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Tax Minimization in the Netherlands

Tax Minimization in the Netherlands

Tax minimization can be defined as a set of strategies used by Dutch companies which want to reduce the overall taxes, while doing business in the Netherlands. Tax minimization in the Netherlands uses different legal procedures to arrange the investments and expenses of the company. Our company formation agents in the Netherlands can help you find out more about efficient tax planning and tax minimization strategies in the Netherlands.

Strategies to reduce taxes for Dutch companies

If you are operating a company in the Netherlandsyou need to consider efficient tax planning in order to avoid paying more taxes than necessary. A good knowledge of the Dutch taxation system is useful for this purpose, but foreign entrepreneurs in the Netherlands can also employ the services of a professional tax planer. A strategic tax planning scheme guarantees that you won’t miss any significant tax saving opportunities.

Tax deductions which can be obtained on a yearly basis can help reduce the overall taxable income of the company. In the Netherlands, the tax year is generally the calendar year and tax returns must be filled by April 1st. 

Special investments can also contribute to tax reductions. The contributions made to retirement plans, for example, should be carefully controlled. Other tax planning strategies may include donating different assets, rather than selling them or, if deciding that they should be sold, to use the capital gains deduction. Securities should be sold in years when other capital assets can yield long-term capital gains.

Our tax advisers and Dutch company formation agents can help you determine the best investment plan.

Tax minimization for natural persons and companies in the Netherlands

One of the main reasons foreign citizens and investors come to the Netherlands is its fiscal system. While in other countries businesses and citizens/investor need to use various tax planning solutions, these are available as incentive/allowance/deduction packages here. They apply to natural persons and companies in the same measure.

So, if you are interested in tax minimization solutions in the Netherlands, our accountants can help you verify if you enter any of the categories that can benefit from the facilities offered by the government.

Tax benefits for natural persons in the Netherlands

When discussing tax minimization solutions in the Netherlands is it useful to know that both natural persons and companies can apply for deductions and allowances. This means that they don’t need to appeal to special measures, but simply choose the fiscal incentives applicable to their situations.

Natural persons can use the following means to reduce the tax burden in the Netherlands:

  1. the healthcare allowance, as every person living in the Netherlands is required to have health insurance.
  2. the childcare allowance, which is a government assistance program for parents with school-aged children;
  3. another incentive given to parents raising children under the age of 18 is the child budget allowance.
  4. the rental allowance, which is a contribution made by the government to help with housing costs.

These can also benefit from the labor and general tax credits. Foreign citizens who live and work in the Netherlands can take advantage of one of the most popular tax minimization solution: the 30% advanced ruling. This last credit also applies to Dutch companies.

Apart from these, Dutch residents can also benefit from the deduction of expenses related to certain utilities and other costs. Among these:

  • – expenses incurred by raising children under the age of 21 can be deducted (these depend on the number of children);
  • – temporary disability and medical expenses incurred as a result of workplace accidents;
  • – public transportation services used to commute from one city to another can be deducted;
  • – the costs associated with renting or owning a home in the Netherlands.

Donations, venture capital loans, and other types of investments also benefit from special taxation schemes in the Netherlands.

If you are interested in making a tax planning strategy, you can use the services and financial advice offered by our Dutch specialists.

We work together with a company formation team in the Netherlands, so we can also help you open a business here.

Tax minimization for Dutch companies

Companies can have important revenues, however, their expenses and taxes are also higher compared to the general population’s living costs. So, tax minimization first appeared as a solution to reduce the tax burden on businesses.

In the Netherlandstax minimization strategies can imply setting up a startup company or making charitable donations.

Startups and new companies can benefit from tax reliefs offered by the Dutch government as it follows:

  • – the SME profit exemption which implies a 14% deduction on the profit of the company;
  • – the entrepreneurship allowance that can lead to a maximum of 46% deduction of the income tax;
  • – the tax relief for new companies which implies the deduction of a specific amount from the business’ annual gross profit  (the maximum amount for 2022 is 2,123 euros).

When it comes to donations, the following can be used to reduce the fiscal burden:

  • – donations to churches;
  • – donations to non-profit organizations or NGOs;
  • – donations to scientific organizations;
  • – donations to cultural organizations.

You can discuss all your options with our local consultants. We can also help you create a Dutch startup company.

Find out from the video below the most important tax minimization strategies in the Netherlands:

The special purpose vehicle as a tax minimization solution in the Netherlands

One of the main ways through which foreign entrepreneurs can minimize the taxes they pay in the Netherlands is the special purpose vehicle, shortly known as the SPV. This type of structure allows investors to pool various assets into a company registered in the Netherlands which will administer these assets. The SPV is a holding company which can benefit from many tax deductions under the double tax treaties signed by the Netherlands. Among these deductions, we remined dividend payments, interests and even royalties.

Reducing taxes through Dutch double taxation agreements

The double tax treaties mentioned above the most employed tax minimization solutions in the Netherlands because they offer transparency and are also covered by various EU directives, such as the Parent-Subsidiary Directive. Under most Dutch double taxation conventions, the Netherlands provides for reduced tax rates, tax exemptions and tax consolidation measures in the case of permanent establishment of foreign companies operating here.

These double tax treaties are also enforceable in relation to the incomes generated by foreign individuals residing or working in the Netherlands and help them to reduce the taxes they pay in their home countries. For example, the income resulted from employment in the Netherlands will only be taxed here.

Among the services offered by our company are also accounting services for foreign and local citizens and companies in the Netherlands.

Taxes in the Netherlands

The standard rate of the corporate tax in the Netherlands is 25% on taxable profits. However, reduced rates apply to companies meeting specific requirements. To these, the Netherlands has also enabled various tax allownaces for companies. The value added tax (VAT) in the Netherlands has a standard value of 21% and there is also a reduced rate applicable to certain services and goods.

If you want to know more about the conditions applicable for foreign investors in the Netherlands, please contact our company incorporation agents. We can help you with company formation services in AmsterdamRotterdam and other major cities in the Netherlands.