As a global entrepreneur you might be familiar with taxes, but you might be new with the Dutch tax regulations. In this article we will provide you a practical oversight of the Dutch taxes, and the requirements that you need to consider for your Dutch business.
Spoiler alert: SME companies, that don’t expect any business in the short-term have nothing to worry about. VAT registration might not be required, so in your first 12 months there could be no tax requirement at all. Most (first) fiscal book years end 18 months after the incorporation of the company.
This article will tell you all about it, even if you expect to be active and employ staff from day 1!
Dutch Administrative Requirements
A company is required to maintain accounting records that are sufficiently adequate to determine the financial position of the company at any time. There are various regulations, including civil and tax regulations, stipulating the period for which the records should be retained. As a general rule, the records must be kept for a period of seven years.
The Dutch accounting rules are regulated by law. The Dutch Generally Accepted Accounting Principles (Dutch GAAP) are mainly based on EU directives. The Dutch GAAP apply to a BV and NV as well as other entities, like for example certain forms of partnerships.
In case the company grants a loan, or decided to pay a dividend to its shareholders, it's important to keep a proper record of the decision taking. In case of an outgoing dividend, it may also be required to file a withholding tax return, and pay the withholding tax to the tax authorities.
Similarly, the appointment of directors needs to be documented carefully, and the company is responsible for withholding taxes on salaries of personnel.
House of Companies can help your company to meet all (tax) compliance requirements. If you have any doubt on how you should deal with a certain situation, please contact us.
In case you decide to use the bookkeeping services of a third party, House of Companies as your local agent, still requires to be updated on completed filing requirements. We can also deal with third party accountants on your behalf.
House of Companies has a strategic alliance with accounting firms and auditors, in case accounting or auditors statements are required, or to deal with Companies which require certain specific expertise.
Tax Requirements For The Company
Dutch companies need to consider several kinds of taxes. And of course, each tax, comes with certain (filing) obligations.
The exact requirements depend on the corporate structure (does it concern a branch or a legal entity/subsidiary) and the tax liability of transactions that take place. In the next paragraphs we discuss the most common taxes that a Dutch business is likely to have to deal with, such as:
VAT
Corporate Income tax
Corporate Withholding Tax (interest, royalty, dividend)
Payrolling Taxes
VAT
VAT is a Sales Tax. Which means, VAT is charged on your sales invoices. The Dutch name for value-added tax (VAT) is BTW (Belasting Toegevoegde Waarde). Sales tax in the Netherlands applies when you sell or buy goods or services in the Netherlands, although there are some exemptions from BTW. If you are required to charge BTW in the Netherlands, then it will be following one of three tariffs:
Zero Dutch BTW applies to international activities, such as transferring goods or offering services outside of the EU.
A Dutch BTW rate of 9%, commonly known as the low tariff, applies to the sale of common products (e.g., food, drink, agriculture, medicines, books).
A 21% Dutch BTW rate, also called the high or general tariff, applies to all other VAT taxable activities.
Basically any company can apply for a VAT number in the Netherlands. Even if the company is not considered resident in the Netherlands, but on occasion, has to deal with Dutch VAT. For example when it imports goods.
For example, if your Dutch company does not provide any VAT tax liable transactions, there is NO legal requirement to apply for a VAT number. This also means that there is no need to file a (quarterly) tax return.
Our team of experts can inform you on the VAT liability of your transactions.
Under the reverse-charge arrangement, you do not charge VAT, but reverse-charge it to your (European) buyer.
In case of export of either services or products, in most cases VAT is not applicable (except for example for electronic services).
VAT related to purchase and sales of Services
You supply a service if you are paid for a service that is not the supply of goods. For example, if you:
transport goods or people
organise musical or theatrical performances
grant licence agreements
carry out advisory duties
work as a lawyer or accountant
carry out repairs or maintenance duties
Whether you will be required to pay VAT relating to these services depends on the question whether you supply the service in the Netherlands. If that is the case then usually you will be required to pay VAT in the Netherlands. The VAT is often reverse-charged to the person receiving the service. Therefore you only pay the Dutch VAT if you supply a service in the Netherlands and if the VAT cannot be reverse-charged to your client.
VAT related To Purchase And Sales Of Products
You will be involved in VAT both in the purchase and sale of goods. You can:
purchase goods in the Netherlands
import from EU countries into the Netherlands
import from non-EU countries into the Netherlands
sell goods to clients in the Netherlands
export from the Netherlands to other EU countries
export from the Netherlands to non-EU countries
Application Of A VAT number
Although many resident companies in The Netherlands receive their VAT number automatically, this is typically not the case when your company is considered ‘non-resident’. Based on several chareasterics of your company, such as the nationality of its ‘sole’ director, or the registration address (fully fledged, or at a business center), the tax authorities can determine if it will consider the company as a ‘resident company’. If not, or in case of doubt, extra information must be provided to the tax authorities, or the ‘non-resident’ VAT number must be applied manually. Such number is typically released within 2-3 weeks after application, and has one major restriction compared to the VAt number for ‘residents’. The ‘non-resident’ VAT number will not allow you to apply for the art. 23 license, to allow VAT exempt(postponed) imports into the EU.
