Are you considering moving or starting a business in the Netherlands and want to know the taxes you will pay? The article below is a comprehensive guide on the most important levies in this country and the regulations that apply when it comes to their imposition on companies and natural persons.
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What is the basis for corporate taxation in the Netherlands?
The basis for corporate taxation in the Netherlands is residency. Companies that are incorporated in the country are all regarded as Dutch resident legal entities. These types of companies are liable for corporate tax on their worldwide income. Non-resident Dutch companies are only taxed on their income produced in the Netherlands.
The tax year for companies in the Netherlands is usually the same as the calendar year, and the period is 12 months, although shorter periods may be allowed in the year in which the company is incorporated. Corporate income tax returns are filed annually within five months of the end of the fiscal year.
What is the standard corporate tax in the Netherlands?
Recent changes in the legislation have led to the division of the corporate tax into two brackets as follows:
- a lower rate of 19% applies on corporate income of maximum EUR200,000 per year;
- the standard rate, which is now 25.8% applies to amounts surpassing EUR200,000 per year.
Another important development to consider is that the Netherlands aligned with the EU Pillar Two Directive, which provides for the taxation of company groups. Such enterprises (multinationals or large local businesses) that have a consolidated group turnover of at least EUR750 million per year will be subject to this Directive.
What other taxes should I be aware of in the Netherlands?
Other taxes for Dutch companies include the real estate transfer tax and the value added tax, which has a standard rate of 21% and a reduced rate of 6%. All VAT payers in the country are required to register.
However, the Netherlands does not impose a withholding tax on interest or royalties. Dividends are exempt from taxation on a domestic level, and they are subject to a 15% rate in other cases. A large number of double tax treaties signed by the Netherlands with other countries allow for double taxation relief.
Are foreign companies taxed the same as local ones in the Netherlands?
When it comes to foreign companies with operations in the Netherlands, there are 2 scenarios that apply:
- in the first one, the foreign company operates through a subsidiary, which is treated like a domestic enterprise from a taxation point of view;
- in the second one, the foreign business operates through a branch, in which case the corporate tax will be applied on the Netherlands-derived income.
The rates remain the same, no matter the type of entity used on Dutch territory.
How are natural persons taxed in the Netherlands?
Residents in the Netherlands are taxed on their worldwide income, while non-residents are taxed only on the income they produce in the country. Personal taxation is progressive in the Netherlands and includes three taxation boxes:
- 1 for income derived from employment, housing, or an enterprise,
- 2 for income derived from substantial interest,
- 3 for savings and investments.
Individuals must also observe the tax year and file the tax return before April 1st of the next year. Penalties apply for late filings or non-payment.
What are the types of income taxed under the Box 1 Regime?
The Box 1 taxation regime applies to income obtained from employment and residential real estate ownership. Specifically, when you fill out the form, you need to write amounts from:
- salary, bonuses, and other similar income;
- pension, annuities, benefits;
- income obtained in other countries.
The same regime applies to freelancers, artists, and sportspeople.
What are the rates of the Box 1 regime?
The Box 1 regime covers a progressive taxation of personal income under the following rates:
- for an annual income up to EUR 38,883, the rate is 35.75%;
- for a yearly income from EUR 38,883 to EUR 78.426, the rate is 37.56%;
- for income in excess of EUR 78,426 per year, the rate is 49.50%.
Please note that these rates apply to people who have not reached the retirement age.
What is the income that needs to be filled out under the Box 2 regime?
The Box 2 regime covers income from substantial interest. This means that if you and your spouse/civil partner own at least 5% of the shares in a company, you must declare it and pay taxes on it. The levy is imposed at a rate of 25%.
How is income taxed under the Box 3 regime?
In the Box 3 form, you need to report income from:
- savings;
- second home ownership;
- share ownership.
The tax to be paid is 30% and is calculated as the value of all the assets after deducting the debts. There is also a non-taxable part of this type of income, and it is the capital yield tax allowance.
For more information about taxation and tax compliance, please contact our Dutch representatives.