company minus any losses related to the shareholding and monumental building tax deductions.

The deductions and personal allowances (“persoonsgebonden aftrek” in Dutch) do not apply for foreign taxpayers that only have income qualifying for Box 2.

The Dutch rollover/tax deferral for eligible legal mergers/demergers and share mergers is not applicable to foreign taxpayers in case the surviving/acquiring company is established outside of Holland. If a Dutch corporation changes its tax residence, then its relocation is considered as a (taxable) substantial shareholding transfer.

An entity established under foreign jurisdiction that has qualified as a resident corporation in Holland for a minimum period of five years but has relocated to another country for the purposes of taxation is considered a resident corporation in Holland for another ten years.

In case the total amount in Box 2 is a negative number, the income is considered as a substantial shareholding loss for foreign residents. Such losses are deductable and can be compensated (loss carryforward or carryback) following the same rules as for resident taxpayers. These losses can be aggregated with any qualifying losses from tax liabilities for resident taxpayers.

The taxable base is determined by special rules if the taxpayer emigrates or the Dutch corporation where he/she is a substantial shareholder transfers its tax seat to a different country.

Our Dutch specialists in taxation can provide consultancy on your tax position. We can prepare and submit your yearly income tax report and take care of other matters related to tax compliance. Please, contact us, if you need further information or tax-related assistance.

In Holland a professional investor may use various vehicles on the funds market. UCITS (Undertakings for Collective Investments in Transferable Securities) and AIF (Alternative Investment Fund) are the most common vehicles that can be marketed in the European Union.

Taxation is among the main considerations in investment fund set-up. In this respect Holland is a very attractive jurisdiction.

If you need further information on the taxation of investment funds in Holland, please, contact our advisors in company formation.

Tax treatment of investment funds (IFs) in Holland

Dutch IFs can qualify for one of three tax categories:

1. tax-exempt IFs;
2. fiscal IFs;
3. tax-transparent IFs.

Each category brings particular tax advantages.

Tax exempt Dutch IFs

Under particular conditions hedge funds and open-end retail funds may be exempt from withholding and corporate income taxes. A main requirement that needs to be fulfilled is the issue of a license by the National Authority for the Financial Markets (AFM).

Fiscal IFs taxation in Holland

Fiscal IFs are not subject to corporate income tax. A withholding tax of 15% applies to the dividends distribution, unless provided otherwise by a treaty for double tax avoidance signed by Holland. In order to receive such tax treatment, the fund has to be incorporated as a public or private Dutch company with limited liability.

Our local registration agents can assist foreign investors in establishing Dutch investment funds.

Tax-transparent IFs in Holland

For the purposes of taxation, a Dutch IF may be deemed transparent if:

1.  the IF is not considered a legal entity with respect to withholding and corporate income tax;
2. the IF is a closed-end fund for mutual account (in Dutch : fonds voor gemene rekening, FGR);
3. the IF or its managers do not have a registered Dutch seat;
4. the IF is not licensed by the National Authority for the Financial Markets.

If you need further information regarding the tax requirements for Dutch investment funds, please, contact us

Tax on income generated by substantial shareholding (Income tax box 2)

If a resident of the Netherlands has a “substantial shareholding” (“aanmerkelijk belang”) with respect to an eligible foreign or Dutch corporation, then the income generated by this shareholding needs to be declared in Box No. 2 of the tax return form for personal income.

In case a taxpayer holds directly or indirectly a substantial share of a corporation, then any income obtained from loans or asset provisions to the corporation is taxable and needs to be reported as derived from other labour in Box No. 1 of the tax return form for personal income.

Read more on Box 2 for Foreign shareholders.

What is a substantial shareholding?

Taxpayers are considered as substantial shareholders if they own, indirectly or directly, alone or with their fiscal partners:

1.  a minimum of 5% of the company’s total share capital (except repurchased shares that will be cancelled);
2. have the rights to acquisition of ≥ 5% of the shares mentioned above;
3. profit shares (or “winstbewijzen” in Dutch) giving entitlement to ≥ 5% of the annual profit or ≥ 5% of any liquidation proceeds;
4. a minimum of 5% of the rights to a vote in a Cooperative (or “Coöperatie” in Dutch) or an Association on a Cooperative Basis (“coöperatieve vereniging”).

The criteria listed above are valid both for legal and economic ownership in its various forms.

The rules for substantial shareholdings apply to options to acquire profit shares / shares in the same manner as to underlying profit shares / shares.

The principles of taxation of substantial shareholdings are basically the same for Mutual Funds (FGRs), Cooperations and Associations on a Cooperative Basis: all these entities are treated as corporations.

In case one corporation owns shares of different classes, the 5% criterion is valid for each class separately. Share classes are determined by special rules.

In case a taxpayer is classified as an indirect or direct substantial shareholder, other owned profit shares / shares issued by the subsidiary also belong to the substantial shareholding and therefore are subject to the same rules.