Corporate taxes
Most Dutch companies need to file corporate tax returns, in certain circumstances, foundations and associations must also file corporation tax returns. This also applies for Dutch branches, even if they are not required to draft financial statements.
Some legal entities, such as tax investment institutions, do not pay corporation tax. The Tax and Customs Administration may also exempt some legal entities that make collective investments from corporation tax.Based on the registration at the Chamber of Commerce, the Dutch tax authorities will automatically release the Corporate Income Tax ID. This is not the same as your VAT number (although the actual number might be the same).
Natural persons (such as the self-employed) pay tax on their profits through their income tax returns.
You have to file your return before 1 June of each year. You have to file your return even if you haven’t received a provisional assessment. If you don’t file your return in time, the Tax and Customs Administration may impose an administrative fine. The corporate tax rates for 2019 are:
19% of taxable income under € 200,000
25% of taxable income over € 200,000
In 2015, 2016, 2017 and 2018, the rate for taxable income under € 200,000 was 20%. In the years 2019-2021, the rates are being gradually reduced (to 15%/21%).
Branch vs. Legal Entity
If your company is foreign-based, with a branch or subsidiary in the Netherlands, you will be liable for corporate income tax on the income received by the Dutch subsidiary. However, it is possible for parent-daughter companies to establish a so-called fiscal unity, which enables them to level out negative results from one constituent of the fiscal unity with the positive results from another (or others).
Timetable
The timetable below shows the timeframes and possible extensions relating to the financial statements process,as well as the requirement to file a corporate tax return. Please note that this does not apply to listed companies. For those companies, the financial statements must be prepared and made generally available within four months after year end. They must be adopted within six months after year end.
Required action | Time frame | Possible extension |
Maintaining accounting records | On-going during the year | Not relevant |
Preparation of financial statements & Filing of the Corporate Tax Return | 5 months after year end | Up to 5 months (making the maximum preparation time 10 months after year end) |
Filing of VAT Return/ VIES Return | Quarterly | Not possible. Penalties (or estimated taxes) apply in case of non-filing. |
Filing of Wage Tax Return (in case of pay-rolling) | Monthly | If the above extension is applied, filing should take place ultimately 12 months after year end. |
Filing Your First Corporate Tax Returns
VATIf you file a declaration, a number of administrative obligations apply. You make a digital declaration via the secure section of our website. You usually make a VAT return once per quarter. You must complete and sign this declaration and return it within 2 months after the end of the period for quarterly and monthly returns. If you are submitting an annual declaration, you must submit the declaration within 3 months.
Even if you have not done business in the Netherlands for a period or if you are entitled to a refund of Dutch VAT, you must also submit a VAT return.
Does it appear after you have completed the declaration that you have to pay VAT? Then you have the time for quarterly and monthly returns up to 2 months after the end of the period for which you made a declaration. If you do an annual declaration, the payment must be credited to our account within 3 months. Is the VAT amount of your purchases and costs higher than the VAT amount that you pay in the Netherlands? Then you can request the difference on your tax return.
When the tax return and payment have to be received by us, you can read the Tax return and payment VAT deadline at the latest.
VPB/Corporate Income Tax Return
All companies (BV’s & NV’s) need to file a corporate tax return. Even if the company was not active, or has not made a profit. For a Dutch Stichting, there could be a tax filing exemption applicable.The first corporate income tax return is often made after 18 months, sometimes even longer. This is because the first financial year of the company is extended.
What is an extended first financial year?
If there is a broken financial year, an extended first financial year can be requested. The purpose of an extended financial year is that companies that only exist for 3 months already have to prepare annual financial statements and have to make declarations. The financial year for these companies with an extended first financial year then runs until 31 December the following year.
Is your financial year the same as the calendar year?
Then you must submit the declaration before 1 June of the following calendar year. Do you have a broken financial year? Then you submit a declaration within 5 months after the end of the financial year.
[At the time the company files it’s corporate tax return, it needs to be certain about it’s tax position (local or foreign tax payer). It’s advised to discuss this with an independent tax lawyer, and get a written opinion on this matter. The tax position might have an affect on how incoming dividends are taxed from subsidiaries, in an international perspective, among other things.]
Dividend Tax Return
Does your company pay dividends to shareholders?
