Corporate taxation in Utrecht
Teleport city rankings for corporate income tax
Residents are liable to tax on their worldwide income; nonresidents are taxed only on Netherlands-source income. Exemptions may apply for certain income from shareholdings, permanent establishments (PEs) and innovative activities (see under “Participation exemption” and “Incentives”). Branches of foreign companies and subsidiaries are treated the same way in determining corporate income tax, although branches usually are exempt from withholding tax on profit remittances to their foreign head offices.
Taxation of dividends
Dividends received by a Dutch resident company are exempt if the participation exemption applies (see under “Participation exemption”). If the participation exemption does not apply, either because the holding requirement is not met or because one of the three tests is not met and the subsidiary has not been subject to any form of corporate income tax, any profit derived from the shares will be taxed at the normal corporate rate without a credit. If the participation exemption does not apply because one of the three tests is not met but the subsidiary has been subject to corporate income tax, a tax credit will be granted. The amount of the credit varies: the maximum credit is 5%, and for EU subsidiaries a credit is granted for the actual amount of corporate income tax, up to the Dutch corporate income tax levied on the dividends.
Companies that have their management in the Netherlands and, in principle, all companies incorporated according to Dutch civil law are regarded as Dutch resident.
Losses may be carried forward for nine years and carried back for one year. Losses incurred in fiscal years 2009 through 2011 may be carried back for three years upon request, in which case, the term for carryforward is limited to six years. Special restrictions apply to losses incurred by a company whose activities are at least 90% finance and/or holding activities.
The participation exemption applies to dividends and capital gains derived from shareholdings of at least 5%, provided: (1) the subsidiary is not held as a mere portfolio investment; (2) the subsidiary is subject to a reasonable effective tax rate based on Dutch tax principles (“subject to tax test”); or (3) less than 50% of the assets of the subsidiary consist of "passive" assets, based on the fair market value of the assets (“asset test”). If the participation exemption is not applicable, a credit for the underlying tax may be obtained.
Foreign tax credit
Profits from a PE of a Dutch company generally are exempt from the Netherlands tax base. Where a PE of a Dutch company is engaged in low-taxed portfolio activities, a tax credit will be granted for foreign tax paid on such activities. Additionally, a tax credit generally is available for foreign withholding tax on interest and royalties under the Netherlands’ tax treaties or, if there is no treaty, where interest or royalty income is received from a developing country.
Corporate income tax is due on all profits derived from conducting a business, including trading income, foreign-source income, passive income and capital gains. In principle, all costs relating to the business are deductible.
Capital gains derived from the sale of a participation are exempt if the participation exemption applies (see under “Participation exemption”). Other capital gains are taxed at the normal
Other taxes on corporations
Real property tax
Municipalities impose an annual tax at varying rates on owners of real property. Real estate tax is deductible for corporate income tax purposes.
Social security contributions on employment income are payable by the employer and the employee. The contributions are calculated on gross salary, less pension premiums withheld from the salary.
A 6% real estate transfer tax is payable on the acquisition of real property in the Netherlands, or certain related rights. A reduced rate of 2% applies to the transfer of a residence.
Compliance for corporations
Administrative penalties may be imposed for late filing or failure to file a Dutch return, or for the late payment or nonpayment of tax. Criminal penalties may be imposed if the Dutch authorities can prove fraud or gross negligence.
Residents are taxed on their worldwide income. Nonresidents are taxed only on their Netherlands-source income. Under certain conditions, foreign individuals with Netherlands-source income are treated as a limited national taxpayer, in which case they are taxed on foreign-source income but are entitled to certain credits.
Residence is based on factors such as employment, family circumstances, etc.
Married couples must file a joint assessment unless a petition for a divorce has been filed. Unmarried couples must file a joint assessment if certain conditions are satisfied.
A taxpayer may request an advance ruling from the tax authorities on the application of the participation exemption to holding companies in international structures; the use of hybrid financing instruments and hybrid entities; the existence of a PE in the Netherlands; or the classification of activities, i.e. group services or shareholder activities.
A provisional assessment, generally based on information from the previous two years, usually is issued in the first month of the taxpayer’s financial year. This assessment is payable in monthly installments for the remaining months of the year.
