Understanding the Dutch corporate tax system: a guide for foreign entrepreneurs

Updated on 16 January 2025

Intercompany Solutions has the expertise to successfully set up a Dutch business for you entirely remotely, allowing you direct access to the European Single Market. Many entrepreneurs from all over the world have already established a Dutch business, ranging from small specialized startups to large multinationals that have set up headquarters or subsidiaries in the Netherlands. In most cases, these companies turn out to be successful and provide a solid source of income for these entrepreneur(s). If you are thinking about expanding your business internationally, we strongly advise you to consider the Netherlands as a potential location. The country is known for its stable political and economic climate, as well as its fair tax rates and interesting tax benefits.

Paying taxes is inherently inevitable, no matter where you live. But it makes sense to choose a country that levies an acceptable tax rate, as opposed to higher rates or even corrupt countries where you might not be sure how much you will have to pay. Our specialized advisers can offer you insight regarding the taxes you will have to pay in the Netherlands, next to setting up your Dutch business. We can even take care of your quarterly and yearly tax return, making it easier for you to focus on your daily business activities. The Netherlands is a country that is very welcoming towards foreign entrepreneurs and has ties to many countries all over the world. If you want to see whether your company has what it takes to do business internationally, we suggest you start here. Please feel free to contact us anytime with any questions you might have regarding the subject.

All business owners pay taxes

Taxes need to be paid in every country, this is a formality we cannot exclude ourselves from. Every country has expenses that need to be paid, which is how taxation originated a long time ago. In order to be able to provide the necessary services to its citizens, a country also needs income. Which is what tax basically is: the income of a country, just like you are aiming at receiving income from your company. Nonetheless, tax rates vary enormously per country, and this can (and should) influence your decision about where you want to do business from. If you are currently situated in a country with high tax rates, it might be profitable to consider an alternative location for your company. If you haven’t set up a company yet, it would be wise to decide which location would be the most profitable.

The corporate income tax rate in the Netherlands is among one of the lowest in the entire European Union (EU). The current rate is 19% for all sums up to €200,000 and 25.8% for sums above this amount. In comparison to some other rates, for example 35% in Malta and 29.9% in Germany, this is quite low. But this is definitely not the only benefit the Dutch have to offer. The Dutch tax system offers many incentives and benefits, especially for starting entrepreneurs. There are also special regulations such as the participation exemption, which can allow you to pay yourself dividends tax-free in some cases. In any case, it’s worthwhile to do some research into taxation and some other factors, such as the amount of corruption in a country, its professionalism, the way the country offers perspective to foreign entrepreneurs, the ties it has internationally and the amount of existing tax treaties between the country and other countries, to name but a few. This will provide you with a clearer picture about the possibilities a country can offer you. We will outline all main tax categories in the Netherlands below, which will save you some time looking up this information yourself. 

The main tax categories

To create an introductory article on the Dutch corporate tax system for foreign entrepreneurs, we aim to cover the most basic and relevant taxes that impact businesses operating in the Netherlands. Next to that, we want to explain the process and key features of the Dutch tax system as well. Understand that this article is pretty basic, but nonetheless informative. We will list the most common taxes you will have to pay when being stationed in the Netherlands, and also the best way to comply with Dutch tax regulations. So read on, if you want to know more about the Dutch tax system and if this is something you are able to adhere to.

1. Corporate Income Tax (CIT)

This is the primary tax that companies in the Netherlands must pay on their profits, provided these companies are legal entities and in Dutch known as “vennootschapsbelasting”. This means that the company has been incorporated by a notary, which makes it a separate entity from the business owner. One of the main benefits from legal entities is the limited liability you enjoy as a natural person. This means, that you are not personally responsible for any debts you create with the company, provided that the way you conduct business is legal and ethical. In any case, let’s get down to corporate income tax.

So, corporate income tax is a tax that governments impose on the profits earned by businesses or corporations. A corporation's profit is calculated as its revenue, minus allowable expenses, such as costs of production, wages, and other operational expenses. This tax is one of the main ways governments generate revenue to fund public services like infrastructure, education, and healthcare. Many people believe only income tax fuels an economy, but that’s not true. It’s businesses that also make a country thrive, and not just due to the extra tax the government can levy. Businesses provide the country with extra employment opportunities, innovative concepts and general independence, since business owners often don’t rely on social services. 

