Country code – NL
Legal Basis – Civil law (Napoleonic)
Legal framework – Book 2 of the Dutch Civil Code
Company form – Private company limited (Besloten Vennootschap met beperkte aansprakelijkheid, BV)
Liability - The liability of the shareholders is limited to the amount of their shares.
Share capital – BVs do not require a minimum share capital (only a nominal deposit of €0.01). Company equity is divided into shares, which are not freely transferable and are privately registered.
Shareholders – A BV may be incorporated by one or more natural persons or legal entities, residents or non-residents. Details of the shareholders are disclosed publicly.
Directors – A BV must have at least one director. Tax substance rules require that at least 50% of the board consist of Dutch tax resident directors.
Secretary – The company may appoint a secretary, but it is not mandatory.
Registered Address – A company must have a registered office in the Netherlands.
General Meeting – A BV is required to hold an annual meeting of shareholders to vote on certain items, such as the appointment of directors and adoption of annual accounts. AGM may be held outside the Netherlands.
Electronic Signature – Permitted.
Re-domiciliation – Inward/outward re-domiciliation is usually not allowed. An exemption applies to the Societas Europeae (European Limited Liability Companies) which in some cases can change their legal seat to the Netherlands.
Compliance – A BV has to draft and file its annual reports and accounts with the Chamber of Commerce and file a tax return annually with the Tax and Customs Administration (Belastingdienst).
Medium and large companies are required have their annual report audited by independent, qualified and registered Dutch auditors, if 2 of the following 3 criteria are fulfilled by the company during 2 successive years: total assets exceeding EUR 4.4 million; turnover exceeding EUR 8.8 million; a workforce of more than 50 employees.
- Shareholders not disclosed *
- Directors not disclosed *
- Corporate shareholders permitted * *
- Corporate directors permitted * *
- Local director required * *
- Secretary required * *
- Local secretary required * *
- Annual general meetings required * *
- Redomiciliation permitted * *
- Electronic signature * *
- Annual return * *
- Audited accounts * *
- Audited accounts exemption * *
- Exchange controls * *
- Civil law (Napoleonic code) Base legal
- 1 Minimum shareholders *
- 1 Minimum directors *
- EUR 1 Minimum issued capital *
- - Minimum paid up capital *
- EURAny Capital currency *
- Anywhere Location of annual general meeting *
- 2017 AEOI *
Tax residency – Corporate residency is determined by the place of effective management. However, in principle, all companies incorporated under the Dutch Civil Law, are deemed to be tax resident in the Netherlands.
Basis – Corporate income tax is levied on worldwide income.
Tax rate – Corporate tax is levied at 20% on the first EUR 200,000 of taxable profits, and 25% on the rest. Rates will be reduced in both brackets, by a total of 4% by 2021: 1% in 2019, 1.5% in 2020 and 1.5% in 2021.
Capital gains – Capital gains are treated as ordinary income and taxed at the standard rate. However, capital gains derived from the disposal of holdings may be tax-exempt provided that the Dutch company holds at least 5% of the shares, and the participation is not held as a portfolio investment, among other conditions.
Dividends – Dividends received are subject to Corporate Income Tax. However, as with capital gains, if the Dutch company holds at least 5% of the shares, the participation is not held as a portfolio investment, and the subsidiary is subject to a reasonable effective tax rate, dividends received may be tax-exempt.
If distributed profits are tax deductible by the subsidiary, for instance under the EU’s Parent-Subsidiary Directive, the tax-exemption may not apply.
If the participation exemption is not available, a credit for the underlying tax may be obtained.
Interests – Interests are subject to corporate income tax.
Royalties – Royalties are generally subject to corporate income tax.
Withholding Taxes – Dividends paid to resident or non-residents are usually subject to a 15% withholding tax unless the tax rate is reduced or exempted under a tax treaty or exempted under the EU parent-subsidiary directive.
Currently, there is no withholding tax on interests, royalties and technical fees.
Foreign-source income – Certain foreign-source income such as foreign branch income or real estate income may be exempted or excluded from the tax base.
