Paying taxes in The Netherlands

Are you considering doing business in, with or from the Netherlands? Then it is important to take note of the tax consequences of this. In this article, Moneywood briefly explains the most important taxes and tax (dis)advantages you might want to be aware of if you are (considering) doing business from the Netherlands.

Three main taxes in the Netherlands

The main taxes levied in the Netherlands are

1. VAT on goods and services (standard 21%).
2. In addition, individuals annually have to pay income tax on their income. 
3. Companies such as nv, bv, and in some cases foundations and associations, pay corporate income tax on their net profit (2022: 15% on profits up to € 395,000, above this amount the tax rate is 25.8%).

VAT

In some cases, you can apply a reduced VAT rate in the Netherlands. You don't have to charge the usual 21% on some goods or services. The  reduced VAT rate  of 9% applies, for example, to food products and repair work.
Do you provide services to a customer in another EU country? Then the VAT is levied in the country where the customer is established. On your invoice you indicate that the  VAT has been shifted. Here  you can read more about VAT and the supply of goods and services to EU countries.

Income tax and corporate income tax

Every Dutch person pays income tax annually. You do this by means of a declaration in which income, debts and assets are mapped out. For employees, most taxes on their income are paid by their employers with their payroll tax. But still they have declare their income taxes, just as entrepreneurs do on their yearly income. Within the declaration of income tax, there is also the possibility to make use of discounts and deductions. These are also included in the corporate income tax. There is quite a large number of schemes that can make doing business in the Netherlands fiscally attractive. Tax benefits regarding income tax can be found in  this overview.  Is your company a corporate business? Then you can read  here  which tax benefits you may be entitled to.

Tax treaties

To prevent international companies from paying taxes in the Netherlands as well as in another country, tax treaties with a large number of countries apply. These are agreements between two countries that stipulate which of them can tax which income. One country will levy taxes and the other will offer a tax reduction or exemption.

On this  list of the countries with which the Netherlands has concluded a tax treaty , you can check whether there is a treaty with the Netherlands if you do business internationally.

183-day scheme

Are you planning to live partly in the Netherlands if you establish your company here? Or will your staff live part of the year in the Netherlands for work? A general and important maxim to determine in which country you are liable for tax is the 183-day rule. In principle, you are liable for tax in the country where you provide your income. But if you work in several countries in a year, this can result in cumbersome or duplicate administration. To simplify this, the 183-day rule has been created. A number of conditions have been drawn up under which, even if you work partly outside the Netherlands, you submit your entire return in the Netherlands and you fall under Dutch tax legislation for your entire income. In  this article  you can read more about the scheme.

As off July 1, 2023, cross-border workers have more opportunities to work from home. When cross-border workers work from home for an employer in a neighbouring EU member state, this could lead to problems with regard to social security or tax legislation. This obstacle to the labour market in the border regions was removed on 1 July: cross-border workers are allowed to work from home for a maximum of half the time, without this affecting the applicable social security legislation. The remaining working time must then be physically spent in the country where the employer is established.

30% ruling

Do you want to permanently settle non-Dutch staff in the Netherlands for work? Then you can use the 30% ruling: This is a special cost reimbursement scheme on income tax. It is an allowance from the tax authorities for the extra costs that an employee incurs by working abroad. This applies both to Dutch employees who are sent abroad for work, and to foreign employees who come to work in the Netherlands and are paying taxes here.

In both cases, the tax authorities meet so-called extraterritorial costs: extra costs that follow working in another country. Think, for example, of (extra) housing costs or the increase in living expenses. The tax authorities do this by offering employers the opportunity to reimburse such costs to employees without tax. Or instead, the employer may choose to apply the 30% ruling. 30% of the salary may then be paid tax-free to the employee. You can read more about  the 30% ruling here.

Preliminary consultations and APA/ATR policy

The Dutch government wants to make the business climate attractive for international entrepreneurs and offer transparency about (tax) legislation. That is why you can make agreements prior to a location decision and gain insight into what the Dutch tax system has for your company. To this end, it uses Advance Pricing Agreements (APAs) and Advance Tax Rulings (ATRs). APA/ATR policy:  APAs and ATRs provide foreign investors with certainty about how national and international tax rules in the Netherlands will apply to them. By means of preliminary consultations, the Tax and Customs Administration gives nationally and internationally operating companies the opportunity to obtain certainty in advance about the application of laws and regulations in the field of taxation. This way you know in advance what to expect when taxing your company and staff. In the  'Decree on preliminary consultations rulings with an international character - questions and answers'  you will find more information (in Dutch only) about preliminary consultations.

Dividend tax

Companies can distribute part of their profits as dividends to their shareholders. Dividends are subject to tax in the Netherlands. The general rate of dividend withholding tax is 15%. Dividend tax is deducted from the profits distributed to shareholders. In some circumstances, a company may be entitled to partial or total exemption from dividend tax or to a refund on dividend tax. The Tax and Customs Administration explains  here  how dividend tax works in the Netherlands.

Business premises in the Netherlands

If you want to acquire ownership of real estate in the Netherlands, it is subject to transfer tax on the market value. If you buy a business space in the Netherlands, you therefore pay tax on the purchase amount. The general tax rate of the transfer tax is 8%.

Are you going to rent business space in the Netherlands? In principle, the rental of a business space is exempt from VAT. But under certain conditions you can choose to tax the rent anyway. You do this via  the Tax and Customs Administration.  As an entrepreneur, you may deduct all costs for the rented business space. This also includes the costs, for example: the interior, the coffee machine and the window cleaner.

Want to read more about paying taxes in the Netherlands?

Would you like to know more about establishing a company or entrepreneurship in the Netherlands?  Here  you will find a comprehensive overview of schemes. The Dutch government has an  extensive, English-language website  with, among other things, checklists for entrepreneurs who want to establish their business in the Netherlands. Our sister company Lexlupa has written several articles on, for example, tax regulations and benefits for entrepreneurs regarding Dutch  income tax  and  corporate income tax. If you have any questions or would like tailor-made advice about doing business in, with or from the Netherlands, please feel free to contact us. Lupacompany has many years of experience in international accountancy.

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