The Netherlands has a large network of agreements for avoidance of double taxation providing tax advantages to international investors establishing companies there. Among these agreements is the treaty with the USA. The first convention for the avoidance of double taxation between Holland and the USA was signed in 1992. Its first amendment dates from 1993.
Our local consultants specializing in company establishment can provide you with additional information about the Dutch tax system.
Scope of the double tax treaty between the Netherlands and the USA
The convention for avoidance of double tax between Holland and the USA covers:
- taxes on income, salaries, corporate profit and dividends in Holland;
- income and excise taxes with respect to insurances imposed to Dutch insurance agents established in the United States.
Dutch foundations working in the United States are subject to special provisions that are also included in the double taxation treaty. These concern the US excise tax. Furthermore, the convention covers similar taxes applicable in both Holland and the USA.
The double tax treaty provisions apply on the basis of tax residency.
Taxation of natural persons in accordance with the double tax avoidance treaty between the Netherlands and the USA
In the Netherlands, residents pay income tax and local companies are liable for corporate tax. For the purposes of double taxation avoidance, all treaties concluded by the Netherlands include provisions covering corporate and income taxes.
International entrepreneurs establishing companies in Holland have the option to choose their tax residency, i.e. pick the country that will hold them liable for tax payment. Foreign taxpayers can choose to pay taxes in accordance with the agreement between Holland and the USA for the avoidance of double taxation or take advantage of the Unilateral Double Tax Avoidance Decree of 2001. The double tax avoidance treaty with the US stipulates that US residents who earn income in Holland shall benefit from credit with respect to taxation of interests, royalties and dividends.
Taxation of businesses in accordance with the double tax avoidance treaty between the Netherlands and the USA
Regarding the tax regime for US companies operating in Holland and vice-versa, the double tax avoidance treaty provides for permanent establishment status that covers:
- mines/exploitation sites
- other offices and places of management;
The agreement for double tax avoidance is valid for facilities already established for 12 or more months.
Double taxes are avoided through reduction of the tax liabilities of Dutch companies in the US. On the other hand, Holland grants tax deductions to US companies operating simultaneously in the two countries.
Our Dutch consultants on company establishment can provide further information regarding the methods to avoid double tax by virtue of the Holland – USA treaty.
Amendments relevant to the double tax avoidance treaty between Holland and the USA
The double tax agreement between the two countries was amended in 2004 to include new provisions for pensions, dividends, alimony and branches. According to them, taxes on dividends transferred to a resident of Holland by a company in the US can be levied in the Netherlands. The rates for taxation of dividends are as follows:
- five percent of the dividend amount (gross) if the beneficiary owns no less than 10 percent of the votes in the corporation transferring the dividends;
- fifteen percent in all other cases.
Dutch and US branch offices are taxed by the country of registration of their permanent establishment. As regards annuities, alimony and pensions, persons with such income are liable for income tax only in their country of residence.
If you need comprehensive information regarding the amendments to the treaty for avoidance of double taxation with the US, do not hesitate to contact our Dutch agents specializing in company formation.