The Netherlands

At a glance

Corporate Income Tax Rate	20 - 25%
Tax rate applied on capital gains	20 - 25%
Tax rate applied on branch profits	20 - 25%

Other taxes (e.g. local or state tax) levied on corporate profits?	no

Withholding taxes (standard rates)	15%
on dividends	15%
on branch profit remittance	N.A.
on interest	N.A.
on royalties	N.A.

Participation exemption
on dividends	fully exempt
on capital gains	fully exempt

Loss carry back period	1 year
Loss carry forward period	9 years

Introduction

The Netherlands has a competitive corporate tax regime that stimulates entrepreneurship and foreign investments in the Netherlands. The participation exemption is one the main pillars of the Dutch corporate income tax system. Under this exemption both dividends and capital gains deriving from qualifying shareholdings are fully tax exempt in the Netherlands. Due to this tax facility, the Netherlands is home country for many holding companies. The underlying principle for the Dutch participation exemption is the aspiration to avoid double taxation when profits of a subsidiary are distributed to the parent company. The exemption system achieves a level playing field for Dutch enterprises operating abroad, since those companies will be subjected exclusively to the foreign corporate income tax rate without having to pay additional tax in the home country (as would be the case if a credit system is applied). Dutch group companies are allowed to file a consolidated tax return under the fiscal unity regime. By doing so, transfer-pricing issues with respect to transactions between Dutch companies may be avoided. The fiscal unity regime also allows that losses of one company can be set of against profits of another company. Dutch companies are allowed to keep their accounts in a functional currency other than the euro and to calculate their tax able profit in that foreign currency. Also the Dutch tax rules re the calculation of the tax base are relatively flexible (i.e. tax accounts may differ from the commercial accounts). The Dutch Revenue has an open mind for foreign investment and has broad experience with facilitating foreign investments in the Netherlands. It is possible to obtain certainty in advance from the Revenue about the tax treatment of certain activities or corporate structures, through an Advance Tax Ruling (ATR) or Advance Pricing Agreement (APA) but also by discussing transactions upfront with the competent tax inspector. For specific industries and investments attractive tax facilities are available (e.g. tonnage tax for shipping companies, R&D facilities and accelerated deprecation and/or investment grants for innovative or sustainable investments). An extensive treaty network further enhances the attractiveness of the Netherlands. Those tax treaties reduce withholding taxes on dividends, interest and royalties frequently to zero per cent. For outbound payments, the Netherlands does not levy withholding tax on interest and royalty payments. In the exceptional case that no tax treaties available for a certain country, unilateral tax relief may be available for certain types of income. Being part of the EU entitles Dutch companies to the benefits of the EU Directives (like zero per cent tax on parent-subsidiary dividends and no withholding taxes on interest and royalty payments between affiliated EU companies).