Anyway, the corporate income tax rate can vary widely depending on the country and sometimes even the size or type of business. For example, some governments offer lower rates or exemptions to small businesses or industries they want to encourage, like renewable energy. In most countries, corporations are required to file an annual tax return, detailing their income, expenses, and other financial information to calculate the tax owed. As we already stated above, the Netherlands offers a highly competitive corporate income tax rate compared to other influential European Union (EU) member states. This type of tax aims to ensure that businesses contribute a fair share to the economy, given the resources and infrastructure they use to operate. 

Critics of corporate income tax argue it may discourage investment or economic growth, if rates are too high. Proponents, on the other hand, view it as essential for maintaining economic fairness and funding public services. Both opinions make sense. Too high rates stifle the business opportunities of any given country, as it hinders potential entrepreneurs in making the step towards self-sufficiency. Then again, if a business is highly successful and brings in enough revenue, it might make just the difference for a country in terms of funding. Imagine you establish a Dutch business that does really well and offers many people in the country a job and brings in enough profit. It is then a catalyst for smaller startups and entrepreneurs to start a business too, as the taxes you pay help new entrepreneurs to start their business. It’s quite circular that way. In short, corporate income tax is a way for governments to ensure businesses support the economic ecosystem they benefit from.

Specific details about Dutch corporate income tax

The Netherlands has a progressive CIT rate. As of 2025, the first €200,000 of taxable profit is taxed at a lower rate (19%), with profits above this threshold taxed at 25.8%. As for deductions and exemptions; businesses can deduct expenses incurred in running their business, including wages, costs for office supplies, and investments in R&D. Furthermore, the Netherlands offers various international tax treaties that prevent double taxation and allow for favorable tax rates on foreign income, which is beneficial for foreign entrepreneurs setting up businesses there.

2. Value Added Tax (VAT)

Value-Added Tax (VAT), in Dutch known as “belasting toegevoegde waarde (BTW)", is a consumption tax that applies to most goods and services in the Netherlands. It is a tax applied to the value added at each stage of production and distribution of many goods and services, and it is typically charged as a percentage of the price paid by the consumer. Unlike (corporate) income taxes, which are based on earnings, VAT is levied on the expenditure of goods and services, making it an indirect tax. VAT is collected at each step of the supply chain, from the production of raw materials to the sale of the final product. Businesses collect VAT on behalf of the government and can usually deduct the VAT they paid on their own purchases from the amount they owe. This ensures that the tax burden is effectively passed on to the final consumer, who pays the full VAT amount included in the retail price.

The VAT system is widely used globally because it ensures a steady stream of revenue for governments and minimizes the likelihood of tax evasion compared to traditional sales taxes. Critics, however, argue that VAT can disproportionately impact low-income households since they spend a larger share of their income on VAT-inclusive goods and services. To address this, some governments exempt essential items like food and healthcare from VAT or apply reduced rates to these categories. In the Netherlands, this is also the case, since there is a lower vat rate and also a 0% rate. We will explain this below. You can also read about it in this article, which covers Dutch VAT extensively.

Specific details about Dutch VAT

The standard VAT rate in the Netherlands is 21%. Next to that, there is a reduced rate of 9% and also a rate of 0% for certain products and services, for example food and medicines. Additionally, there are also some VAT exemptions. Some services, like financial services, insurance, and education, are VAT-exempt. Please note that VAT registration in the Netherlands might be mandatory. Foreign businesses that are selling goods or services to Dutch customers may need to register for VAT, especially if they exceed the threshold for remote sales. If you want to know whether you need to register for VAT, please feel free to contact us for a consultation on the topic.

3. Dutch income tax

Dutch income tax, known in Dutch as "inkomstenbelasting," is a tax levied on the income of individuals that are currently residing or earning income in the Netherlands. This is a tax that is common throughout the world. When you have a job, for example, there is always a certain percentage you have to pay to the government. The Dutch tax system operates on a progressive structure, meaning that higher income levels are taxed at higher rates. A foreign entrepreneur with a Dutch company may need to pay Dutch income tax, depending on the business structure and the entrepreneur’s tax residency. We will explain below how this typically works.