Provided certain conditions are satisfied, a parent company may form a fiscal unity with one or more of its subsidiaries, under which the losses of one company may be offset against the profits of another company and fixed assets of one company may be transferred to another company without corporate income tax consequences. To qualify for fiscal unity status, the parent company must own at least 95% of the statutory voting rights and must be entitled to at least 95% of the profit and capital of the subsidiary. The parent company and the subsidiaries must have the same financial year. Under certain conditions, a Dutch PE of a foreign company may be included in a fiscal unity. The Dutch government has proposed a tax law amendment that will expand the possibilities of forming a fiscal unity via a company that is based in a different EU member state. The new rules also will broaden the possibilities of forming a fiscal unity with a foreign-based company that has a Dutch PE.
See under “Disclosure requirements,” above. Personal taxation:
Box 1 income is subject to progressive rates of 36.55% up to 52%, with a 14% base deduction for entrepreneurs; Box 2 income is taxed at a rate of 25%; and under Box 3, a fixed presumed gain of 4% (of the market value of the Box 3 assets minus debt) is taxed at a flat rate of 30%.
The tax year generally corresponds to the calendar year, although a deviating year may be used if so provided in the company's articles of association. The tax year usually is 12 months, but shorter or longer periods are permitted in the year of incorporation.
Income is categorized and taxed within one of three "boxes." Box 1 is income from an enterprise, employment and housing. Box 2 is income from substantial interests (5% or more). Box 3 is income from savings and investments.
Capital gains are, in principle, taxed at progressive rates in Box 1. If the gains are related to a substantial interest, a rate of 25% applies in Box 2. If the gain relates to an investment, the gains are not taxed as such in Box 3. There is no capital gains tax on gains from the sale of a dwelling.
Deductions and allowances
All expenses incurred that are necessary to obtain taxable income in Box 1 and Box 2 generally are deductible, except expenses related to employment. Certain expenses of a mixed character are not deductible or are deductible subject to certain limits. In relation to Box 3, liabilities are deductible from the taxable base.
Other taxation in Utrecht
Value added tax
Filing and payment
Depending on the amount of VAT payable, VAT returns are filed monthly, quarterly or annually.
The standard VAT rate is 21%, with a reduced rate of 6% applying for certain goods and services.
VAT is levied at each stage in the chain of production and distribution of goods and services. VAT applies on the supply of goods, the rendering of services, the acquisition of goods by businesses and the import of goods.
There is no registration threshold in the Netherlands; all VAT payers are required to register.
The abuse of law doctrine applies where the purpose of a transaction or series of transactions is the avoidance of tax.
Intracompany pricing for goods and services must be at arm's length, and documentation must be maintained on intragroup transactions. Acceptable transfer pricing methods include the comparable uncontrolled price, resale price, cost plus, profit split and transactional net margin methods, with transaction-based methods preferred over profit-based methods. It is possible to enter into an advance pricing agreement for the use of a certain transfer pricing method.
As a result of the global fight against tax evasion and the OECD base erosion and profit shifting (BEPS) project, country-by-country reporting requirements are introduced as from 1 January 2016.
Controlled foreign companies
There is no specific CFC legislation, but there is an obligation to annually reassess shareholdings of 25% or more in low-taxed companies whose assets consist of at least 90% "passive" assets.
The thin capitalization rules have been abolished and replaced with new rules. The new rules disallow the deduction of interest costs relating to excess debt (deemed to be) associated with the acquisition price of participations. The excess debt for purposes of this rule is calculated based on a mathematical rule, under which operational participations acquired from a third party generally are excluded. (See also “Other,” below.)
Accounting principles/financial statements
IAS/IFRS/Dutch GAAP. Financial statements must be filed annually.
Principal business entities
These are the public company (naamloze vennootschap or NV), private limited liability company (besloten vennootschap or BV), partnership (commanditaire vennootschap or CV, vennootsc hap onder firma or VOF, etc.), cooperative and branch of a foreign company.
In domestic situations, dividends are exempt from withholding tax if the participation exemption applies or, for corporate income tax purposes, if a fiscal unity exists between the dividend payer and the recipient.
Technical service fees
The Netherlands does not levy withholding tax on technical service fees.
The Netherlands does not levy withholding tax on interest. Interest on a hybrid loan can qualify as a dividend for tax purposes, in which case the rules for dividends apply.
The Netherlands does not levy withholding tax on royalties.
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