Service - Corporate compliance
If you aspire to establish a Dutch business, you will need to inform yourself about certain compliance obligations. Every business or corporation that will conduct business in the Netherlands, needs to register itself officially at the Dutch Chamber of Commerce, and subsequently also at the Dutch Tax Authorities. This is due to national tax purposes and the corresponding obligation to report and file taxes, as well as several payment obligations. In practice, this results in a liability for Dutch income tax, corporate income tax and value-added tax (Dutch BTW). In some cases, dividend withholding tax and interest withholding tax may also be levied. In order to be able to adhere to these laws and regulations, a solid and correct corporate compliance program or strategy is considered to be essential for any successful Dutch business.
Why is corporate compliance important?
Corporate compliance means you adhere to the laws of a certain country, in which you establish your business. For example, every Dutch business has a legal obligation to keep a correct administration. You will need to store all administrative files for a minimum amount of seven years, which can be done both in physical and digital ways. If you don’t comply with such laws and regulations, you can expect countermeasures such as fines and penalties. In very extreme situations, you can also face criminal prosecution related to tax avoidance and/or embezzlement. Furthermore, if you don’t keep a correct administration or refuse to file tax returns, the Dutch Tax Authorities can reverse the burden of proof regarding the levying of taxes. Thus, the organization will estimate your taxes based on information they do have. Intercompany Solutions can assist you with keeping a solid administration, your tax returns and everything else connected to corporate compliance. This way, you avoid getting yourself in a precarious situation.
Taxation in the Netherlands
In general, the Netherlands is seen as a country with a very effective and efficient tax office. The country itself is highly regulated, with a modern IT infrastructure to complement governmental affairs. Compliance with national taxation laws is fairly easy, since the laws and regulations are straightforward and fairly easy to comprehend. This makes it possible for every corporation and Dutch business to comply to these terms, should they choose to do so. We will explain more about tax compliance on this page, making it possible for you to decide whether compliance is a possibility for your (future) company.
What is the definition of corporate compliance?
Compliance, in general, refers to the methods a company or corporation can use to ensure they are complying to all applicable laws and regulations in relation to their business in a certain country. It also says something about the ways a company follows its own internal compliance structure. The actual definition of compliance refers to the action to comply with existing rules and/or standards. In the world of business, this basically means you have processes in place that ensure your business and all its employees follow all standards, laws, ethical practices and regulations that apply to your company and, in general, the entire industry you operate in.
What is the essential purpose of corporate compliance?
One would believe that corporate compliance is only about following the law of a certain country, but it actually goes a bit beyond that. In a recent study, it showed that almost 70% of all companies and organizations state that certain compliance efforts can aid to reduce issues such as:
- Legal costs
- Regulatory issues
- The total resolution time of administrative tasks and fines
Compliance, therefore, is not just about obeying current laws. It is also a safeguard to prevent unnecessary effects, when a company does not obey the laws and regulations in place (by accident). Therefore, you can say that compliance is also about prevention, as opposed to simply obeying the law. A solid compliance strategy will effectively avoid any problems whatsoever, making it easier for you to do business in the Netherlands smoothly and effortlessly.
The difference between external and internal compliance
When we talk about tax compliance, we are referring to external conditions that need to be met. But any company can have an internal compliance strategy or structure, as well. In essence, almost all businesses deal with a mix of both internal and external (regulatory) compliance. Internal compliance is aimed more at maintaining a certain level of quality or a business standard you want your business to meet. Corporate compliance is aimed at reducing compliance risks with the help of compliance functions. A compliance risk is basically anything, that could put your business at risk.
5 types of compliance functions
Corporate compliance is aimed at preventing and reducing certain business risks. These can be identified in 5 separate compliance functions:
1. Identification of risks
The first and also most important focus of corporate compliance is the identification of potential threats and risks to your company. Ideally, before these even happen. If your compliance program is well-thought-out, you will be able to identify any compliance issues before they happen and manage to sort these out before anything actually happens. A very simple example: you received a letter from the Dutch Tax Authorities, stating your annual tax return is too late. The identification of this risk will urge you to file the tax return.