Double taxation of foreign dividends, interest and royalties is relieved by a tax credit provided by Dutch tax treaties or unilaterally if the payer is a resident of a developing country designated by Ministerial Order. If no relief applies, a deduction of the foreign tax paid is allowed.
Dividends and capital gains that qualify for the aforementioned participation exemption may not be subject to taxes.
Losses – Losses arising from taxable income may be carried forward for 9 years and carried back for 1 year.
Inventory - Inventory may be valued at the lower of acquisition/production costs or market value. First in first out (FIFO), Last in first out (LIFO) or average cost methods are generally permitted.
Anti-avoidance rules – There is transfer pricing legislation in Luxembourg. Transactions between related entities have to be governed by OECD’s arm’s-length principle and must be documented.
Acceptable transfer pricing methods include the comparable uncontrolled price, resale price, cost plus, profit split and transactional net margin methods. It is possible to enter into an advance pricing agreement for the use of certain transfer pricing methods.
There are no thin capitalization rules.
Netherlands has implemented certain tax law modifications to meet OECD’s BEPS standards and has conscripted to local law the EU Anti-Tax Avoidance Directive 1 (ATAD1) which entered into force on January 1, 2019.
Anti-avoidance measures include the introduction of controlled foreign company (CFC) rules – certain non-distributed income of a CFC, namely dividends, interests, royalties, certain capital gains, and other income, will be subject to Dutch corporate tax.
CFC rules are applicable to the aforementioned income type accrued by foreign subsidiaries located in low-tax jurisdictions, in which a Dutch company has a 50% or more interest, or by a low-taxed foreign permanent establishment.
Low-tax jurisdictions are those that have no corporate income tax or have corporate income tax lower than 9%, or jurisdictions that are considered non-cooperative jurisdictions for tax purposes by the EU. The Dutch Ministry of Finance will publish a list every year of jurisdictions to which CFC measures apply.
The 2019 list consists of the EU’s list of non-cooperative jurisdictions: American Samoa, USVI, Guam, Samoa, Trinidad & Tobago; and a Dutch list of low-tax jurisdictions: Anguilla, Bahamas, Bahrain, Belize, Bermuda, BVI, Cayman Islands, Guernsey, Isle of Man, Jersey, Kuwait, Qatar, Saudi Arabia, Turks & Caicos, UAE and Vanuatu.
Certain exceptions will apply if a subsidiary’s passive income is less than 30% of its total income or if the subsidiary meets certain economic substance requirements in its jurisdiction of establishment – such as salary expenses of over EUR 100,000 and office space for a period of 24 months. Note that Dutch tax authorities will no longer grant tax rulings for transactions with companies established in the aforementioned low-tax jurisdictions.
New anti-avoidance provisions also include the so-called ‘earnings stripping rule’ for groups, which limits the deductibility of net interest expenses (interest revenue – borrowing costs) up to 30% of taxable profits. Net interest expenses up to EUR 1,000,000 (lower than EU standards) are not caught by the earnings stripping rule. Non-deductible interest expenses will be allowed to be carried forward indefinitely.
In addition, the Dutch government has already announced a legislative proposal for Q3 2019 that will apply a 20.5% withholding tax on royalty and interest payments to low-tax jurisdictions included in the aforementioned list. This withholding tax is expected to come into force by January 1, 2021.
Labor taxes –National Insurance Tax, Employee Insurance Contribution, and Dutch Health Insurance are paid by both the employer and employee. The employer must withhold social security contributions from the employee’s salary at an aggregate rate of 27.65% (2018) calculated on the first EUR 33,994 (2018) of each employee’s gross salary.
Tax credits and incentives – There are additional deductions available for investments in energy-efficient assets and environmental assets. Companies conducting certain R&D activities may be eligible for a reduction of wage taxes.
Personal income tax – An individual is deemed to be tax resident in the Netherlands based on a series of facts and circumstances such as permanent home, employment duties, family residence, registration with local authorities, local bank accounts and local assets and the intended length of stay in the Netherlands.
Foreigners have usually deemed tax residents if their family is residing in the Netherlands or if they stay in the Netherlands for more than 1 year. However, expats may opt for several tax benefits if they fulfill certain conditions.
Tax residents are subject to tax on their worldwide income.
