General information

  • The Kingdom of the Netherlands is a state situated in Western Europe on the shores of North Sea. The official language is Dutch. The official currency is Euro.
  • The legal system of the Netherlands is based on European continental law, the main source of law is legislation.
  • The Netherlands is a member of EU, WTO, Schengen Agreement, OECD.
  • The main trading partners of the Netherlands are Germany, Belgium, France, United Kingdom, USA, Italy and Russia.

Advantages of the jurisdiction

  • The Netherlands is a developed Western European state with modern industrial production, the main branches of which are machinery construction, petrochemicals, shipbuilding and metallurgy.
  • As of 2019, the Netherlands takes 13th place in economic freedom rating by The Heritage Foundation and 17th place in 2018 world GDP ranking according to the World Bank statistics.
  • Wide trading and economic links, including outside the EU.
  • No currency control rules.

Use of Dutch companies

  • The use of Dutch holding companies which own shares of their subsidiaries, real estate or intellectual property assets, may be advantageous because of tax exemptions provided as by national legislation, so by EU Directives.
  • The reduced taxation may be granted to both ownership and disposal of abovementioned assets.
  • As the Netherlands has a wide range of double tax avoidance agreements (DTAAs) it is possible to benefit from holding structures with subsidiaries from some foreign countries, including non-EU countries.

Legal forms of Dutch companies

  1. Company limited by shares (in Dutch: Besloten Vennootschap, BV) is a standard legal form of entity, the capital of which is divided into shares. Both natural and legal persons of any nationality and tax residency may be shareholders of BV. The liability of shareholders on company’s duties is limited by the amount of their capital contribution.
  2. Public company (in Dutch: Naamloze Vennootschap, NV) is a company the shares of which may be listed on a stock exchange. The minimum size of paid capital is 45 000 Euro. Starting from 2019 only ordinary shares are permitted to issue, so that bearer shares issued previously must be converted to ordinary ones.
  3. Partnership (in Dutch: Vennootschap onder Firma, VOF) is unincorporated legal form which must be found by at least two partners: general partner and limited partner. Both natural and legal persons of any nationality and tax residency may be the partners. The conclusion of partnership agreement is necessary for formation of VOF.
  4. Limited partnership (in Dutch: Сommanditaire vennootschap, CV) is a legal form basically similar to VOF, but having one essential difference: the requirement to conclude partnership agreement in order to form partnership is not mandatory. Limited partners of CV are not obliged to provide personal information for registers (e.g. name and surname, address, etc.), in contrast with the general partner.
  5. Cooperative (in Dutch: Сoöperatie) is a legal entity consisting of at least two members. The amount of minimum share capital and requirement to pay it are not established by law, however in some cases the liability arising from cooperative’s duties is imposed on itself, not on the members.
  6. Societas Europaea.

Main features of Dutch BV companies

  1. Shareholders. As it was mentioned previously, any natural and legal persons may be shareholders of BV independently of their nationality, country of registration or tax residency. The minimum number of shareholders is 1, nominee service is not provided.
  2. Share capital. Current Dutch legislation does not establish requirements to minimum amount of authorized capital of BV. The payment of capital necessary for incorporation can be 0, 01 Euro in cash or in cost of other asset. The capital is divided on shares which may be nominated in Euro or in other foreign currency.
  3. Memorandum and Articles of Association (M&AA). The main corporate document of BV must be made in Dutch language.  The company is deemed to be incorporated from the moment of certification of M&AA by Dutch notary, which also finishes incorporation procedure by filing an application with Chamber of Commerce and tax registration of a company in Dutch Tax and Customs Administration in most cases.
  4. Directors. Natural or legal persons of any nationality, registration or tax residency may be directors of Dutch BV. The minimum number of directors is 1. One person can be sole director and sole shareholder at the same time.
  5. Possibility to start operate before the incorporation procedure of BV is finished. The legislation of the Netherlands allows to enter into transactions on behalf of the BV which is still in the process of incorporation. As the moment of incorporation of BV in fact is the date when the notary certifies M&AA, the company is entitled to operate from this date without waiting for entry of registration information into the Commercial Register.
  6. Meetings of shareholders. There are no requirements regarding frequency of shareholder’s meetings. Meetings of shareholders held outside the territory of the Netherlands are permitted.