Sole proprietorship or partnership 

If you operate as a sole proprietor or are in a partnership in the Netherlands, the business income is taxed as personal income under Dutch income tax laws. It’s noteworthy that non-residents are generally taxed in the Netherlands only on income earned from Dutch sources, including business profits. However, tax residency rules may vary based on the entrepreneur's home country and any applicable double taxation treaties. We will cover the topic of tax residency later on. 

Director-shareholders of limited companies (BV and NV)

If you own a private or public limited liability company (BV or NV) and also act as its director, you are required to pay yourself a so-called customary salary, which is “gebruikelijk loon” in Dutch. This salary is subject to Dutch income tax. Additionally, the company itself pays corporate income tax on its profits, as we previously explained, and any dividends distributed to you are subject to dividend withholding tax, which might be offset or reduced by tax treaties. We will also discuss this topic later on.

Double taxation treaties

The Netherlands has an extensive network of treaties that prevent double taxation. Depending on the treaty between the Netherlands and your home country, income tax and other relevant taxes may be paid in the Netherlands, your home country, or shared between the two. Typically, taxes paid in one country can be credited against tax owed in the other. If you need help with figuring out what the case is in your specific situation, you can always contact us for expert advice.

Tax residency

If you are considered a tax resident of the Netherlands, you are taxed on your worldwide income. Non-residents are taxed only on Dutch-source income, as we already stated above. Tax residency depends on various factors such as the length of stay, family ties, and economic interests in the Netherlands. If you are never in the Netherlands and operate a Dutch business entirely remotely, you are not always seen as a tax resident. So let’s break this down. Any person operating a Dutch business remotely could potentially be seen as a tax resident of the Netherlands under certain circumstances. Tax residency is determined based on factual circumstances rather than solely on formal business arrangements. The Dutch tax authorities consider various key factors to determine residency for tax purposes, which we will list below.

Place of residence

If the individual lives primarily in the Netherlands, even temporarily, they may be classified as a tax resident. The main rule is that 183 days or more spent living in the Netherlands during a calendar year within a 12-month period, qualifies someone as a tax resident. This rule is commonly applied for individuals who do not have clear ties to another country and spend substantial time in the Netherlands.

Permanent home

Owning or renting a home in the Netherlands may indicate residency, especially if it serves as a primary living space. There is no set amount of time required to spend in the home, but it must be a place where the person has the intention to live and that is available for them to use at any time. For example, owning a home in the Netherlands, even if not used daily, can qualify as owning a permanent home if it is available for use. This is more about the availability and intent to use the home rather than a strict number of days spent there. Also note, that if an individual rents out their home in the Netherlands but still maintains it as an available property, this can still be considered a permanent home for tax residency purposes. The key factor is whether the property is available to them to use when they need it, not necessarily if it is occupied. If someone spends significant time in another country, it could still be argued that they have a permanent home in the Netherlands if they maintain that property and are connected to it in other ways, such as with family or financial ties.

Family and social ties

Strong personal or familial connections in the Netherlands, such as family members living there,  can contribute to residency status. In the Netherlands, this actually plays a crucial role in determining tax residency, especially if there are ambiguities about whether an individual should be classified as a resident or non-resident. These personal connections can significantly influence residency status. The tax authorities consider these ties when deciding whether someone’s center of life is in the Netherlands. This is quite an elaborate subject, which is too long to discuss in this particular article. If you want to know more, you can always contact us about this subject.

Economic ties

Operating a business in the Netherlands, having substantial income originating there, or paying for social security and other economic contributions strengthens the case for tax residency. For example, if an individual operates a business, owns a company, or has a substantial investment in the Netherlands, this is a strong indicator that the Netherlands is where their economic activities are centered. This includes income generated from Dutch sources, including employment, rental properties, or profits from a Dutch business. If a substantial portion of your income originates from the Netherlands, the tax authorities may view you as having a center of economic life there. Paying Dutch social security contributions is another strong indication of residency. Social security payments reflect an ongoing relationship with the country’s welfare system and are often tied to the individual’s tax status. 