Substantial shareholders’ taxable income

The substantial shareholders’ taxable income is formed by the regular profits generated by the shareholding (e.g. dividends) minus allocable expenditures and by the capital gains obtained through transfers of shares included in the shareholding. Personal allowances can be deducted from this income.

If certain conditions are fulfilled, the income received from inherited substantial shareholdings can be subtracted from the price of acquisition of the shareholding for a period of two years.

Can we help you?

Our qualified tax advisors can provide consultancy on your tax position. They can also prepare and file your yearly income tax report and handle other issues related to tax compliance in your name. If you need further information or assistance, please, contact us.

A characteristic feature of the tax system in the Netherlands is the option to consider the treatment of particular transactions or operations with the tax authorities in advance. The Tax Administration may give you advanced clearance. The National Tax Authorities can conclude two types of agreements with the taxpayers: an Advance Pricing Agreement (APA) or an Advance Tax Ruling (ATR).

APAs are agreements where the Tax Authorities specify the method of pricing that will be applied by the taxpayer to company-related transactions. This programme gives taxpayers the option to resolve or avoid potential or actual disputes on transfer pricing in a cooperative, proactive manner.

ATRs are agreements with the Tax Authorities that determine the legal obligations and rights of the taxpayers in their specific situations.

APAs and ATRs are binding both for the Tax Authorities and the taxpayer. Their conclusion is subject to particular substance requirements. Generally the Tax Administration is able to process requests for ATRs, APAs and other inquiries (for instance for VAT registration, fiscal unity or facilitated merger) without significant delays.

The EU law requires the Tax Authorities in Holland to automatically exchange data on APAs and ATRs with the National Tax Authorities in other Member States. The Tax Administration has prepared standard documents that taxpayers fill in to conclude cross-border rulings or arrangements with respect to transfer pricing. All National Tax Authorities in the EU are required to exchange such information. This improves the transparency with respect to corporate taxation in the Community. Eventually the EU may also start exchanging similar information with National Tax Authorities in non-members.

Cooperative compliance

If certain conditions are fulfilled Dutch businesses can apply for the so-called horizontal monitoring (enhanced relationship with the National Tax Authorities). Horizontal monitoring is a type of voluntary cooperative compliance where the organisation concludes a specific agreement with the Tax Administration. This provides advanced assurance and security and prevents taxpayers from bad tax surprises. Still the scope of horizontal monitoring includes more than legislative compliance: the business needs to demonstrate that it controls its tax risks and processes by using a Framework for Tax Control.

The National Tax Authorities adjust their monitoring intensity and methods with respect to the taxpayer’s tax control level. Hence their audits will switch from reactive (performed for past periods) to proactive (to provide security upfront). The relationship between businesses and the Tax Authorities in horizontal monitoring rests on transparency, mutual understanding and trust.

The main advantage of this arrangement is the possibility to deal with relevant tax positions and risks at the time of their occurrence within plausible commercial deadlines. Companies are expected to behave transparently in their interactions with the Tax Authorities and, in turn, the administration responds quickly with regard to issues brought to its attention by these businesses. Furthermore the horizontal monitoring programme helps to accurately determine taxable cash flows, current and deferred taxes, and guarantees that companies have few, if any, unsure tax positions. This saves businesses both costs and time. However it is worth mentioning that the Dutch Tax Administration has not yet formulated objective principles regarding the requirements for the Framework for Tax Control.

If you reside in Holland or receive Dutch income, you need to follow the national laws on taxation. As a resident (living in Holland) or non-resident (foreign) taxpayer receiving Dutch income, you will need to pay income tax in Holland.

Taxable Dutch income types

The Dutch tax laws recognize 3 types of income that are subject to tax. These are classified into boxes. Box 1 concerns income related to home ownership or employment, i.e. salaries, business profit, pension, regular benefits and owner-occupied real estate. Box 2 covers substantial interest income and Box 3 represents income from investments and savings.

The taxation system in Holland is quite complex and you can end up paying up to one-fourth of your personal income in taxes, but all rates depend on the nature of the work you perform and your residency, among other factors. Persons taxable in accordance with the Dutch laws need to submit their returns in digital form by the beginning of April each year. If it is impossible to keep this deadline due to particular circumstances, an extension can be granted upon request.

Taxes levied on Dutch residents / non-residents

In the form for tax return Dutch residents are obliged to declare their income received worldwide, including amounts that Holland is unable to tax by virtue of international or national regulations. Employment income, business profits and capital gains obtained in foreign countries fall in the list of such revenues. Non-residents can choose whether to be treated as residents with respect to taxation. Persons with status of resident taxpayers must declare their worldwide income permitting the option of taxation of this income in another country. To avoid double taxation, Holland offers tax relief (or tax credit) against owned tax. An experienced Dutch attorney can advise you with regard to the most convenient possibilities for your business.