Disclosure of corporate information and UBO registers

The details of directors and shareholders are to be entered into the register maintained by the Chamber of Commerce. Names of directors, shareholders and attorneys, share capital data and information of branches are publicly available and may be disclosed to third parties after payment of a fee and registration on official website of the Chamber of Commerce.

There is a limited extent of company information which is available without payment of an extract and without registration on the website: name, registration number and registered office address. The search is to be done by name or by registration number of a company, some of webpages are in Dutch language only.

As for the register of ultimate beneficial owners (UBOs), the legislative act which establishes this institute currently is on the last stage of adoption. Said act defines UBO as a natural person who owns directly or indirectly more than 25% of shares, ownership interest or voting rights of the company, or otherwise exercises control over the company.

UBO register in Netherlands will also be publicly available, thus any third parties will be able to get the following UBO details: name and surname, month and year of birth, nationality and country of residence. Still there is no precise information when the centralized register will be created and what conditions must be met to get an access to it (registration, payment, etc.), because the adoption of abovementioned bill has been postponed to some future date.

Taxation of Dutch companies

  1. Corporation tax

The company is tax resident in the Netherlands if it has been incorporated in accordance with Dutch laws (“incorporation criterion”). In some cases, foreign companies may also be deemed resident in the Netherlands if they are managed and controlled from the territory of the Netherlands (“management and control criterion”).

Resident companies are taxed in the Netherlands on their worldwide income.  Non-resident companies are taxed on their Dutch-sourced income. The deduction of costs is applicable for tax base determination purposes.  Starting from 1 January 2019 losses may be carried back for 1 preceding tax period and carried forward for next 6 tax periods.

Corporation tax rates in the Netherlands are progressive: in 2020 the tax rate is 16,5% for profits not exceeding 200 000 Euro, and 25% for profits more than 200 000 Euro. In 2021 it is planned to reduce corporation tax rates: 15% on profits not exceeding 200 000 Euro, and 21,7% for profits more than 200 000 Euro. It is probable that tax rates can be revised consequently as well.

Usually, corporation tax period is calendar year unless the company chooses another shifted 12-months period by its M&AA. Companies are also entitled to establish the first accounting period which does not fall within 12 months (i.e. is longer or shorter) in the year of its incorporation.

  1. Dividends

Capital gains received as a result of disposal of tangible or intangible assets by Dutch company and dividends paid by its subsidiaries may be exempt from taxation if the following conditions are met:

  1. Dutch company owns at least 5% of the capital of the subsidiary; and
  2. Less than 50% of subsidiary’s assets are portfolio investments, i.e. such subsidiary is operational (active) company; or
  3. the subsidiary is taxed in its country of residence at “fair tax rate” in view of Dutch tax principles, that is not registered in offshore or low tax jurisdiction.
  1. Withholding tax

Generally, dividend payments to non-residents are subject to withholding tax in the Netherlands. The standard withholding tax rate is 15%, but it may be reduced under DTAA with the state which the recipient of dividends is resident in.

Also, the full exemption of withholding tax under EU Directive of parent companies and subsidiaries may be applicable. Such exemption is provided to companies resident in the EU or in the EEA Member State which own more than 5% of shares of Dutch company.

Interest and royalties are not subject to withholding tax by default, but in some cases interest under intergroup loans between affiliates (so called “hybrid loans”) may be qualified as dividends for withholding tax purposes.

  1. Value added tax (VAT).

Sale of goods, acquisition of goods for business purposes and provision of services are VAT taxable. Standard VAT rate is 21%, however some types of goods, such as food products, medicines and books, are taxable at reduced rate of 9%.

The turnover threshold required for VAT registration is not prescribed by Dutch law, so that all companies which are VAT taxpayers are to be VAT registered. As opposite to it, the VAT tax period depends on company’s turnover and may be 1 month, 1 quarter or 1 calendar year, after the end of which it is required to file VAT return and pay tax.

Dutch reporting requirements

As it was mentioned previously, most frequently corporation tax period equals calendar year. Corporation tax returns must be filed by Dutch companies with tax authorities in 5 months after the year’s end.

Furthermore, there is a requirement to issue financial statements and keep it for at least 7 years at any address at directors’ consent (not necessarily in the Netherlands). Companies are entitled to make accounts in Euro or in other currencies in which they operate. In the same way, it is possible that financial statements are in Dutch language or in other languages.

