Tax advantages in the Netherlands
Below you will find the main tax advantages of doing business in the Netherlands.
One of the most used tax advantages is the so-called deelnemingsvrijstelling. In short, this is a Dutch tax regulation that exempts an entity that has a stake of at least 5% in another entity to pay tax over the profit paid out to the receiving entity. This tax-regulation is often applied with mother and daughter companies.
Mother BV has a 100% stake in Daughter BV. Daughter BV makes €100 profit and pays €15 in corporate income tax (15%). Daughter BV pays out the €85 as dividend to the 100% shareholder, Mother BV. The €83,50 that Mother BV receives is exempt from corporate income tax. So the total taxation for this structure is 15%. If this ‘deelnemingsvrijstelling’ was not in place, the total taxation would amount to another €12,75 (15% of the €85 dividend) which would make the total tax rate 27,75% and the taxes to be paid €27,75.
This is advantageous for the mother company in case of a profit-turnout. Additionally it could save a lot of money when the mother company decides to sell the daughter company. The entire profit from the sale of the daughter company will flow tax-free to the mother company. The daughter company has already paid corporate income tax over the value increase of the company (the profit) in the years prior to the sale. Taxing the profit again when the daughter company is being sold would mean double taxation of the profits.
The deelnemingsvrijstelling gives internationally operating companies an extra advantage if the daughter company is located in a country with lower corporate income tax than the rate in the Netherlands. This means that the profit of the daughter company will be taxed at the low rate of the foreign country. Afterwards the post-tax profit can be channeled to the Dutch mother company. The amount that flows to the mother company will then NOT be taxed in the Netherlands.
In 2017 a new advantage for startups took effect. Since then the director / major shareholder (DGA) of an R&D-focused private limited liability company (BV) is allowed to only earn (pay himself) the legal minimum wage (€1551 gross per month) in the first 3 years after the start of the company. Let’s say a company makes a healthy profit and the director/shareholder decides to pay himself an extremely low salary or no salary at all and live off the dividend. He will then only have to pay the, very low, corporate income tax. To make sure everyone pays their fair share and to avoid tax avoidance, director/major-shareholders are supposed to pay out a salary to themselves of +/- €47.000. The amount paid out to the director/shareholder is taxed with the higher income tax. This is the general rule and there are many exceptions to it. You can argue at the Tax Authorities (Belastingdienst) that you do not have the means to pay out such a salary. This startup scheme can be used without first consulting the tax authority. The idea is that the company will have more money available aimed at growth. For a private company, the minimum wage is generally €47.000 gross per year (exceptions exist). The DGA can use this scheme without first consulting the tax authority. As a result, the company has more money available for business growth. The measure is aimed at a director-major shareholder (DGA) of a BV doing research and development and is part of the effort to reduce taxation on R&D.
Innovation Box: 9% tax
All the profit your BV makes with the development of innovative activities are taxed in the so-called Innovation Box.
The Netherlands is a hotbed for innovation, with a number of startups and tech companies thriving in the country. The Dutch government has taken notice and created the innovatiebox, a tax incentive that rewards companies for investing in innovative products and processes.
The innovatiebox offers a number of benefits, including a reduced tax rate on profits derived from qualifying innovative activities. This can make a significant difference for companies that are able to take advantage of the incentive, and has helped to make the Netherlands an attractive destination for startups and tech companies.
In order to qualify for the innovatiebox, companies must meet a number of criteria. First, they must be engaged in research and development (R&D) activities that aim to create new or improved products or processes. Second, they must have incurred costs related to these activities in the form of salaries, materials, or other expenses. Finally, they must be able to demonstrate that their R&D activities have resulted in actual innovation, as measured by factors such as commercial success, patents obtained, or technical achievements.
The innovatiebox has been successful in promoting innovation in the Netherlands, and has helped to make the country a leading destination for startups and tech companies. If your company is engaged in R&D activities and you are looking for a way to reduce your tax liability, the innovatiebox may be right for you.
If you would like to learn more about the innovatiebox and how it can benefit your company, please contact us. We would be happy to discuss your specific situation and help you determine whether the incentive is right for you.
Find the corporate income tax tariff on those profits below.
|SME tariff||15% (up to €395.000)||19% (up to €200.000)|
|Standard tariff||25,8% (profits exceeding €395.000)||25,8% (profits exceeding €200.000)|
|Innovation Box||9% on profits derived from qualifying innovative activities||9% on profits derived from qualifying innovative activities|
Officially the 30% facility for incoming employees. This tax benefit gives employers the possibility to give an incoming employee from abroad to the Netherlands a tax free refund of the expenses the employee has made in making the transfer. Also, and more importantly, as an employer you can give your employee 30% of the wage including the reimbursement, completely tax free. Furthermore, for the latter you do not have to prove that you have actually made those costs. Both employer and employee have to submit an application to qualify for this facility.
As an eenmanszaak (sole proprietorship), you are not eligible for the ruling. This is because the 30% ruling is for employees, and as an eenmanszaak you are technically not an employee.
It is possible to get the ruling by being a director/employee in your own BV company. However, the BV would usually need to be established before the arrival of the director.
The following are the requirements to successfully apply for the 30% ruling:
- You have an employment relationship;
- You are recruited from another country by your first employer in the Netherlands, or you are on assignment in the Netherlands from another country;
- Of the 2 years before your 1st working day in the Netherlands, you lived outside the Netherlands for more than 16 months, at a distance of more than 150 kilometres from the Dutch border;
- You have specific expertise that is not or is only barely available on the Dutch employment market;
- You have a valid decision.
Is it possible to apply for the 30% ruling after you have already moved to NL?
You can apply for a 30% ruling for an employee if he or she has had the employment contract signed before he or she resides in the Netherlands. So, for example, signed a contract on April 1 and started living in the Netherlands on April 15. Then the 30% application is legitimate. Moving, then signing the contract and then applying for the arrangement is not allowed.
Other tax incentives
There are many sector specific incentives and benefits. The most important benefits are listed below:
- One of the lowest corporate income tax rates in Europe.
- Participation exemption. No taxation of intercompany dividend payouts.
- The 30%-ruling. This gives a 30% tax break on wages in certain cases.
- Lower corporate tax rate for innovative businesses (Innovation Box)..
- In the top of countries with most bilateral tax treaties to avoid double taxation.
- WBSO R&D tax credit. Innovative businesses who obtain this tax credit pay less wage tax and national insurance contributions.
- The Energy Investment Allowance (EIA) lets qualifiying companies deduct 45% of the investment costs from the taxable profit on top of the usual depreciation.
- MIA & VAMIL schemes. The MIA lets qualifying companies deduct a maximum of 36 percent of the investmens costs for environmentally firendly investments on top of the company’s regular investment deductions. The Vamil gives qualifying companies the opportunity to decide when to write off 75 percent of your investment costs, which gives advantages both in liquidity and interest.
- Fiscal unity system that provides tax consolidation within a group (holding and operating BV).
If you have any questions on this, please request a quote for more information.