Have A Question? Call An Expert
REQUEST A FREE CONSULTATION

If you would ask a regular Joe in the streets in the Netherlands, he would probably not define the Netherlands as a 'tax haven'. However, for some companies, the Netherlands was regarded as a tax haven.

The taxation system in the Netherlands focuses on attracting foreign capital, and a great way to do this, is by offering tax-breaks and subsidies. Holland has, for example, double tax agreements with many countries. One of the biggest breaks for many businesses is the fact that incoming royalties are untaxed in Holland. The Netherlands is currently addressing the criticism by implementing a variety of new regulations to combat tax avoidance.

What exactly is a tax haven?

Before we get into that more, it is important to know what exactly a tax haven is. A tax haven is a country that offers foreign businesses (and also individuals) a minimal taxation liability in a stable environment. Little or no financial information about this liability will be shared with foreign authorities.

Businesses do not have to operate out of the tax haven, to benefit from the local policies. This means that a business can be established in a country where taxes are high, but that it chooses to pay its taxes in a country with a very low (or even zero) rates for taxes. Especially many multionals look for tax havens, since that helps them improve their profits. Many US companies are very well known examples.

Usually they are mentioned in relation to using different low tax juridisctions such as BVI (British Virgin Islands), Hong Kong, Panama. Mentions about these practices are recently quite well known, such as in ''The Panama Papers'', and are described as well in older articles, such as in Rovnickwriting ''Sun sand and lots of money''. The latter referring to how many tropical countries, who primarily focus on the tourism industry, are accredited with billion dollar turnovers of (Western) multionals taking place there, despite little to none actual local business activity.

Multinational corporations are often accused of exploiting local regulations (by ''shopping'' the most favourable conditions). Many international corporations with stores worldwide, pay taxes only in a handfull of jurisdictions. Shifting the profit to more favourable jurisdictions. The criticism is that (usually) more poor countries are not paid their fair share of taxes by this corporations.

The tax justice network classifies different tax havens which are used by multinationals to avoid tax.
''Corporate tax havens also foster a worldwide race to the bottom. As one jurisdiction introduces a new tax loophole or incentive or tax cut to attract mobile capital, others will try to put in place an even more attractive offering, triggering others in turn to join in, resulting in an unseemly race to the bottom that steadily shifts the tax burden away from wealthy shareholders of multinational corporations, who are mostly wealthy people, and towards lower-income groups. That is why, in many countries, corporate taxes are falling while corporate profits are rising. As a result of this race, tax cuts and incentives don't stop at zero: they turn negative. There is no limit to multinationals’ appetite for free-riding off public goods and subsidies paid for and provided by others. This race to the bottom gets called "competition" but it is a completely different beast from the market competition we are familiar with, and for the reasons given above it is always pernicious.'' Source

To avoid such occurances, and a race to the bottom. Europe is taking decisive actions to set a policy for taxing multinationals in the entire Eurozone. This prevents corporations from turning competing governments against one another to attract the multinational. The first step in such regulations is to have multinationals disclose their turnover, earnings and taxation in each country. Such collective action will also allow the Eurozone to push back against the interests of the United States, which wants its multinationals to be taxed as much as possible in the United States.

The Netherlands, beneficial tax regulations

The Netherlands is providing an attractive fiscal climate to multinationals. The methods through which it does that are competitive, yet above-board. not comparable to the traditional tax havens. From 2024 it is 19% for €200.000 and if it exceeds that amount it becomes 25.8% for the corporate tax rates. (compared to BVI 0%). This new regulation seems to be aimed mostly at smaller corporations, positioning the Netherlands to attract more small businesses.

The Netherlands offers advanced tax rulings for multinationals, so the tax inspector will discuss with them how they should interpret the rules. What is allowed and what is not. Instead of providing a control in hindsight and risking fines, the Netherlands prefers to talk up front. Communicating clearly with new businesses, instead of providing an uncertain atmosphere.