Then you must withhold 15% dividend tax on the dividend that you pay. You must declare and pay within 1 month of the day on which the dividend is made available. Do you not submit a declaration on time or do you not pay the amount of the declaration on time? Then you can get a supplementary assessment with a fine.
If you do not agree with the amount of the declaration that you have paid afterwards, you can object.
Foreign Beneficiary In Participation Situations
In a participation situation, do you pay dividends to a non-resident person entitled to income? Then you can apply a withholding exemption to the benefit.
Accounting requirements for the company
Required action | Time frame | Possible extension |
Renewal of Corporate Structure (registered office (at Business Center), collecting data from bookkeeper ), etc.) | 12 months after the formation of the company | |
Preparation of the Annual General Meeting, including invitations to all shareholders (as per legal requirements) | Ultimately 12 months after year end | |
Adoption of the financial statements by the general meeting | Within 2 months of the date of preparation | If the above extension is applied, adoption should take place ultimately 12 months after year end |
Filing of the financial statements | Within 8 days of adoption, but in no event later than two months after the date of preparation (whether the financial statements have been adopted or not) | If the above extension is applied, filing should take place ultimately 12 months after year end. |
Additionally the following is also to be considered:
Preparation and/or Evaluation of legal contracts, like General terms of Conditions, Privacy Agreement, NDA, Service Agreements, etc. based on Dutch Company law (we can assist you in this, and can provide drafts according to your requirements without any fees. Customization can be done at extra charge). For preparing operational contacts and providing formal Legal Opinions, the fee is charged on an hourly rate around 250 euros per hour (all fees will be communicated up front).
Preparation of board resolutions, or shareholders resolutions which refer to (incidental) corporate changes, like change of a director, change of company name, change of company activities, change of personal details (filing at Chamber of Commerce). Or the preparation of share transfer agreements in cooperation with a notary.
Provide basic information on legal and tax regulations and legislation (we will also send relevant updates to you).
Tax Requirements For Directors
Minimum required salary for Director(s)
There are stipulations when it comes to pay-rolling directors in the company, who also own shares in the same company. They are required to receive a minimum salary of €45.000, unless we apply for an exemption (based on valid reasons, like the fact that it concerns a startup company which doesn't make any profits (yet)). Please, note that this requirement is only applicable to directors, who also hold 5% or more shares in the company, hence if you appoint a person, who is not a shareholder, the requirement won't be applicable. If salaries are paid, wage tax has to be withheld by the employer and a personal income tax return has to be filed.
If you start to work in the Netherlands as a foreigner, the first thing you need to apply is a BSN number at the municipality (in Dutch “gemeentehuis”). The BSN number is necessary so that you can be identified in the tax and social security system. If you do not have a BSN number you cannot work here. The application must be done within 5 working days after arrival. Please bring a valid passport or identity card to the municipality.
Income Taxes & Social Contributions
The income you receive from the Dutch employer will be subject to Dutch personal income tax. Please note that the Dutch tax year is equal to a calendar year. The employer withholds wage tax via the payroll, which can be offset against the personal income tax. The exact personal income tax due is determined by submitting your personal income tax return. The tax return should normally be filed within 3 months after the calendar year has ended. For the year in which you moved to or from the Netherlands, you will receive an invitation from the Dutch tax authorities to file a so-called migration tax return (m-form). Please note that we will request for an extension for filing and preparing your Dutch migration tax return.
The directors can also apply for the 30%-ruling (see Tax Incentives brochures below) which gives them a tax break on their salary. We might also need to look into Tax Treaties in order to avoid Double Taxation in case a director is resident in another country.
We can assist you in preparing a tax calculation of the taxes/social contributions which will be relevant in case of a certain salary. In order to use this service, we will ask you to complete the Salary Data Sheet, which we can provide to you upon your request.
Tax Requirements for other staff members
In general, staff members are taxed in a similar way then the Directors. However if you relocate staff to the Netherlands you need to consider immigration requirements (if from outside the EU), and in case they work less than 6 months in the Netherlands, they might still be tax liable in their country of 'residence' (based on the tax treaty). House of Companies can also help you payroll your staff members, and assist with immigration requirements.
Personal Income tax
If you live in the Netherlands or receive income from the Netherlands, you will be subjected to pay income tax in the Netherlands. You pay tax in the Netherlands on your income, on your financial interests in a company and on your savings and investments.
This means, that even if you live outside the Netherlands, you are legally required to file an Income Tax Return in case you receive (or are expected to receive) income, such as:
Involvement as a Director (salary)
Involvement as a Shareholder (dividends)
Real estate (owned as individual)
There is a legal requirement in Netherlands to obtain a certain amount of salary, when a shareholder (>5% shareholding) also acts as director. This is the so-called DGA-salary. You find a full article on this tax rule in our blogs. Aside from this requirement, it’s likely that you will obtain a salary, once your company becomes operational. Therefore you need to consider that this salary is taxed in the Netherlands, although in most cases you are eligible for tax credit in your country of residence.
