Dutch Tax System
Corporate Tax
Corporate Income Tax is levied on the taxable profits made by a company in a given year minus deductible losses: 20% on the first Є200.000 and 25,5% on the excess of Є200.000. With the reduction, the Dutch corporate income tax rate becomes one of the lowest in Western Europe. A company may set off its losses retroactively against its taxable profits for one preceding year (carry back) and against its taxable profits for nine years to come. The Netherlands does not have Capital Tax. The dividend withholding tax is 15%. Under a tax-treaty this rate can even be lowered. The Netherlands has no withholding tax on interest and royalties.
International Aspects / Tax Haven
For many years international companies chose the Netherlands to start a branch in Europe or a holding company. The first reason is that the Netherlands has a tax open door policy and is international oriented. The Netherlands has been concluded in many tax treaties with countries all over the world in order to avoid double taxation. One of the most important features of the Dutch corporate income tax law is the provision with respect or profits and gains derived by a Dutch company from its subsidiaries and qualifying participations. The second reason why the Netherlands is attractive for companies is because the countries policy encourages entrepreneurial spirits and therefore has a perfect environment for international tax planning. The Netherlands is regarded as the "Tax Haven" of multinationals. The Netherlands facilitate so-called “conduit structure”, which make it possible for international operating companies to channel their financial flows through the Netherlands in order to reduce tax charges elsewhere. Thus many international has it’s headquarter in the Netherlands. Some companies are only mailbox-companies who do not have commercial practice, but are incorporated to reallocate revenues to countries with zero or less tax to be paid.
Personal Income Tax
Personal Income Tax is levied on the income of individuals and is reduced on the amount of general levy rebates. There are three categories of taxable income:
Box 1 taxable income from work and dwellings;
Box 2 taxable income from substantial interests;
Box 3 taxable income from savings and investments.
Individuals must report their income of the previous year to the Tax Authorities before 1 April every year. Because of several kinds of levy rebates, it is possible to get tax return.
Wage Withholding Tax / Payroll tax
Wage withholding tax or payroll tax is a deduction of wages, social security benefits and pensions. The employer deducts the wage tax from the monthly salary of the employee as an advance payment of the personal income tax. There is a progressive tax on wages, profits, social benefits and pensions. Thus there are brackets:
· Bracket 1: 33% tax on salaries under €18,628;
· Bracket 2: 41.95% tax on salaries between €18,629 and €33,436;
· Bracket 3: 42% tax on on salaries between €33,437 and €55,694;
· Bracket 4: 52% tax on salaries over €55,694.
(all salaries above are yearly amounts, 2011 standard)
30% ruling
Expats who are working for a Dutch company and have certain expertise, can apply for a 30% tax-free lump-sum allowance for the extra costs of the employee’s stay in the Netherlands (extraterritorial costs). This implies that the employee can benefit from regular personal income tax. This lump-sum allowance amounts up to 30% of the employee’s total wages and allowances during the first 10 years of their stay in The Netherlands. In addition, the employer may also provide a tax-free reimbursement of the fees paid for the employee’s children to attend an international school. The 30% ruling is a very favorable feature of the Dutch tax system for expats.
Value Added Tax (VAT)
The Dutch value added tax (VAT) is levied on at each stage in the chain of production and on the distribution of goods and services. The paid VAT by the entrepreneur on expenses or investment may be deducted from the VAT he charges to the third party. The general VAT rate is 19%. Some goods and services are subject to a reduced rate of 6%, while some types of transactions are even exempted from VAT. Transactions between the European markets are levied to special tax rules.
