Netherlands tax system - taxation of Dutch B.V. companies and individuals: VAT, income tax and capital gains. Tax treaties of the Netherlands.

Dutch tax residents pay income tax on their worldwide income, non-residents on income from Dutch sources.

There are three categories of income (boxes) for tax purposes:

1. Employment income, deemed income from housing, periodic payments, and business income. Such income is taxed at progressive rates:

• Income up to EUR 35,129 – 9.45% (the national insurance premium is also charged on this amount at a rate of 27.65%, i.e. the total fiscal payment rate is 37.1%);
• Income from EUR 35,130 to 68,507 – 37.1%;
• Income over EUR 68,507 – 49.5%.

2. Income from substantial participation in companies. Substantial participation means holding, individually or jointly with relatives, at least 5% of company shares. Profits from the sale of such investments and dividends on them are taxed at 26.9%.

3. Income from savings and investment. There is no tax as such on capital gains or current investment income (for example, dividends, interest, and royalties – unless it is business income). Instead, the taxpayer's net assets (assets less liabilities) are assessed as at 1 January. This value is used to calculate an annual fixed income taxed at the rate of 31%. There are various deductions and exemptions. The return on net assets is calculated using a special scale:

• 1.9% for assets with a total value of EUR 50,000 to 100,000;4
• .5% for assets with a total value of EUR 100,000 to 1,000,000;
• 5.69% for assets with a total value over EUR 1,000,000.

Dutch companies pay tax on their worldwide income. The standard income tax rate is 25.8% (effective January 1, 2022). The standard income tax rate is 25%. For companies with profits up to EUR 245,000, the tax rate is 15%.

Capital gains and dividends are included in the general tax base. However, such income is exempt from tax under the substantial participation exemption. This exemption applies if participation is at least 5% and a number of other conditions are met. Such conditions usually include the non-portfolio nature of the investment.

The exemption is also available if the subsidiary is taxed at a sufficient tax rate (at least 10%), and if less than 50% of the subsidiary’s assets are passive assets.

Dividends must not be deductible for corporate income tax by the distributing entity.

A foreign company is considered a controlled foreign company (CFC) if:

• a participation held in it, directly or indirectly, solely or jointly with related parties, is more than 50%,
• more than 30% of its income is passive income,
• the foreign company is from a low-tax jurisdiction (corporate income tax rate is less than 9%) or a jurisdiction listed as non-cooperative by the national government or the EU.

The passive income of a CFC is taxed in the hands of the Dutch controlling person.

CFC rules may disapply if the foreign company is engaged in genuine business activities.

Withholding tax is levied on dividends at the rate of 15%. The tax can be reduced under double tax treaties and EU directives.

Withholding tax is not levied on interest or royalties, except for payments to related parties in certain low-tax jurisdictions. In this case, the tax may be levied at the rate of 25%.

The standard VAT rate is 21%.

Some goods and services are subject to the reduced rate of 9%.

Employees pay a national insurance premium on remuneration up to EUR 35,129 at the rate of 27.65% (payable together with income tax).

Employers pay an employee insurance premium for income up to EUR 58,311 at rates depending on the industry. On average, the contribution is EUR 6,757 per year for a permanent employee and EUR 9,673 for temporary employees.

Employees pay compulsory health insurance contributions of about EUR 1,498, employers – at 7% on remuneration up to EUR 58,311.

There are some other premiums as well.

The tax is levied on the market value of the property at the rate of 8%.

A reduced rate of 2% applies when purchasing a property for living in it; in some cases, an exemption applies.

The tax may also be levied on the transfer of shares in a company with a significant share of real estate assets.

An annual tax is levied on immovable property owners at the municipal level.

The rates depend on the municipality; the tax base is the market value of the property.

The tax is levied on the market value of the gift or inheritance.

There are tax-exempt thresholds. Their size, as well as the tax rate (from 10% to 40%) depends on the degree of relationship between the parties.

The Netherlands has signed 101 Double Tax Treaties (DTC) and 23 Tax Information Exchange Agreements (TIEA) with the following jurisdictions:

101 DTCs: Albania, Argentina, Armenia, Aruba, Australia, Austria, Azerbaijan, Bahrain, Bangladesh, Barbados, Belarus, Belgium, Bosnia and Herzegovina, Brazil, Bulgaria, Canada, China, Croatia, Curacao, Czech Republic, Denmark, Egypt, Estonia, Ethiopia, Finland, France, Georgia, Germany, Ghana, Greece, Hong Kong, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Japan, Jordan, Kazakhstan, Korea, Kosovo, Kuwait, Kyrgyzstan, Latvia, Lithuania, Luxembourg, Malawi, Malaysia, Malta, Mexico, Moldova, Mongolia, Montenegro, Morocco, New Zealand, Nigeria, Norway, Oman, Pakistan, Panama, Philippines, Poland, Portugal, Qatar, Romania, Russia, Saudi Arabia, Serbia, Singapore, Sint Maarten, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Suriname, Sweden, Switzerland, Tajikistan, Taiwan, Thailand, Tunisia, Turkey, Uganda, Ukraine, UAE, United Kingdom, United States of America, Uruguay, Uzbekistan, Venezuela, Vietnam, Zambia, Zimbabwe;

23 TIEAs: Andorra, Anguilla, Antigua and Barbuda, Bahamas, Belize, Bermuda, British Virgin Islands, Cayman Islands, Cook Islands, Costa Rica, Dominica, Gibraltar, Grenada, Guernsey, Isle of Man, Jersey, Liberia, Liechtenstein, Marshall Islands, Monaco, Montserrat, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Samoa, San Marino, Seychelles, Turks and Caicos Islands.

In addition, the Netherlands has signed and ratified the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). The Multilateral Convention entered into force for the Netherlands on July 1, 2019.

There are no foreign exchange controls in the Netherlands.