Corporate tax in the Netherlands

Corporate tax in the Netherlands deals with the tax payable in the Netherlands on the profits earned by companies. In general, a Dutch company is subject to 25% corporate tax ("vennootschapsbelasting") on its worldwide profits. However, certain items of income are exempt from tax and certain costs are non-deductible.

Worldwide profits

A Dutch company is subject to Dutch corporate tax on its worldwide profits, after taking into account tax deductible costs.

Rate

The 2013 Dutch corporate tax rate was 20% of the taxable income up to and including €200,000, above which the rate is 25%.

Exemptions

Certain items of income are exempt from Dutch corporate tax. The most important items of income that are exempt are:

  • capital gains and dividends derived from qualifying subsidiaries ("participation exemption")
  • income attributable to a foreign business enterprise ("permanent establishment").

Participation exemption

Capital gains, dividends and profit participation loan interest derived from a qualifying subsidiary are fully exempt from corporate tax in the Netherlands ("participation exemption"). A subsidiary qualifies for the Dutch participation exemption when:

  • the subsidiary is an active company, and
  • the Dutch parent company holds an interest of at least 5% of such company.

Foreign branch

Any income received by a Dutch company from a foreign branch is exempt from Dutch corporate tax, provided such branch is a permanent establishment or representative.

Tax haven

The Netherlands has been known internationally, since at least the 1970s, as a tax haven. A political debate about this issue started in 1977, when economist and social-democratic MP Flip de Kam published a book about corporations transferring large sums to Caribbean countries without paying Dutch corporate tax. Minister Van der Stee admitted that the country was internationally known as a tax haven, but refused to act, arguing that the problem could not be solved on a national level alone.[1] The debate raged for years; in 1986, Representative Willem Vermeend estimated that the country's tax service missed some ƒ4 billion per year due to companies such as The Rolling Stones' holding bv's using the "Caribbean route".[1]

Dutch tax laws have brought the country into conflict with the European Union several times, starting with strong criticism in the 1999 Primarolo Report. The Dutch government responded by having a group of high-ranking fiscal experts (known with the Ministry of Finance as the "Barbapapa group") create a smoke screen, changing the appearance of the fiscal system while leaving its structure intact.[1]

Starting 2009, the "tax haven" label resurfaced and sparked political controversy when the White House issued a press release in which the Netherlands was mentioned as tax haven.[2][3] According to various NGO's the Netherlands "can be seen as an intermediary tax haven for foreign corporations".[4][5][6] In February 2013, the Dutch House of Representatives accepted a motion calling on cabinet members to "reject, and where possible in discussions to insist on not mentioning" the qualification of the country as a tax haven; the motion was drafted by MP Roland van Vliet, a former tax advisor with Ernst & Young.[7] Economist Ewald Engelen estimated that at the time of the motion, the state earned some €1.5 billion in tax from €12 thousand billion being transferred through the country annually.[8]

As of 2013, the country harbors holding companies for various multinationals, participates in more than a hundred bilateral tax treaties, and the various exemptions facilitate tax avoidance by corporations.[1][6]

In June 2014 the EU initiated a new investigation relating to the Dutch corporate taxes as part of a State aid (European Union) case by the Directorate General for Competition. The case was specific to Starbucks.[9] The investigation ended in October 2015, with the EC ordering Starbucks to pay up to €30 million in overdue taxes.[10] The EC exposed in its decision a legal structure commonly used by companies established in the Netherlands to avoid corporate taxation, the so called Dutch BV-CV structure.[11] In 2017, the EU initiated another State aid (European Union) investigation into a special deal on corporate taxation between the Dutch public administration and IKEA.[12]

National and foreign companies known to have special agreements with the Dutch tax service include Starbucks, Microsoft and PostNL. A 2015 FOI request by de Volkskrant to unearth the agreements failed, because these secret agreements are not centrally administered by the Tax and Customs Administration; with even the House of Representatives not having access to them.[13]

See also

References

  1. 1 2 3 4 Vanheste, Tomas; Oberndorff, Map (6 August 2013). "Nederland belastingparadijs, met dank aan de PvdA" [The Netherlands a tax haven, thanks to the Labor Party]. Vrij Nederland.
  2. ↑ "The Netherlands a tax haven, a misunderstanding?". Tax Justice nl. Retrieved 21 May 2011.
  3. ↑ "US tax haven claim surprises Dutch". DutchNews.nl. 5 May 2009. Retrieved 21 May 2011.
  4. ↑ "New tax treaty policy prejudices developing countries". Centre for Research on Multinational Corporations. 20 April 2011. Retrieved 21 May 2011.
  5. ↑ Michielse, Geerten (24 February 2011). "Mag het een beetje minder koopman zijn?" (PDF) (in Dutch). Tijdschrift voor Fiscaal Recht.
  6. 1 2 "Dutch masters of tax avoidance". The Guardian. 19 October 2011.
  7. ↑ Smits, Henk Willem (19 February 2013). "Geert Wilders houdt wél van belastingparadijs Nederland" [Geert Wilders does love Holland, the tax haven].
  8. ↑ Engelen, Ewald (16 February 2013). "Nederland is een topplek voor belastingontwijking" [Holland is a great place for tax avoidance].
  9. ↑ "Starbucks Unit Swapped Millions of Euros for Roasting Art". Bloomberg. 14 November 2014.
  10. ↑ "Commission decides selective tax advantages for Fiat in Luxembourg and Starbucks in the Netherlands are illegal under EU state aid rules". European Commission. 21 October 2015.
  11. ↑ "European Union/Netherlands - Dutch CV-BV Structures: Starbucks-Style Tax Planning and State Aid Rules". IBFD. 11 February 2016.
  12. ↑ "State aid: Commission opens in-depth investigation into the Netherlands' tax treatment of Inter IKEA". European Commission. 18 December 2017.
  13. ↑ "Belastingdienst: geen zicht op deals met bedrijven" [Tax Administration: no overview of deals with corporations]. De Volkskrant. 23 October 2015.

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