The Netherlands will combat tax evasion

The Netherlands will cooperate internationally to reduce tax evasion. The government has announced a variety of measures to combat tax evasion. Among the actions named are:

''I. As of 2021, the Netherlands will introduce a withholding tax on outgoing interest and royalty flows to low tax jurisdictions and in abusive situations. This prevents the Netherlands from being used for transfer activities to tax havens.
II. The government wants to offer both the Netherlands and its contract partners an effective set of tools against tax avoidance.
III. In the implementation of the first and second European directive to combat tax avoidance (ATAD1 and ATAD2), the Netherlands will go further than this directive prescribes.
IV. The importance of transparency in the approach to tax avoidance and evasion is evident. The government is, therefore, continuing the policy effort of the previous cabinet. The government will clarify the legal responsibility law of lawyers and notaries. Penalty fines imposed on them are made public. This means that these financial service providers need to be better accountable for the structures on which they advise.
V. To strengthen the integrity of financial markets, the government is working on legislation to establish a so-called UBO register (Ultimate Beneficial Owner). Existing legislation for trust offices will also be tightened.''

Find here the original Dutch regulator position on the measures as announced on 23-02-2018.

Unfair to compare the Netherlands to other ''tax havens''?

We believe it is unfair to address the Netherlands as a mere tax haven, the Netherlands is famous for the colorful capital of Amsterdam and the port of Rotterdam – the biggest port in Europe and until recently, the biggest port worldwide. Also, the Netherlands is very popular for its favorable business environment. The Netherlands has a rich history of international commerce, dating back to the 17th century and the ''VOC'', the first public corporation in the world. Which was likely the biggest corporation to ever exist (inflation corrected).

Would you like to start a company in the Netherlands?

If you are looking for a stable European country and prosperous economy to expand your business, it might be wise to look into the possibility of establishing a branch of your company in the Netherlands. Intercompany Solutions can help you do this. In the past years, we have helped forming over 500 companies and we offer a 100% satisfaction guarantee.

Our business law experts will make sure that every aspect of setting up your business will be done according to all the relevant laws. We can help you with every aspect, from setting up your business to accounting services, company bank account application, citizenship and residency services, and legal services.

The dividend tax Netherlands is a kind of income tax on payments of dividends to the shareholders of companies. The Netherlands tax law has provisions for a fixed rate on dividends. In case the business meets particular criteria, tax exemptions may apply. Our local agents can give you comprehensive information on tax compliance with respect to any Dutch entity.

The maximum rate for a dividend tax Netherlands is 25%. However, companies do not owe dividend taxes if they fulfil certain requirements for participation exemption. This exemption concerns capital gains and dividends from shares of no less than 5%. Subsidiaries can be eligible for participation exemptions if they are active and pass the tax test (for being taxed in accordance to the Dutch principles). Additionally, less than 50% of the company’s assets can be passive. If a subsidiary meets these conditions, its income from dividends is exempt from taxes.

Dutch companies not qualifying for participation exemption are liable for taxes at the usual corporate rate with respect to profit from shares. If Dutch subsidiaries are subject to corporate tax but they do not meet all criteria to benefit fully from the exemption, they may receive a special credit.

Our lawyers in the Netherlands can provide you with detailed information on the provisions relevant to dividend income.

Dutch corporate taxes

According to the national law companies established in the country are resident and need to pay taxes on any income generated worldwide. Non-resident entities performing activities in the Netherlands owe taxes only with respect to income generated locally.

The Netherlands tax on corporate income is levied for all profits from business activities in the Netherlands, including income from foreign sources, capital gains and passive income.

The Dutch Tax office or ''Belastingdienst'' in Dutch, is the agency in charge of internal revenue and taxation. If you need more details on the Dutch tax system, do not hesitate to contact our local lawyers. We offer comprehensive services with respect to tax compliance. You can also check our article on paying taxes in the Netherlands.

The Netherlands and its taxation system offer many special benefits to international investors. Corporate taxation in the country varies depending on the taxable profit of businesses: there are two rates determined by the amount of income. Our local lawyers are available to assist you in opening a company and fulfilling the requirements for your full corporate tax compliance in the Netherlands.

Corporate taxation in the Netherlands

Any business incorporated in the Netherlands is regarded as a resident company liable for corporate taxes. Resident entities owe taxes with respect to income obtained worldwide while non-resident ones are taxed only on the profit generated in the country.

The rate of corporate taxes is 19% for up to EUR 200 000 of taxable yearly income and becomes 25.8 % for amounts exceeding this value. Corporate tax is charged for any profits generated from business activities in the Netherlands, including income from trading, international operations, passive and source incomes, etc. In principle, all costs connected to the activity of the company are deducted from the total profit.

The Dutch Tax office or ''Belastingdienst'' in Dutch, is the agency in charge of internal revenue and taxation.