The number of required accounting documents depends on whether the company is classified as micro-sized, small, medium or large company by the following criteria:

 

Micro-sized company

Small company

Medium company

Large company

Net turnover (Euro)

Not exceeding 700 000

From 700 001 to 12 000 000

From 12 000 001 to 40 000 000

Over 40 000 000

Net assets value (Euro)

Not exceeding 350 000

From 350 001 to 6 000 000

From 6 000 001 to 20 000 000

Over 20 000 000

Number of employees

Not exceeding 10

From 11 to 50

From 51 to 250

Over 250

Micro-sized companies must issue and file only balance sheet, small companies must file balance sheet and explanatory notes. The number of accounting documents for medium and large companies is increased: they need to file director’s report, financial statements (balance sheet, profit and loss account with explanatory notes) and auditor’s report. Auditor’s report may be issued by competent specialists as in Netherlands, so in any foreign country.

Tax agreements of the Netherlands

As of the first half of 2020 Netherlands has a wide range of DTAAs concluded with different foreign jurisdictions. They include 99 states and territories:

  1. Albania
  2. Argentina
  3. Armenia
  4. Aruba
  5. Australia
  6. Austria
  7. Azerbaijan
  8. Bahrain
  9. Bangladesh
  10. Barbados
  11. Belarus
  12. Belgium
  13. Bermuda
  14. Bonaire, St. Estatius and Saba
  15. Brazil
  16. Bulgaria
  17. Canada
  18. China
  19. Croatia
  20. Curaçao
  21. Czech Republic
  22. Denmark
  23. Egypt
  24. Estonia
  25. Ethiopia
  26. Finland
  27. France
  28. Georgia
  29. Germany
  30. Ghana
  31. Greece
  32. Hongkong
  33. Hungary
  34. Iceland
  35. India
  36. Indonesia
  37. Ireland
  38. Israel
  39. Italy
  40. Japan
  41. Jordan
  42. Kazakhstan
  43. Korea
  44. Kosovo
  45. Kuwait
  46. Kyrgyzstan
  47. Latvia
  48. Lithuania
  49. Luxembourg
  50. Macedonia
  51. Malawi
  52. Malaysia
  53. Malta
  54. Mexico
  55. Moldova
  56. Mongolia
  57. Montenegro
  58. Morocco
  59. New-Zealand
  60. Nigeria
  61. Norway
  62. Oman
  63. Pakistan
  64. Panama
  65. Poland
  66. Portugal
  67. Qatar
  68. Romania
  69. Russian Federation
  70. Saudi Arabia
  71. Singapore
  72. Slovakia
  73. Slovenia
  74. South Africa
  75. South Korea
  76. Serbia
  77. Spain
  78. Sri Lanka
  79. St. Maarten
  80. Surinam
  81. Sweden
  82. Switzerland
  83. Taiwan
  84. Tajikistan
  85. Thailand
  86. The Philippines
  87. Tunisia
  88. Turkey
  89. Turkmenistan
  90. Uganda
  91. Ukraine
  92. United Arab Emirates
  93. United Kingdom
  94. USA
  95. Uzbekistan
  96. Venezuela
  97. Vietnam
  98. Zambia
  99. Zimbabwe

The majority of DTAAs establish reduced withholding tax rates or exemption from withholding tax for such passive incomes as dividends, interest and royalties.

Netherlands’ participation in international exchange of information

Most DTAAs of the Netherlands provide for exchange of information upon request for tax administration of Dutch residents’ international activity. Besides DTAAs, Netherlands entered into special Tax Information Exchange Agreements for bilateral exchange of information upon request with several offshore jurisdictions (Anguilla, Antigua and Barbuda, British Virgin Islands, Belize, Bermuda, Grenada, Dominica, Cayman Islands, etc.).

The Netherlands also takes part in automatic exchange of tax information, being a signatory of Multilateral Agreement Competent Authority Agreement on the automatic exchange of information on financial accounts (MCAA). The practical phase of automatic exchange of information in the framework of MCAA began for the Netherlands in 2017.

According to Organization for Economic Co-operation and Development (OECD), the Netherlands exchanges information with 70 foreign jurisdictions, so that the details of personal and corporate accounts which belong to residents of such jurisdictions and were opened in Dutch banks may be transferred to foreign tax authorities.

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