2. Prevention of risks
Once you are able to identify risks, you can set up preventive measures to prevent potential issues. This can be achieved by implementing certain control mechanisms to protect your company from identifiable risks. A very simple example: setting a deadline every time you need to file a tax return. This will enable you to file your tax returns on time, so you won’t have to receive any reminders in the future.
3. Monitoring of risks
In order to learn from past mistakes and work more efficiently, your corporate compliance program should also include risk monitoring. By tracking, analyzing and monitoring potential risks, you can test whether your current program is effective. Monitoring risks also enables you to test whether the risk identification and prevention steps are working well. A very simple example: after 3 fines, you decide to hire a third party, to monitor and assist you with your tax obligations.
4. Resolution of risks
Once you know about potential risks, it is also very important to implement strategies to resolve these if they come up. Even the best strategy can still hold space for a risk to ‘slip through’, which is why it’s important for you to know how to deal with risks. A very simple example: new legislation has been put in place that forces you to change the way you handle your administration. This urges you to change your compliance strategy.
5. Advice about potential risks
If you are not very well acquainted with compliance regulations, we firmly advise you to seek the assistance of a third party such as Intercompany Solutions. We can take a look at your business and overall situation, in order to provide you personalized advice about the most fitting corporate compliance strategy. If you want your compliance department to run smoothly, you should utilize all five compliance functions. These work together for you to ensure the least amount of possible risks for your business.
Overview of Dutch taxes
There are several official taxes in the Netherlands, which apply to natural persons as well as corporate entities. These Dutch taxes also consist of direct taxes and indirect taxes. Direct taxes are taxes such as income tax, which you pay directly to the Dutch Tax Authorities. Indirect taxes are taxes such as excise duties and motor vehicle tax.
When you pay your taxes directly to the Dutch Tax Authorities, then these are considered direct taxes. You pay direct taxes on your income, profit and capital. Dutch direct taxes are as follows:
- Income Tax
- Payroll tax
- Corporation tax
- Dividend tax
- Inheritance tax
- Gift tax
- Gambling tax
- Capital gains tax
When it’s not you who pays taxes directly to the Dutch Tax Authorities, but someone else, these are named indirect taxes. For example, taxes that are included in the prices and rates of products and services. For this reason, indirect taxes are also named cost-increasing taxes, such as the taxes levied on products like alcohol and fuel. Dutch indirect taxes are as follows:
- Sales tax (VAT)
- Excise duties
- Taxes on passenger cars and motorcycles (bpm)
- Motor vehicle tax (mrb)
- Tax heavy motor vehicles (bzm)
- Transfer Tax
- Insurance tax
- Rental tax
- Bank tax
- Environmental tax
- Import tax
- Export declaration
How does this affect you when you own a Dutch business?
If you own a company in the Netherlands, it is presumed you have either income or wealth from Dutch sources. Therefore, you are also presumed liable for several taxes. The most straightforward taxes are Dutch Income Tax and BTW (VAT), but as we explained above, there are more taxes you should take into consideration.
The Dutch Tax Authorities generally have access to all kinds of personal data via different governmental bodies, but every company owner is still solely responsible for filing a correct yearly and quarterly tax return. If you want to make sure this is done right, we advise you to look for a specialized third party you can safely outsource your tax responsibilities to. Intercompany Solutions has many years of expertise with services such as:
- Advice about Dutch taxes
- Keeping a correct administration
- Filing of all periodical tax returns
- Assisting business owners with their compliance program
- Opening of bank accounts
- Registration at the Dutch Tax Office
Keep in mind, that all corporations that are subject to Dutch taxes, are required to comply to very specific rules and regulations. This is also directly linked to your country of origin, and any possible tax treaties that exist between your native country and the Netherlands. Our financial advisers can assist you with any question, problem or inquiry you might have regarding the subject. They deal with complex tax and compliance matters on a daily basis and, thus, are able to inform you correctly and substantially. Please feel free to contact us any time for advice, or a clear quote.