Exemptions of corporate tax Netherlands

Certain items of the income are exempt from corporate taxes. These are dividends and capital gains obtained from particular subsidiaries and profits generated by foreign businesses. This is regulated in the subsidiary-parent directive.

Local subsidiaries are eligible for exemption from Dutch corporate tax if they are active and the Dutch parent company holds at least 5% interest. These subsidiaries must undergo a test showing whether they qualify for exemptions. The parent company will be eligible for participation exemption in case they are already charged with reasonable taxes in the country where the subsidiary is located. Similarly, a subsidiary would qualify for participation exemption in case its passive assets do not exceed 50 % of the total assets.

Our lawyers in the Netherlands can provide you with further details about corporate tax exemptions and their application with respect to your Netherlands company.

Other characteristics of corporate taxation

The tax system in the Netherlands offers different reliefs and benefits. Certain budget allocations, for instance, apply for development and research activities. Such allowances reduce the company’s taxable income. Similarly, companies working in the field of export and import can take advantage of a special tax regime with respect to tonnage available for companies dealing with shipping.

Physical and corporate persons who are employed or perform business activities in the Netherlands need to follow the local requirements for taxation. Paying taxes in the Netherlands is obligatory both for companies established in the country and branches of international entities. Substance has a role in the tax status, a business address in the Netherlands needs to be compliant to the substance requirements by the tax authorities.

Corporate taxation in the Netherlands

The country does not charge withholding taxes on royalties or interest. Dividends are not taxed at the domestic level; otherwise, the tax rate on dividends is 15%. The Netherlands has signed numerous agreements with other states worldwide to avoid double taxation and lower the tax burden on companies.

For Dutch companies, the accounting year usually matches the calendar one with 12 months duration. Shorter periods can be considered in the incorporation year. The tax on corporate income is paid annually, up to 5 months after the financial year ends.

The Dutch Tax office or ”Belastingdienst” in Dutch, is the agency in charge of internal revenue and taxation.

Personal taxation in the Netherlands

Dutch residents are taxed with respect to their income worldwide; nonresidents pay taxes only on income generated locally. The principle of taxation of physical persons is progressive with three sections: section 1 applies to income from housing, employment or enterprises; section 2 is for income from substantial interest; section 3 is relevant for investments and savings.

Physical persons are obliged to respect the taxation year and deposit any liabilities before the first of April on the next year. Delays/non-payment are subject to penalties.

If you would like more information on taxes and tax requirements, do not hesitate to contact our agents in the Netherlands.

VAT IN THE NETHERLANDS

The Netherlands uses a value-added tax system (VAT), which is named Belasting toegevoegde waarde (BTW) in Dutch. This system is very similar to the system that is used in other countries of the European Union. Not all transactions are subject to VAT, but in Holland, it is very common to charge this value-added tax. The regular tax rate is 21%, and this rate is charged on (almost) all goods and services by businesses within Holland.

If products are imported from outside the EU, this VAT rate may also apply. The Netherlands  also uses a special lower tax rate. This rate was 6% for many years, and it applies to specific goods and services, for instance, food products, medicine, art, antiques, books, entry to museums, zoos, theaters, and sports. This rate has been increased to 9% as of 2019.

The value-added tax (VAT) is a broadly based consumption tax that all EU countries use, including the Netherlands. As a consumption tax, the burden of paying it is placed on the final consumer of the goods or services. While all EU countries apply a VAT tax, each member country can make decisions about what to tax and on what rate levels. VAT in the Netherlands is considered an indirect tax because it is first paid to the seller of the goods or services. The seller then pays the tax to the revenue authorities.

More information about the Dutch VAT rate

The value-added tax rate in the Netherlands is rather straightforward. However, there are some exceptions that can make it harder to understand every little detail. If you want to be sure you are doing everything right, it would be best to hire a consultant who can guide you through the process. Intercompany Solutions for example. We can help to set up your business in the Netherlands. We provide corporate solutions for investors and companies worldwide, and serve international clients who are interested in company formations and corporate services. We help entrepreneurs with all aspects of their company setup. Read more on setting up a business in the Netherlands.

The different VAT rates in the Netherlands

The Netherlands has several VAT rates and a list of goods and services that are VAT-exempt. The main, general Dutch VAT rate is 21% and this has been so since 2012. This rate applies to most goods and services.

