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Netherlands-UK Double Taxation Avoidance Treaty

Netherlands-UK Double Taxation Avoidance Treaty

The first double taxation agreement between the Netherlands and the United Kingdom was signed in 1980 and was amended soon after, in 1983. The agreement contained provisions about the avoidance of double taxation of the income and capital gains, while the amendment introduced in 1983 contained provisions about the prevention of fiscal evasion. In 2008, the Netherlands renewed its double taxation treaty with the United Kingdom. The new double taxation agreement was enforced at the beginning of 2011.

Our Dutch company formation agents can offer more information on the double tax treaties signed by the Netherlands. We can also help foreign investors who want to open companies in the Netherlands.

What are the taxes covered by the Netherlands-UK double tax treaty?

The Netherlands-UK double taxation agreement covers the income and the capital gains taxes imposed on behalf of one of the contracting states in the other. The taxes covered refer to the total income and capital gains or on elements constituting these taxes. In the Netherlands, the double taxation treaty covers the following taxes:

  • – the income tax,
  • – the wages tax,
  • – the corporate tax,
  • – the dividend tax.

In the United Kingdom, the double taxation agreement covers the following taxes:

  • – the income tax,
  • – the corporate tax,
  • – the capital gains tax,
  • – the petroleum revenue tax,
  • – the charge on ring fence trades.

The agreement also applies to other similar taxes levied in the Netherlands and in the UK.

The permanent establishment under the Netherlands-UK double tax treaty

One of the most important provisions of the double tax treaty agreements between the Netherlands and the UK is related to the permanent establishment status which can be taken by:

  • – branch offices;
  • – factories;
  • – workshops;
  • – mining facilities;
  • – places of management;
  • – other types of offices.

In order to be deemed a permanent establishment must operate in the other country for a minimum period of 12 months.

With respect to the taxation of the permanent establishment, it will be taxed only in the country where it operates.

There are various documents you need to prepare when starting a business in the Netherlands. The Articles of Association are the most complex, as they need to contain all the important information that will also be recorded by the Companies House. If you need support in drafting them, please contact us.

How does the UK-Netherlands double tax treaty apply?

The UK-Netherlands double taxation agreement applies to all types of incomes, including the income derived from movable and immovable property. The income derived from the alienation of immovable property may be taxed in the other state, no matter where it is situated, provided that a tax credit is granted in the recipient’s country of residence.

UK and Dutch companies will also benefit from the avoidance of double taxation, in case they own immovable property. With respect to business profits, the profits of a Dutch or UK company will be taxed only in the company’s resident country, provided that the company does not have a permanent establishment in the other country. Subsidiaries of Dutch companies located in the UK will be taxed in the United Kingdom. Dividends are taxed as it follows:

  • – 10% of the gross amount of the dividends,
  • – 15% of the gross amount of the dividends, if these are derived from the alienation of movable or immovable property,

Dividends are exempt from taxation if the recipient holds at least 10% of the voting power in the company paying them.

Avoidance of double taxation in the Netherlands and the UK

The Netherlands-UK double taxation treaty provides for the following methods of eliminating double taxation:

  • – the Netherlands will offer tax exemptions and reductions for incomes generated by individuals and companies in the UK;
  • – the UK will offer tax allowances for incomes generated by UK companies in the Netherlands.

For more information about the taxes covered by the double taxation agreement with the UK, you may contact our Dutch agents.