Welcome to Dutch Taxes

Corporation Tax

Although the Dutch Tax system is not that different from it's surrounding neighbor countries Germany and Belgium, there are numerous features that make it attractive for foreign companies to locate operations in the Netherlands. An important reason for foreign companies to choose the Netherlands as their base of European trade, stems from the supportive Dutch tax policy. The Dutch government has a solid record of stable industrial, educational and tax policies that stimulates entrepreneurship and foreign investment in the Netherlands.

The Netherlands have a sophisticated tax system with high tax rates some aspects of its fiscal system are extremely attractive and make it the ideal location in which to base international trading operations. Attractive fiscal incentives are further enhanced by a complex network of double taxation treaties (few of which contain any anti avoidance provisions) and by the existence of a procedure of advance tax rulings whereby the tax authorities who are autonomous and approachable can at short notice specify the fiscal consequences of certain business structures provided that material financial interests are involved and the propositions are reasonable. Tax rulings can be negotiated in advance providing certainty on taxable income and the effective corporate tax rate for the next four to eight years. The final, effective tax rates obtained are among the most competitive in the European market.

Corporation tax rates have been cut by the Dutch government from 34.5% in 2006 down to 31.5%, with a further cut to 30% taking place this year. This reduction will bring the country's corporate tax rate below the average rate in the old EU15, which currently stands at 31.4%.

In 2005, the government put forward further reductions in corporation tax to stimulate the economy and foreign investments: as from 1st January, 2007, the starting rate of corporation tax will be lowered to 20% on the first €41,000 of profit, compared with the current 27%, and the headline rate of corporation tax will be reduced from 31.5% to 26.9%. Owners of small and medium-sized enterprises will benefit from an exemption of at least 5% of their profits.

The proposals also include a proposal to reduce the tax rate for profits derived from intercompany financing and treasury activities to 10%, and confirm the already announced abolition of the capital duty of 0.55% on the issue of share capital.

Individual Tax

If you live in the Netherlands, you qualify as a resident taxpayer. If you live abroad and receive income from the Netherlands that is taxable in the Netherlands, you qualify as a non-resident taxpayer. In both cases, you will be subject to Dutch income tax. Individuals can be liable for the following taxes: income, salaries and social security contributions, corporate income, dividend withholding tax, inheritance and gift tax, value-added tax (BTW), motor vehicle tax, environmental taxes and local taxes. For the purposes of determining tax in the Netherlands, the first step the Belastingdienst will take is to determine your residency status. Several factors are considered, including location of family home, employment, and registration in a municipal register.

There is technically no legal definition of a resident, but the working rule tends to be that you are NOT a resident if you are in the Netherlands for less than 183 days a year, the location of the family home is in an another country, and/or that the company you work for does not have an office or branch in the Netherlands. However, under certain circumstances, you can be considered as a resident for the purposes of taxation or a non-resident taxpayer who qualifies for the 30 percent ruling.

It can have far reaching and long-term impacts on tax and eventual residency questions as to how residency is defined in terms of tax. Be sure to get advice.

Residents are liable for income tax on income from all domestic and foreign sources including business income, employment income, investment income and income from periodical benefits. Non-resident taxpayers are taxed on Dutch business income, employment income, income from real estate in the Netherlands and income from periodical benefits and shareholdings in Dutch companies.

As well as residency, other personal circumstances such as marital status and whether the couple are taxed individually or not, children, ownership of a car, ownership of a house, your employment status, healthcare costs and other assets and expenses are taken into account when assessing the amount of taxable income. Personal allowances are also dependent on the individual's circumstances and vary widely, depending on age and family circumstances (number of children, married or single, single parent, disability, home owner, etc).

The 30% ruling is one of the best known features of the Dutch tax system for expatriates. It is applicable to foreign employees working in The Netherlands who have a certain expertise or experience which is not available or scarce on the Dutch labor market.

The Netherlands has a special tax regime for expatriates, the so-called 30% ruling, which provides a substantial income-tax exemption (up to 30%) for a period of up to 120 months. This is viewed as a reimbursement of the extra costs involved in living abroad.

As part of the reform of the Dutch tax system, effective 1 January 2001, the 30% ruling was incorporated in Dutch tax law, replacing the former 35% ruling for expatriates working in the Netherlands. The 30% ruling preserves many of the characteristics of the 35% ruling, but several important changes were also made. According to the new rules, the employer may grant the employee a tax-free allowance up to a maximum of 30% of his remuneration. The State Secretary of Finance clarified the term remuneration as 'wage from current employment.' This means that incidental and flexible forms of income such as bonus payments and stock options are also included. Originally, this tax-free allowance was only applicable to regular payments. Termination and pension payments, however, remain excluded.