There is a special VAT rate of 9% that applies to a subsection of goods that are considered necessities. The goods include foods and drinks (but not alcohol), livestock meant for agricultural purposes, medical necessities (such as prescription medications), most reading materials, and seeds for use in agriculture and horticulture. Materials purchased for home renovations are also sometimes taxed at this rate, depending on the age of the home. There are a few services that are taxed at this lower 6% rate, as well. Among these are hairdressing services, vacation rental homes, public performances that are considered artistic (plays and musical performances), and most transportation services.

A zero VAT rate is applied to items that are not consumed in the Netherlands. If they are shipped to and consumed outside the EU, then no VAT will be applied. Likewise, if the goods are purchased by a legal business entity within another EU country, then that entity is responsible for charging VAT to the final consumer in the country in which it exists. However, if the goods are sent to a final consumer in another EU country, then you must charge VAT in the Netherlands.

VAT exemptions in the Netherlands

The Netherlands also has a number of exemptions; visible exports are amongst these. These are zero-rated. If VAT exemptions apply, you don’t have to pay the tax, and you also cannot deduct it. There is a list of services that are completely exempt from VAT in the Netherlands. By being exempt, the state does not charge any tax on them whatsoever. These exemptions include medical services provided by a doctor or nurse, banking services, insurance advice and services, childcare services, and educational services.

Journalistic services are also VAT exempt, but only if the service provided by the journalist is deemed to be intellectual property and is only that journalist’s original ideas. Determining what is and what is not VAT exempt can be tricky, and it is suggested that you always speak with a local advisor to ascertain your particular VAT status. It is not possible to claim a refund of the VAT that is charged over the costs and investments that are related to the goods and services that fall under the VAT exemptions. Goods and services that are exempted from VAT are: letting or selling immovable property (provided that the building is more than 2 years old), healthcare services, childcare, care services and home care and other similar topics.

Are there any other tax exemptions in the Netherlands?

These aren’t the only tax exemptions in the Netherlands. Other tax exemptions are sports organizations and sports clubs, services supplied by socio-cultural institutions, financial services and insurances, services supplied by composers, writers, and journalists, education, and fundraising activities. There is also an agricultural scheme in place, which applies to agricultural and livestock farmers, foresters, and market gardeners. All the goods and services that are provided by these entrepreneurs are also exempted from VAT. This scheme is called ‘Landbouwregeling’. All other tax exemptions in Holland can be requested from the Dutch tax office.

Tax-free shopping

A topic that needs some special attention is tax-free shopping. If you want to offer goods to customers who desire to shop tax-free, then you will need to take some extra measures and precautions. For example, you will need to check their ID or passport to make sure that these customers live outside the EU. Another requirement is that the goods you sell will leave the EU with the customer. In cases that you do charge VAT, you can return in to the customer at a later stage. You can achieve this by supplying your customer with an invoice, that also mentions the customer’s ID number. They will need to have this document signed by customs for export. Once the invoice is signed, they can send it back to you and you can refund the VAT they paid.

VAT rate for foreign entrepreneurs

If you are doing business in the Netherlands, but your business is established outside the Netherlands, then you will have to deal with the Dutch regulations. If the service or product you provide is supplied in the Netherlands, you usually have to pay value added tax here. However, in reality, the tax is often reverse-charged to the person who receives the service or product. If this is not a possibility, you have to pay the value added tax in the Netherlands. Reverse-charging VAT is possible if your client is an entrepreneur or a legal entity, established in the Netherlands. In that case, you can exclude the tax from your invoice and state ‘VAT reverse-charged’. You are allowed to deduct the tax charged over any costs related to this transaction.

VAT registration in the Netherlands

If your company provides any goods and services for consumption in the Netherlands or the EU, then it must register for VAT. Once you are registered, you are required to submit annual VAT returns and make regular payments to the revenue service of VAT you have received. These VAT submissions can now be made electronically. Payments can be made either monthly or quarterly. Some smaller companies that collect very little VAT may be able to make one annual VAT return and payment, instead of paying regularly throughout the year. You should consult with an advisor to determine if your VAT payments are low enough to qualify for a single, yearly payment.

Please contact our Dutch advisor for further details about VAT issues in the Netherlands. We can advise you on tax exemptions, and what you must do to qualify for them. We can also assist you with the submission of annual tax returns and help you register your company for VAT in the Netherlands.

Dedicated to support entrepreneurs with starting and growing business in the Netherlands.

Member Of

menuchevron-downcross-circle