Duration of stay

Spending more than 183 days in any tax year in the Netherlands can result in residency classification under certain international tax treaties. If someone spends 183 days or more in the Netherlands over a 12-month period, they will likely be considered a tax resident, regardless of whether they have a permanent home available. This is a general guideline for those who have no other strong tax ties to another country.

Operating Remotely

If the individual operates the business entirely remotely from a country outside the Netherlands and does not meet the above criteria, they are less likely to be deemed a tax resident. However, they may still face Dutch taxation on income derived from the business under non-resident taxation rules, especially if the business or owner of the business has a permanent establishment or generates Dutch-source income.

International tax treaties may help in navigating this difficult topic. Double taxation agreements (DTAs) between the Netherlands and the individual's country of residence may override Dutch residency rules. DTAs typically prevent double taxation by allocating taxing rights and defining residency more precisely. In the end, whether someone operating a Dutch business remotely is considered a Dutch tax resident depends on their specific ties to the Netherlands. If the individual maintains strong economic, social, or physical presence in the Netherlands, they might be seen as a resident for tax purposes. If they operate remotely from another country without ties to the Netherlands, they are likely treated as a non-resident taxpayer. It’s advisable to consult a tax advisor familiar with Dutch and international tax laws to ensure compliance and optimize tax obligations, especially in cross-border scenarios. Intercompany Solutions can assist you with such issues.

Specific details about Dutch income tax

The Dutch income tax system is relatively straightforward. There are taxable income categories that divide taxable income into three "boxes," each with specific rules. These are as follows:

• Box 1: Taxable income from employment, homeownership, and other earnings
• Box 2: Income from substantial shareholdings, which is usually in private companies
• Box 3: Income from savings and investments, taxed based on a deemed rate of return

For Box 1 (employment and homeownership), tax rates are progressive, with rates ranging from approximately 37% to 49.5%, depending on income. The rate for taxable income from work and housing is a progressive rate with 2 brackets. You will pay proportionally more tax as your income increases. In 2024, you will also pay national insurance contributions to your taxable income from work and housing up to and including €38,098. In the year that you reach the AOW age, you will pay according to an adjusted rate.

For Box 2, the rate you pay on your taxable income from substantial interest depends on the level of income in 2024. Up to and including 2023, there was 1 percentage, which was 26.9%. Since 2024, for income up to €67,000 you pay 24.5%. For income above the threshold of €67,000, you pay 33%. For Box 3, on your taxable income from savings and investments, you pay 36%. Also note that individuals can claim various deductions, such as mortgage interest relief for homeownership, and receive credits for work-related or child-related allowances. Compliance with Dutch income tax laws typically requires filing an annual tax return. For complex situations involving international income or tax residency, professional advice is recommended, which we can help with of course.

4. Payroll taxes and social security contributions

If your Dutch business employs staff in the Netherlands, you will need to pay payroll taxes and social security contributions. Dutch payroll taxes and social security contributions are mandatory payments employers and employees must make to the government to fund public services and social security systems. These contributions are deducted from employees’ gross salaries and supplemented by employers. There are many underlying elements to payroll taxes in the Netherlands. We will discuss these below.

Income tax 

We already discussed income tax for business owners above, but if your company has employees, they will also need to pay income tax over their salaries. You, as their employer, withhold this as an advance on the income tax they owe at the end of the tax year. It is withheld directly from salaries and includes components for general income tax and national insurance contributions.

Employer contributions

Employers also pay contributions toward employee insurance schemes, such as unemployment insurance and sickness benefits. When an employee is fired, for example, and it wasn’t their fault, they can get an unemployment benefit from the Dutch state. 

Social security contributions

Social security contributions in the Netherlands are divided into two categories, the first being national insurance contributions, which fund nationwide benefits like old-age pensions (AOW), child benefits, and related benefits. Employees and self-employed individuals contribute to these. The second are employee insurance contributions, which fund employee-specific benefits, such as unemployment insurance (WW) and sick leave (ZW). Employers bear these costs.