Employment, enterprise and housing income is taxed at progressive rates of 36.55% up to 51.95%, although a 14% base deduction may apply for entrepreneurs. Interests are taxed at 25% and income from savings and investments is usually taxed based on a fixed presumed gain (assets minus debt) at a rate of 30%. Calculation of presumed gains is based on past market returns realized.
Capital gains are usually taxed at progressive rates 36.55% up to 51.95%, exceptions may apply.
Other taxes – Transfer of immovable property is usually taxed at 6%. There is a municipal tax levied on real property. Inheritances received from Dutch residents are taxed at rates between 10% and 40%.
There is a landlord tax, charged to landlords that rent out more than 50 houses.
The sale of goods and services are subject to V.A.T. at a standard rate of 21%. Reduced rates and exemptions may apply.
- Offshore Income Tax Exemption * *
- Offshore capital gains tax exemption * *
- Offshore dividends tax exemption * *
- CFC Rules * *
- Thin Capitalisation Rules * *
- Patent Box * *
- Tax Incentives & Credits * *
- Property Tax * *
- Wealth tax * *
- Estate inheritance tax * *
- Transfer tax * *
- Capital duties * *
- 25% Offshore Income Tax Rate *
- 25% Corporate Tax Rate *
- 25% Capital Gains Tax Rate *
- 25% Dividends Received *
- 15% Dividends Withholding Tax Rate *
- 0% Interests Withholding Tax Rate *
- 0% Royalties Withholding Tax Rate *
- 1 Losses carryback (years) *
- 9 Losses carryforward (years) *
- FIFOLIFOAverage cost Inventory methods permitted *
- 119 Tax time (hours) *
- 9 Tax payments per year *
- 13.8% Social Security Employee *
- 13.8% Social Security Employer *
- 51.95% Personal Income Tax Rate *
- 21% VAT Rate *
- 124 Tax Treaties *
Country details *
The Kingdom of the Netherlands is a transcontinental sovereign state. Its main jurisdiction is the Netherlands, located in northwestern Europe, member of the BENELUX and the European Union, known for a flat landscape of canals, tulip fields, windmills, and cycling routes. It borders to the north and west with the North Sea, to the south with Belgium and to the east with Germany. The Kingdom also comprises the constituent Caribbean territories of Aruba, Curaçao, Sint Maarten and the dependent special municipalities of the Caribbean Netherlands (Bonaire, Sint Eustatius, and Saba).
Frequently known by the name of its most influential and relevant historical region, Holland, the country is one of the most densely populated areas in the world, with 41 543 sq. km and 17 million inhabitants. Its capital is Amsterdam, although The Hague is the seat of government. Its official language is Dutch, but English is widely spoken among its population. Other regional languages include Frisian and Papiamento. The legal tender currencies of the Kingdom are the Euro (EUR) in the Netherlands, the US Dollar (USD) in the Caribbean Netherlands, the Aruban Florin (AWG) in Aruba, and the Netherlands Antillean Guilder (ANG) in Curaçao and Sint Marteen.
Netherlands is one of the most developed states worldwide, ranking seventh in the Human Development Index (HDI) (2016). Its economy is characterized by stable industrial relations, low unemployment, a surplus in the trade balance, being an important commercial hub in Europe. In the industrial activity predominates the agro-industries, steel products and aluminum, metal and engineering, machinery and electrical equipment, bulk chemicals, natural gas, petroleum products, construction, transportation equipment, microelectronics, and fishing.
A highly mechanized agricultural sector employs only about 2% of the labor force but generates large surpluses for the food industry and for export, being the third worldwide. Its main agricultural products are dairy products, poultry, meat, livestock, flower bulbs, flowers, vegetables and fruits, sugar beets, potatoes, wheat, barley.
The Services sector accounts almost three-quarters of the GDP, and mainly comprised of tourism, commerce, hotels, restaurants, transportation, storage, and communications and financial services (banking and insurance).
The Netherlands has an attractive tax regime for tax optimization, attracting the establishment of holding companies, which under certain conditions may not pay taxes on the dividends and profits received from their subsidiaries. In addition to being one of the countries with more tax treaties to avoid double taxation.