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Netherlands Income Taxes and Tax Laws

(by Balthazar Netherlands Tax Consultants, www.netherlandstax.com)

Netherlands Income Taxes

Income taxes in the Netherlands

In the Netherlands there are basically two income taxes:

(i) Corporate tax; and
(ii) Personal income tax.

Companies are subject to Dutch corporate tax and individuals are subject to Dutch personal income tax.

Dutch Corporate Tax

Rate

The 2009 Dutch corporate tax rate is 25.5%. The proposed 2010 and 2011 Dutch corporate tax rate is also 25.5%.

Taxable profits

The worldwide profits of a Dutch company are subject to Dutch corporate tax. However, certain items of income (such as income from qualifying subsidiaries) are exempt from tax.

Participation exemption

Capital gains and dividends derived from a qualifying subsidiary are fully exempt from Dutch corporate tax on the basis of the Dutch participation exemption. A subsidiary in general qualifies for the Dutch participation exemption when (i) the subsidiary is an active company and (ii) the Dutch parent company holds an interest of at least 5% in the subsidiary.

Tax group

A tax group ("fiscal unity") can be formed in the Netherlands when (i) a Dutch company holds 95% or more of the shares in another Dutch company, and (ii) the financial years of the companies are the same.

Losses carry forward and back

For Dutch corporate tax purposes, tax losses can be carried back to profits of the first preceding year and carried forward to profits of the following nine years.

Tax return

Corporate tax returns need to be filed in the Netherlands within 5 months after the end of a financial year (an extension can be requested).

Tax payment

Dutch corporate tax is paid during the financial year on the basis of an estimate. After the financial year, the exact final tax due is determined on the basis of the corporate tax return.

Dutch Personal Income Tax

Rate

The 2009 Dutch personal income tax rate is max. 52%. This rate applies to income to the extent it exceeds EUR 54,766. For the income up to EUR 17,879 the rate is 33.5% and for the EUR 17,879 - EUR 54,776 income the rate is 42%. These amounts are including Dutch social security contributions.

Taxable income

The income an individual receives is subject to Dutch personal income tax.
Any Dutch payroll tax already withheld on the income will reduce the amount of Dutch personal income tax payable.

Savings and investments

Savings and investments are subject to personal income tax on their fair value at a fixed rate of 1.2% (for 2009). The fair value of savings and investments is assets minus liabilities. The first EUR 20,315 (for 2009) are exempt. For certain expats living in the Netherlands an exemption can be claimed for their savings and investments.

Tax reductions

There are a number of tax reductions available. For example there is a tax reduction available when you live and work in the Netherlands or when you are conducting a study/training.

Tax return

Dutch personal income tax returns need to be filed in the Netherlands within 3 months after a calendar year (an extension can be requested).

Tax payment

Dutch personal income tax is paid during the calendar year on the basis of an estimate. After the calendar year, the exact final tax due is determined on the basis of the personal income tax return.

If you have any further questions or need more information about tax in the Netherlands, please contact Balthazar Netherlands Tax Consultants.

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