Dutch corporate income tax (CIT)

Companies in Holland and particular entities established elsewhere and receiving income from Dutch sources are liable for corporate income tax (CIT). Companies with capital consisting of shares, cooperatives and other entities conducting business are on the list of company types subject to taxation. All companies need to file tax returns every year. The deadline for submission is five months after the concerned year’s end. All taxes need to be paid within two months of the receipt’s assessment.

Value Added Tax is, per se, a consumer tax incorporated in the price paid by the end customer for a particular service or product. In line with the EU legislation, VAT is applicable to the provision of goods, services, importation and acquisition of goods. Holland has three different VAT rates: a standard 21% rate, a special 9% rate for drugs, food, newspapers and books, and a 0% rate for international trade to allow for VAT-exempt export of commodities.

If you need further information and personal advice with regard to your business, please, get in touch with our local lawyers.

An important aspect of the corporate tax system in the Netherlands is the special participation exemption according to which all capital gains and dividends generated by an eligible shareholding are exempted from taxes.

Even though all companies residing in Holland are generally liable for CIT on their income generated worldwide, profits originating from an eligible shareholding are tax-exempt at the level of the shareholder considered as tax-resident in Holland. This tax exemption is called the Dutch participation exemption (hereinafter referred to as: PE).

The PE has two main purposes. In its purely domestic sense it prevents double taxation of the income of a single enterprise (taxing both the income of the company and of its parent corporation). From an international perspective the PE aims to avoid double taxation by different countries.

Corporate tax in the Netherlands

Generally, all local companies are liable for corporate income tax, or CIT, with respect to their income generated worldwide. For profits up to 200 000 Euro the CIT rate is 19%. Any income exceeding this threshold is taxable at a rate of 25.8%.

Corporate residents

All resident Dutch companies need to pay CIT. Tax residency is determined based on the particular circumstances and facts. The effective management location is defined by certain prerequisites. This is the location where:

• important decisions regarding the business are made;
• the directors meet and work;
• the company stores its business records and prepares its financial statements.

Thus entities are considered tax resident if their effective management locations are in Holland.

Eligible shareholding

According to the effective legislation, the PE is applicable to profits from shareholding of a Dutch resident parent company, if it fulfills the requirements listed below:

1. The parent corporation participates with at least five percent of the nominal contributed share capital (alternatively, depending on the circumstances, five percent of the rights to vote) of a given company whose capital has been split into shares (requirement for minimum threshold);
2. At least one of three conditions is fulfilled:

• the parent corporation participates with the objective to accumulate a return higher than what is expected from passive investment in a portfolio (the motive requirement);
• the subsidiary’s indirect and direct assets include less than fifty percent passive assets subject to a reduced tax rate (the asset requirement);
• according to Dutch standards the subsidiary already carries an adequate tax burden (the taxation requirement);

3. The profits generated by the subsidiary are not deductible with respect to CIT in the subsidiary’s country.

Participation not eligible for exemption

In case the requirement for minimum threshold (at least five percent participation in the nominal contributed share capital) is fulfilled, but the other conditions for PE are not, the corporation will receive up to 5 percent credit for the base tax payable for the participation (with the exception of eligible EU participations, where the credit can cover the whole tax).

Motive requirement

The motive requirement involves circumstances and facts and is fulfilled when the parent company invests in its subsidiary with the aim to obtain profits exceeding the ones from passive portfolio investments. Generally, the requirement is met if, for example, the parent company is actively involved in the subsidiary’s management or if it performs a significant function in the group’s business enterprise. If >50 percent of the subsidiary’s consolidated assets are made up of shareholdings amounting to <5 percent, or the subsidiary (including its subsidiaries) functions predominantly as a leasing/licensing or group financing company, then the motive requirement will not be fulfilled.

Asset requirement 

Free passive assets, subject to a reduced tax rate, have the following characteristics:

• they are not practically required for the enterprise of their owner; and
• the profit that they generate is taxed effectively at <10% rate.

Immovable property always qualifies as “good” for the purposes of this requirement (never mind its function in the enterprise and its taxation). The fair value of assets on the market is decisive for the fulfilment of the requirement’s conditions. The asset requirement is continuous and mostly needs to be fulfilled throughout the whole accounting year.

Assets used for leasing, licensing or group financing are considered passive, except when they are included in active leasing or financing enterprises, as defined by law, or their financing consists of ≥ 90% third party loans.

Taxation requirement

In general, participations are considered subject to adequate taxation if they are taxed as profits at a minimum rate of 10 percent. Certain differences in the tax bases, e.g. a broad PE, taxation deferral until profit distribution, deductible dividends or absence of limitations with respect to interest deduction may lead to the disqualification of profit tax as sufficient liability, except in cases where the effective rate of taxation in accordance with the Dutch standards is ≥ 10%.