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Netherlands Tax News 2011

Netherlands Switzerland DTA Entry Into Force

November 2011
The double tax treaty, DTA, between the two countries which was signed on February 26, 2010 will enter into force on November 9, 2011 and apply from January 1,2012.
The double tax treaty includes, inter alia, exemption from tax withholding for payments of interest and royalties.
Payment of dividend to companies owning 10% or more of the capital and to pension funds will be exempt from tax withholding too.

Dutch Preference Shares Classified As Loans

May 2011
When providing finance, it is important to determine under which conditions it is given so that the financing also gets the desired classification for tax purposes.
The qualification of the finance in the financial statements was for the court in this case an indication that it was also a loan for tax purposes.
To read the full article please click here.

Dutch Interest for Delayed VAT Refunds

March 2011
About 8,000 companies will get soon interest from the Dutch tax authorities due to delays in filing VAT refunds from other EU countries.
The interest follows technical problems in VAT filing in 2010 causing refunds to last more than the standard up to 15 days.

Netherlands Japan New Tax Treaty

September 2010
The Netherlands and Japan signed on August 25, 2010 a new tax treaty which is expected to promote mutual investments and strengthen the economic relations between the countries.
The tax treaty provides reduction or exemption of withholding tax on dividend, royalties and interest.
Both countries also agreeded on an arbitration procedure in case of dispute between the tax authorities.
For Japan it is the first time to include an arbitration clause in a tax treaty.
Source: Dutch Ministry of Finance www.minfin.nl

Cooperative in the Netherlands

August 2009

Article by Balthazar Tax Consulting

The Netherlands Cooperative is a company form currently used a lot by international enterprises and private equity houses. Why? Because it is exempt from withholding tax and very flexible from a legal perspective.

Since 2005 a lot of international enterprises and private equity houses have been using the Netherlands Cooperative. The main benefits of using the Netherlands Cooperative are the following:

Distributions by the Netherlands Cooperative are exempt from withholding tax;
Applicability of the favourable Netherlands participation exemption;
Access to the extensive tax treaty network concluded by the Netherlands and the EU Parent-Subsidiary Directive; and
Its legal flexibility.

Netherlands Cooperative tax features

The Netherlands Cooperative is a normal taxable entity in the Netherlands (subject to corporate income tax and VAT). However, distributions by the Netherlands Cooperative are not subject to Dutch dividend withholding tax.

The Netherlands Cooperative not being subject to Dutch dividend withholding tax is one of the main reasons why the company is currently often used as Finance or Holding Company. It provides for a tax free exit.

Another tax benefit of the Netherlands Cooperative is that it can benefit from the favourable Netherlands participation exemption. As a result capital gains and dividends derived from qualifying subsidiaries are fully exempt from corporate income tax in the Netherlands.

A subsidiary qualifies for the Netherlands participation exemption when (i) the subsidiary is an active company and (ii) at least 5% of the shares in the subsidiary are owned. No minimum holding period is required. Thus, the shares in the subsidiary do not have to be owned for a certain minimum period.

The third tax benefit of the Netherlands Cooperative is that it has access to the extensive tax treaty network concluded by the Netherlands and to the EU Parent-Subsidiary Directive. It is recognised for tax treaty and EU purposes.

Netherlands Cooperative legal features

The Netherlands Cooperative is a separate legal entity that can own assets and conclude agreements. Its articles of association are very flexible as there are not a lot of mandatory provisions that have to be included in the articles. The Netherlands Cooperative is incorporated by the execution of a notarial deed.

The Netherlands Cooperative is usually a Cooperative “U.A.” which stands for exclusion of liability. This means that members of the Netherlands Cooperative are only liable for the amount of contributed capital in the Cooperative.

From a formal Dutch legal perspective, the Netherlands Cooperative does not have a capital divided into shares. But the articles of association can be drafted such that the membership rights are in economic sense similar to shares.

The Netherlands Cooperative does not have shares and shareholders, but has membership rights and members respectively.

Cash repatriation by the Netherlands Cooperative is very flexible as the Dutch capital protection rules do not apply and because the Netherlands Cooperative is not subject to any withholding tax in the Netherlands.

For more information about the Netherlands Cooperative, we refer to Netherlands Cooperative Experts Balthazar who are specialists in this area.

