General

The corporate tax rate for 2007 is 20% on profits up to €25,000, 23.5% on profits between €25,000 and €60,000, and 25.5% on the excess.

The Dutch tax system has many features that make the country an attractive location for businesses with international operations. Examples include the tax treatment of business profits, the participation exemption (where dividends and capital gains on the sale of shares in foreign subsidiaries are exempt from corporate tax), the absence of withholding taxes on interest and royalties, and an extensive tax treaty network. A corporate income tax reform, which came into effect on January 1st 2007, modernises and simplifies the Corporate Income Tax Act and improves the investment climate.

The Dutch tax authorities recognise that taxation significantly affects an international company’s choice of business location. It takes a client-oriented approach, providing potential international investors with advance information on the Dutch tax treatment of future investments in the Netherlands. The advance ruling process has been standardised through a series of ministerial decrees and reforms of the Corporate Income Tax Act to bring the process into line with best-practice guidelines of the OECD. The tax inspector in whose area of jurisdiction the business locates is bound by agreements made with the Information Office and the Rotterdam office’s special ruling teams. The tax authorities will issue a ruling within eight weeks.

Taxable Income and Rates

Corporation tax is levied on all companies established in the Netherlands (resident taxpayers) and on certain non-resident companies that derive income from the Netherlands. The Corporate Income Tax Act stipulates that all companies incorporated under Dutch law are deemed to be established in the Netherlands. Other factors taken into account in determining whether a company is established in the Netherlands include the place of its effective management, where the head office is located and where shareholders’ meetings are held.

Resident companies are subject to taxation on their worldwide income, and non-resident companies are subject to corporate income tax on certain Dutch-source income.

The Netherlands has a three-tier corporate income tax system. As noted above (5.1), the first €25,000 in corporate profit is taxed at a flat rate of 20%, with a 23.5% rate on profits between €25,000 and €60,000, and 25.5% on the excess.

There are no provincial or municipal corporate income taxes, but some municipal taxes apply to companies in the Netherlands. Municipal rates, the most important of which is the property tax, vary considerably.
Companies pay a variety of environmental taxes indirectly through suppliers. These include taxes on fuels, groundwater, tap water, and waste and energy consumption. The Netherlands does not impose an excess profits tax or an alternative minimum tax.