Health insurance contribution 

Employees and self-employed individuals pay for mandatory basic health insurance, and employers need to contribute a fixed rate toward healthcare costs.

Specific details about payroll taxes and social security contributions

Payroll taxes and contributions are progressive, meaning the more an employee earns, the more they have to contribute. This is the same with income tax, and the same rates apply in this case. You as an employer will need to handle most administrative aspects, which means you have to deduct amounts from employees’ salaries and remit these to the Dutch tax authorities. The payroll tax and social security contributions category ensures comprehensive coverage for healthcare, pensions, and unemployment, reflecting the Netherlands' strong social welfare framework. Understanding Dutch payroll taxes and social security is essential for employers and employees, particularly in international or cross-border contexts. If you don’t adhere to these laws and regulations, you can risk many hefty consequences. The Netherlands also has tax-free allowances for certain social security schemes, such as child benefits, or tax-free amounts for expats in specific schemes.

5. Dividend tax

The Dutch dividend tax is a withholding tax which is applied to profits distributed by Dutch companies to their respective shareholders. This tax is regulated under the Dutch Dividend Tax Act and ensures that the Dutch government receives a portion of the income generated from dividend payments. This tax is deducted by the distributing company before shareholders receive their dividend payments. The tax applies to both Dutch and foreign shareholders receiving dividends from Dutch companies. Shareholders include individuals and entities holding shares in corporations or limited liability companies established in the Netherlands, such as the BV and NV.

The dividend tax ensures that income from investments is subject to taxation in the Netherlands. It aligns with international tax principles and helps prevent tax avoidance. For companies and investors, understanding these rules is vital to ensure compliance and optimize tax obligations. Dividend distributions from a Dutch company are generally subject to a 15% withholding tax. However, this can be reduced or eliminated under certain conditions, which we will list below.

Double taxation relief

Many shareholders can offset the withheld dividend tax against their income or corporate tax liability in the Netherlands. For foreign shareholders, the Netherlands has tax treaties with many countries to avoid double taxation. These treaties may reduce the withholding tax rate or provide mechanisms for reclaiming excess tax.

Exemptions

Exemptions or reductions often apply to intercompany dividend distributions within the EU or under specific conditions, such as participation exemptions for substantial holdings. The Dutch participation exemption is a corporate tax rule that provides significant benefits to companies with qualifying shareholdings. If a Dutch company holds at least 5% of the nominal capital in another company, which is then called a qualifying participation, any benefits derived from this participation—such as dividends and capital gains—are exempt from Dutch corporate income tax. This exemption aims to avoid double taxation on profits that are already taxed at the level of the subsidiary.

There are some eligibility criteria. The Dutch entity must own at least 5% of the share capital in the other company. The participation should not be held primarily as a portfolio investment, unless it passes a substance or motive test, ensuring the investment serves an operational or strategic purpose. Additional rules prevent abuse, particularly for low-tax jurisdictions or passive investment holdings. Exemptions cover both dividends received and capital gains on the sale of qualifying participations. Keep in mind that costs associated with acquiring or selling such participations, such as transaction fees or legal costs, are generally non-deductible. Also note that foreign exchange gains or losses may or may not fall under the participation exemption, depending on their timing and direct connection to the participation. 

Specific rulings, such as those by the Dutch Supreme Court, provide guidance on how dividend timing and currency fluctuations are treated under this rule​. Losses on the liquidation of a qualifying participation may be deductible under specific conditions, subject to rules on timing and affiliation between entities. The participation exemption helps maintain the Netherlands as an attractive base for holding companies by reducing tax burdens on international operations. However, its application involves nuanced requirements, so consulting a specialized third party such as Intercompany Solutions for detailed compliance is recommended.

Filing and payment

The company paying the dividend is responsible for withholding and remitting the tax to the Dutch tax authorities. So you should do this correctly and within the necessary time limits. Furthermore, shareholders typically do not need to take action unless they are claiming a refund or credit for overpaid tax.

