Corporate tax in the Netherlands

Corporate tax in the Netherlands deals with the tax payable in the Netherlands on the profits earned by companies. Currently, the Dutch corporate tax rate is 15%. This rate applies to taxable income of up to 245,000 euros. On the excess, a rate of 25% applies. These rates have been lowered by the Dutch government to stimulate a competitive tax environment for international businesses.

Worldwide profits

A Dutch company is subject to Dutch corporate tax on its worldwide profits, after taking into account tax deductible costs.

Rate

The 2019 Dutch corporate tax rate is 19% of the taxable income up to and including €200,000, above which the rate is 25%.[1] The lower rate will decrease to 16.5% in 2020. The rates will further decrease to 15% and 21.7% respectively in 2021.

Exemptions

Certain items of income are exempt from Dutch corporate tax. The most important items of income that are exempt are:

  • capital gains and dividends derived from qualifying subsidiaries ("participation exemption")
  • income attributable to a foreign business enterprise ("permanent establishment").

Participation exemption

Capital gains, dividends and profit participation loan interest derived from a qualifying subsidiary are fully exempt from corporate tax in the Netherlands ("participation exemption"). A subsidiary qualifies for the Dutch participation exemption when:

  • the subsidiary is an active company, and
  • the Dutch parent company holds an interest of at least 5% of such company.

Foreign branch

Any income received by a Dutch company from a foreign branch is exempt from Dutch corporate tax, provided such branch is a permanent establishment or representative.

Anti Abuse clause

The Dutch Corporate income tax regulations have included a great many anti-avoidance clauses since 1969, to avoid abuse of the tax rules by corporations. There have been implemented anti abuse clauses for the participation exemption, interest deductions for hybrid loans and recently for the dividend withholding tax act.[2]

Tax haven
See also: Dutch Sandwich (tax avoidance)

The Netherlands has been known internationally, since at least the 1970s, as a tax haven. A political debate about this issue started in 1977, when economist and social-democratic MP Flip de Kam published a book about corporations transferring large sums to Caribbean countries without paying Dutch corporate tax. Minister Van der Stee admitted that the country was internationally known as a tax haven, but refused to act, arguing that the problem could not be solved on a national level alone.[3] The debate raged for years; in 1986, Representative Willem Vermeend estimated that the country's tax service missed some ƒ4 billion per year due to companies such as The Rolling Stones' holding bv's using the "Caribbean route".[3]

Dutch tax laws have brought the country into conflict with the European Union several times, starting with strong criticism in the 1999 Primarolo Report. The Dutch government responded by having a group of high-ranking fiscal experts (known with the Ministry of Finance as the "Barbapapa group") create a smoke screen, changing the appearance of the fiscal system while leaving its structure intact.[3]

Starting 2009, the "tax haven" label resurfaced and sparked political controversy when the White House issued a press release in which the Netherlands was mentioned as tax haven.[4][5] According to various NGO's the Netherlands "can be seen as an intermediary tax haven for foreign corporations".[6][7][8] In February 2013, the Dutch House of Representatives accepted a motion calling on cabinet members to "reject, and where possible in discussions to insist on not mentioning" the qualification of the country as a tax haven; the motion was drafted by MP Roland van Vliet, a former tax advisor with Ernst & Young.[9] Economist Ewald Engelen estimated that at the time of the motion, the state earned some €1.5 billion in tax from €12 thousand billion being transferred through the country annually.[10]

As of 2013, the country harbors holding companies for various multinationals, participates in more than a hundred bilateral tax treaties, and the various exemptions facilitate tax avoidance by corporations. A notable example is most of the holdings of the Agnelli family which are incorporated there.[3][8]

In June 2014 the EU initiated a new investigation relating to the Dutch corporate taxes as part of a State aid (European Union) case by the Directorate General for Competition. The case was specific to Starbucks.[11] The investigation ended in October 2015, with the EC ordering Starbucks to pay up to €30 million in overdue taxes.[12] The EC exposed in its decision a legal structure commonly used by companies established in the Netherlands to avoid corporate taxation, the so called Dutch BV-CV structure.[13] In 2017, the EU initiated another State aid (European Union) investigation into a special deal on corporate taxation between the Dutch public administration and IKEA.[14]

National and foreign companies known to have special agreements with the Dutch tax service include Starbucks, Microsoft and PostNL. A 2015 FOI request by de Volkskrant to unearth the agreements failed, because these secret agreements are not centrally administered by the Tax and Customs Administration; with even the House of Representatives not having access to them.[15]

See also

References
  1. "Corporate income tax (VPB)". Business.gov.nl. Retrieved 17 December 2019.
  2. https://www.pwc.nl/en/insights-and-publications/tax-news/pwc-special-budget-day/amendments-to-anti-abuse-provisions-in-dutch-tax-legislation.html
  3. Vanheste, Tomas; Oberndorff, Map (6 August 2013). "Nederland belastingparadijs, met dank aan de PvdA" [The Netherlands a tax haven, thanks to the Labor Party]. Vrij Nederland.
  4. "The Netherlands a tax haven, a misunderstanding?". Tax Justice nl. Retrieved 21 May 2011.
  5. "US tax haven claim surprises Dutch". DutchNews.nl. 5 May 2009. Retrieved 21 May 2011.
  6. "New tax treaty policy prejudices developing countries". Centre for Research on Multinational Corporations. 20 April 2011. Retrieved 21 May 2011.
  7. Michielse, Geerten (24 February 2011). "Mag het een beetje minder koopman zijn?" (PDF) (in Dutch). Tijdschrift voor Fiscaal Recht. Cite journal requires |journal= (help)
  8. "Dutch masters of tax avoidance". The Guardian. 19 October 2011.
  9. Smits, Henk Willem (19 February 2013). "Geert Wilders houdt wél van belastingparadijs Nederland" [Geert Wilders does love Holland, the tax haven].
  10. Engelen, Ewald (16 February 2013). "Nederland is een topplek voor belastingontwijking" [Holland is a great place for tax avoidance].
  11. "Starbucks Unit Swapped Millions of Euros for Roasting Art". Bloomberg. 14 November 2014.
  12. "Commission decides selective tax advantages for Fiat in Luxembourg and Starbucks in the Netherlands are illegal under EU state aid rules". European Commission. 21 October 2015.
  13. "European Union/Netherlands - Dutch CV-BV Structures: Starbucks-Style Tax Planning and State Aid Rules". IBFD. 11 February 2016.
  14. "State aid: Commission opens in-depth investigation into the Netherlands' tax treatment of Inter IKEA". European Commission. 18 December 2017.
  15. "Belastingdienst: geen zicht op deals met bedrijven" [Tax Administration: no overview of deals with corporations]. De Volkskrant. 23 October 2015.
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