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Tax Code in the Netherlands

Tax Code in the Netherlands

Updated on Friday 04th September 2015

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The Tax Code in the Netherlands (“Algemene wet inzake rijksbelastingen”) was introduced in 1959 and contains all general rules and administrative procedure related to taxation issues in the Netherlands.

Taxes within the  Dutch Tax Code can be divided into the following main categories:

  • ·         Income tax
  • ·         Wage withholding tax
  • ·         Value added tax
  • ·         Dividend tax
  • ·         Inheritance and Gift tax
  • ·         Customs

The income tax in the Netherlands subdivides into corporate tax (for companies) and personal income tax (for individuals).

Personal income tax 

According to the Tax Code in the Netherlands, the personal income tax can be classified into three categories:

  • -       Employment and business income
  • -       Income from a limited liability company, where the individual has more than 5% of the shares of the company
  • -       Income from savings and investments

Any income received by an individual in the Netherlands is subject to the personal income tax, according to its category. However, there are certain tax reductions applicable for individuals who work and live in the Netherlands or who study or train in the country.  The 30 % Dutch rule is a personal tax reduction that applies to specialized foreign employees working in the Netherlands in certain fields where trained personnel is hard to find. The purpose of this tax reduction is to compensate the extra costs encountered by the employees during their stay in the Netherlands.

In the Netherlands, citizens have to report their income for the previous year by April 1.

Corporate income tax

The corporate income tax applied to Dutch companies represents 25% of its worldwide profits.

Certain items of income are exempt from the corporate tax:

  • -       Dividends and capital gains derived from qualifying subsidiaries
  • -       Income attributable to a foreign business

Subsidiaries qualify for the exemption if:

  • -       it is an active company
  • -       the Dutch parent company holds an interest of at least 5% of the company

Foreign branches can also qualify as an exemption from the Dutch corporate tax if the branch is a permanent establishment or representative.

The Dutch corporate tax is paid during the financial yeas based on an estimate. The exact financial tax amount is determined based on the corporate tax return. In the Netherlands corporate tax return needs to be submitted within 5 months after the end of the financial year.

Our accountants in the Netherlands are able to guide you through the entire process of paying taxes. For more information on the applicable taxes and compliancy, as well as matters related to the Tax Code in the Netherlands, please contact our Dutch accounting firm.

 

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