6. Other relevant taxes

There are some other noteworthy taxes to be discussed, such as environmental taxes. There are specific Dutch taxes for environmental protection, such as the Environmental Tax, which handles topics such as emissions and waste. Now that the world is so focused on climate change and battling this, it is quite a hot topic. Next to that, there might be municipal taxes. These vary by region and can include property taxes, waste disposal taxes, and other local levies that businesses may be subject to. Additionally, there is the capital gains tax. This applies to the sale of certain assets, but is often less of a concern for entrepreneurs, as capital gains on shares held by businesses may fall under the participation exemption.

Incentives for foreign entrepreneurs and R&D

The Netherlands offers a variety of tax incentives, especially to encourage foreign businesses and research and development (R&D). For instance, this involves the Innovation Box Regime. This allows a reduced tax rate of 9% on profits derived from qualifying intellectual property, which is a significant benefit for companies focused on R&D. Furthermore, the Netherlands has a network of tax treaties that prevent double taxation for foreign entrepreneurs and often allow businesses to benefit from reduced withholding tax rates on dividends, interest, and royalties, as we already discussed before. If you want to know whether you qualify for any exemptions or incentives, feel free to contact us for personalized information.

Filing and paying taxes

Foreign entrepreneurs should be aware of the deadlines and procedures for filing taxes in the Netherlands. Corporate income tax returns need to be filed annually, usually within five months after the end of the financial year. For large companies, the Dutch tax system requires advance tax payments throughout the year based on estimated profits. Next to that, the Dutch tax authorities conduct regular audits of businesses, so entrepreneurs should ensure proper documentation and compliance. If you would like assistance with your periodical tax returns, Intercompany Solutions has the expertise to help you with that, The Dutch tax system is generally business-friendly, with various incentives for foreign entrepreneurs and a clear framework for taxes like VAT, payroll taxes, corporate income tax, and dividend tax. For those looking to expand or start their business in the Netherlands, understanding these tax obligations is crucial to ensuring compliance and optimizing their tax position.

Why choose the Netherlands for your new business?

As we already discussed above, the Netherlands has very competitive tax rates and a very stable economic and political climate. If you decide to do business from the Netherlands, your company will also profit from the professional and innovative name the country has made for itself internationally. If you would like to set up a Dutch business in a relatively short amount of time, we can assist you with that. Our company establishment procedure takes up only a few business days in general, provided that you can send us the necessary information and documents we need to establish your company. If you want to establish a legal entity such as a BV or NV, keep in mind that we will also need to go to a notary to incorporate your business. If you can provide us with a power of attorney to act on your behalf, the process itself can be done entirely remotely. You can then start doing business immediately and profit from all this country has to offer.

Do you need financial advice, or help with your Dutch tax returns or business?

We can understand that navigating Dutch tax laws can be daunting for any foreigner. All tax laws are different in every single country, which can make doing business internationally quite complicated without adequate assistance. Intercompany Solutions has assisted hundreds of foreign entrepreneurs from over 50 different nationalities. Our clients range from small one-person startups to multinational corporations, and everything in between. Our processes are aimed at foreign entrepreneurs and, as such, we know the most practical ways to assist with your company registration. We can assist with the full package of company registration in the Netherlands:

• Company establishment in the Netherlands
• Opening of a local bank account
• Application for VAT or EORI number
• Application for a variety of permits
• Application for a visa or start-up permit
• Startup assistance
• Financial services
• Administrative services
• Secretarial services
• Legal assistance
• Tax and financial services
• Media
• General business advice

We are constantly improving our quality standards to continually deliver impeccable services. 

Intercompany Solutions can establish your Dutch company and assist you with periodical tax returns

Would you like to expand your current company to the EU, or start a new business in the Netherlands? Or do you already own a Dutch business as a foreigner, but do you need assistance with your administration or tax returns? We are here to help you move forward and achieve success with your Dutch company, whilst adhering to all applicable laws and regulations. Our firm is not only specialized in company establishment, but we can also offer you a variety of professional services that help you keep your Dutch company afloat. We can assist you with all financial and fiscal matters, which will make it easier for you to focus on your company goals and your personal ambitions. Feel free to contact us with any questions you might have, and we will get back to you as soon as possible. You can also take a look at the services we offer on our website, which will allow you to understand the scope of our experience and expertise.