In the Netherlands you can apply for a expat- tax credit (the so-called 30% ruling) in case you will be on the payroll of the Dutch company, earning a certain minimum amount of salary. We also further explain this ruling in this fact Sheet, and on our blog.
As a shareholder you are taxed in the country of your residency, however a withholding tax on your received dividends might apply. In many cases your involvement as a shareholder can be a reason for the tax authorities to send you an invitation to file your Dutch tax return, focused on any salaries or dividends you might have received.
In the Netherlands, worldwide income is divided into three different types of taxable income, and each income type is taxed separately under its own schedule, referred to as a 'box'. Each box has its own tax rate(s). An individual's taxable income is based on the aggregate income in these three boxes.
Box 1 refers to taxable income from work and home ownership, and includes the following:
Employment income (company car can be considered as such)
Home ownership of a principal residence (deemed income).
Periodic receipts and payments.
Benefits relating to income provisions.
Box 2 refers to taxable income from a substantial interest, and box 3 applies to taxable income from savings and investment.
You pay tax on income from your wealth, including savings, shares and a second home. It is calculated as the value of all assets (such as savings and shares) minus any debts. Part of your wealth is not taxable: the capital yield tax allowance. You pay 30% tax on your taxable income from savings and investments. The government assumes a fixed return, which varies, depending on your savings and investments.
Combined rates in Box 1 for persons younger than retirement age | ||||
Taxable income | Tax per bracket | Premium National Insurance | Total rate |
|
Of more than | But less than |
|
|
|
|
|
|
|
|
€ 0 | € 20,384 | 9.00 % | 27.65 % | 36.65 % |
€ 20,384 | € 34,300 | 10.45 % | 27.65 % | 38.10 % |
€ 34,300 | € 68,507 | 38.10 % |
| 38.10 % |
€ 68,507 |
| 51.75 % |
| 51.75 % |
Box 2 (Taxable Income From A Substantial Stake In A Limited Company)
For the year 2019 the tax rate for income from a substantial interest is 25%.
Box 3 (Taxable Income From Assets)
The tax rate for income from savings and investments stays 30%. Expats with the 30% ruling can opt in the tax return to be exempted from taxation on savings and most of the investments.
Personal Withholding taxes and Social Contributions
Based on your personal situation, our accounting team can determine the exact personal withholding taxes that might be relevant. If you are on the payroll of the Dutch company, we can prepare a wage tax calculation, providing you full understanding on the related taxes. Ofcourse, this is only relevant when you are on the payroll, which we can postpone in case the company is not making a profit yet.
The Netherlands has a minimum wage requirement to employ staff, but there are also certain restrictions on taking a minimum salary, while paying out high dividends (which would cause a tax advantage in most cases). (See DGA-salary requirement)
When we calculate your personal income (withholding) taxes, we will also consider the 30%- ruling which applies for expats, which have come to the Netherlands for the first time to perform a job.
In most cases, the withholding tax on the salary, can also be considered the final income tax. meaning, when you file the personal income tax return at the end of the year, it’s not expected that you have to pay extra tax. This can vary, and will depend on extra possible jobs or income you might have, or an incorrect calculation of the withholding tax (for example, wrong tax incentives have been considered).
In case you/the employee, is NOT resident in the Netherlands, no social contributions are due. Only the actual taxes. As you might know, most of the progressive tax rate of 52% consists of social contributions. This means that non-residents pay a much lower rate, in the area of 8-10% on their income. We can assist you to determine if this lower tax rate is applicable.
Filing Your Personal Income Tax Return(s)
The Wage tax returns are submitted on a monthly basis, assuming the salary is also paid on a monthly basis. In case of an outgoing dividend, the dividend tax return must be submitted once the dividend payment has been done (within 30 days). No tax breaks are applicable for dividend taxes, unless such as provided by tax treaties. Aside from these tax returns, which focus on withholding taxes, there is an annual requirement to file a Personal Income Tax return, which will cover all incomes as described above (Box I, II & III).
Even if the Tax and Customs Administration has not sent you a provisional assessment you may still be required to file a tax return. To determine whether you need to pay tax or are entitled to a refund and if so, how much, you can use the services of our accounting team who can provide you an exact calculation.
What Is The Dutch 30 Percent Ruling?
The 30 percent ruling is a tax exemption for foreign employees who were hired abroad to work in the Netherlands. If the conditions are met, the employer is allowed to pay the employee 30 percent of his or her salary as a tax-free allowance. This tax-free allowance is considered a compensation for the expenses the employee has by working outside his or her home country, but such expenses do not need to be substantiated.
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