Netherlands Holding BV

August 2009

Article by Balthazar Tax Consulting

The Netherlands Holding BV is often used to reduce a group’s effective tax rate. Using the Netherlands Holding BV has the following benefits:

(i) access to EU directives and the extensive tax treaty network concluded by the Netherlands;
(ii) the favourable Netherlands participation exemption; and
(iii) exempt cash repatriation opportunities.

How you can benefit from the Netherlands Holding BV

When you plan to set up or buy a non-Dutch company the following could be the case:
- dividends paid by the non-Dutch company are subject to local withholding tax;
- capital gains on the non-Dutch company are subject to local capital gains tax.

When one of the above applies, the Netherlands Holding BV could reduce local withholding tax or capital gains tax. This works as follows:

A Netherlands Holding BV is set up. The Netherlands Holding BV sets up or buys the non-Dutch company. Dividends and capital gains the Netherlands Holding BV receives are exempt from any local withholding tax or capital gains tax as a result of a tax treaty or EU directive. In the Netherlands the dividends and capital gains are exempt on the basis of the Dutch participation exemption. Subsequent cash repatriation by the Netherlands Holding BV is tax efficient on the basis of a tax treaty, EU directive or absence of withholding tax on interest.

Thus, as a result of the Netherlands Holding BV the levy of foreign taxes could be restricted.

EU directives and Dutch tax treaty network

By using the Netherlands Holding BV you can benefit from the EU directives and the extensive tax treaty network of the Netherlands. EU directives and tax treaties reduce the amount of foreign taxes to be paid.
For example, when a foreign subsidiary of the Netherlands Holding BV pays a dividend to the Netherlands Holding BV, an EU directive or tax treaty could restrict the levy of foreign withholding taxes on this dividend.

Netherlands participation exemption

When the Netherlands Holding BV is used, you can benefit from the favourable Netherlands participation exemption. On the basis of the Netherlands participation exemption capital gains and dividends derived from a qualifying subsidiary are fully exempt from Netherlands corporate tax. There is no minimum holding requirement for the Netherlands participation exemption to apply.
A subsidiary qualifies for the Netherlands participation exemption when (i) the subsidiary is an active company and (ii) at least 5% of the shares in the subsidiary are owned.

Exempt cash repatriation

By using the Netherlands Holding BV you can benefit from the tax efficient cash repatriation possibilities. Due to the extensive Dutch tax treaty network, the EU directives and absence of withholding tax on interest in the Netherlands, cash repatriation by the Netherlands Holding BV is very tax efficient.

For more information about the Netherlands Holding BV, we refer to Dutch Tax Experts Balthazar who are specialists in this area.

Netherlands: New Quarterly V.A.T. Filing

May 2009
Starting 1.7.2009 all V.A.T payers, including those currenly paying on a monthly basis, can file and pay their V.A.T. on a quarterly basis, thus improving their cashflow.
The filing date is the last day of the month following the relevant quarter.
In case of a refund for a certain month, the V.A.T. report can still be filed on a monthly basis, as before the amendment.

Netherlands Budget 2009

November 2008
The Dutch cabinet presented on September 16 the Netherlands budget for 2009, including tax changes.
From 1.1.2009 the first 2 tax brackets in box 1 for individuals will be reduced, compared to the 2008 brackets.
Box 1 tax rates generally relate to employment and housing income for individuals.
Employees aged 62 or more will get a 5% tax credit of their income, a 10% tax credit when they are aged 64.
The right for parental leave will be doubled, from 13 weeks to 26 weeks.
Corporate income tax rate for income in 2008 of up to EUR 250,000 will be reduced to a 20% .This retroactive change relates to 2008 only.
The personal income tax exemption for small and medium enterprises, SME, will increase from 10% to 10.7%.
The standard VAT rate in 2009 will remain unchanged, 19% as in 2008.

Netherlands Tax Rates 2008

March 2008
In 2008 the Netherlands corporate tax rates are 20%-25.5%, depending on the annual income.
The tax rate for income up to EUR 40,000 is 20% ,a 23.5% rate, compared to the previous 23% rate, for income of EUR 40,001-EUR 200,000, and 25.5% for income exceeding EUR 200,000.
Personal income tax rates are progressive for salary income. The 2008 rates are 2.5%-52%.
Thr standard VAT rate is 19%. The VAT rate is expected to rise to 20% in 2009.

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