Netherlands Tax & Business Guide - Deloitte

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Basic facts
Population 16.4m Inflation 1.1% (2006)*
Main languages Dutch, Frisian GDP per head US$40,410*
Currency Euro (ƒ) GDP growth 2.9% (2006)*
Economic communities European Economic Area, EU, OECD, WTO
GDP sources 2.7% agriculture, 24.1% industry, 73.2% services
*Economist Intelligence Unit estimates.
Political environment

The Netherlands is a constitutional monarchy with a bicameral parliament. Following a general election in December 2006, a coalition government was formed in February 2007, again led by Jan Peter Balkenende, the prime minister, and comprising the centrist Christian Democratic Appeal, the left-wing Labour Party and the small Protestant Christian Union Party.
Foreign trade and investment
Exports US$391.1bn (2006)* Imports US$343.0bn (2006)*
*Economist Intelligence Unit estimates.

Leading export markets: The EU (in particular Germany, Belgium, the UK and France).

Major exports: Machinery and transport equipment; chemicals; food, drink and tobacco; and fuel.

The government actively encourages foreign investment. An important incentive is the willingness of the Dutch tax authorities to provide advance tax rulings. Other incentives include direct subsidies, loans and grants for environmental and research and development projects, employment premiums for job-creating investments and interest subsidies.
Business and financing
Business forms Private limited company (BV), corporation (NV)

The two most common business vehicles are the private limited company (besloten vennootschap or BV) and the public company (naamloze vennootschap or NV). BVs are the most common form used by Dutch commercial enterprise and foreigners. The liability of shareholders in a BV is limited to their paid-up capital contributions. Firms that aim to raise capital from the public must adopt the NV form. General and limited partnerships are also possible, as is a branch of a foreign firm.

Foreign and Dutch companies are subject to the same rules on market access.
Labour environment
Unemployment rate 5.5% (2006)* Minimum wage ƒ1,300.80 (monthly)
*Economist Intelligence Unit estimate.

About 25% of the working population is unionised.

Social insurance contributions are compulsory.

Foreigners must obtain a residence permit, and persons from outside the EU also need a work permit.
Taxation
Corporate tax
Main rate 25.5%

Resident companies are subject to tax on their worldwide income; non-resident companies are subject to corporate income tax on certain Dutch-source income. There is no definition of residence in the tax law, but companies incorporated in the Netherlands are considered to be resident. Foreign companies may be considered resident depending on the circumstances, the most important factor being the place of effective management.

The corporate tax rate for 2007 is 25.5%, with a lower rate of 20% applying to the first ƒ25,000 of profits and a rate of 23.5% applying to the next ƒ35,000 of profits. Dividends are taxable but a participation exemption applies for holdings (in domestic or foreign companies) of more than 5% (or in some cases lower), subject to certain conditions.
Individual tax
Progressive rates to 52%

Resident individuals are taxed on their worldwide income; non-residents are taxed only on Dutch-source income. Residence is determined according to personal circumstances, which include the location of a permanent home, the place where the spouse and children live, and the location of personal and economic interests. Income from employment or business is taxed at progressive rates to 52%. Dividends received are subject to a 15% withholding tax, which is creditable against the total personal income tax liability. Dividends, interest and capital gains relating to a substantial shareholding (5%) are taxed as a separate category of income at 25%. There is a favourable tax regime for expatriate employees, subject to certain conditions.
Capital gains
Company gains are taxed as income

Capital gains of companies are included in taxable profits and subject to normal corporate income tax. Capital gains derived from the sale of shares in a company are, in principle, exempt from corporate income tax under the participation exemption. In general, there is no capital gains tax for individuals, except for business profits and gains on privately acquired substantial shareholdings (5% or more) by individuals.
Indirect tax
VAT standard rate 19% Lower rate 6%

Value-added tax (VAT) applies to most transactions at the 19% standard rate. The lower rate of 6% applies to basic goods and services. Exports and the performance of electronic services for customers outside of the EU are zero-rated. Exemptions include newly constructed immovable property transferred at least two years after first use; financial and insurance services; health services; and the supply of social and cultural goods and services.

Registration is compulsory for businesses.
Tax administration and compliance
Tax year Corporations: accounting year; Individuals: calendar year

Preliminary assessments of tax can be made during the tax year, providing for prepayments of tax. A tax return form is sent to the company after the year-end, and the company must return the form within one month, although an extension is possible upon request. An assessment is then made within three years of the end of the tax year, and final tax is payable within two months of the date of the assessment.

Tax is withheld at source from salaries. Individual tax returns are due by April 1st following the end of the tax year, but an extension is usually possible. If an individual derives income other than employment income, a preliminary assessment may be made, with a final assessment issued within three years of the end of the tax year.
Additional tax information
Withholding taxes Dividends 15%, Interest and Royalties 0%. The dividend withholding tax rate may be reduced by an applicable tax treaty or under the EC Parent-Subsidiary Directives.
Tax treaties The Netherlands has concluded more than 80 tax treaties.
Dividends Taxable, with a participation exemption in some cases.
Revenue protection There is transfer-pricing and thin-capitalisation legislation.
Groups A fiscal unity is permitted.
Incentives Holding companies; group interest box regime (5% tax rate) (implementation of the group interest box regime is pending a state aid examination by the European Commission); group patent box regime (10% tax rate); free depreciation for certain assets; research and development expenditure; environmental relief.
Other taxes Environmental taxes on water and waste products, Excise duties, Immovable property transfer tax, Import duties, Inheritance and gift taxes, Insurance premium tax, Municipal real estate tax.