Netherlands

In the Netherlands, corporate residence is determined by each corporation’s facts and circumstances. Management and control are important factors in this respect. Companies incorporated under Dutch law are deemed to be residents of the Netherlands (although not with respect to certain provisions, such as the participation exemption and fiscal unity).

Permanent establishment (PE)

Non-resident companies are liable to corporate income tax only with respect to Dutch source income, like profits from a permanent establishment or income from real estate located in the Netherlands. Until 2020, the term ‘permanent establishment’ for Dutch tax purposes followed the criteria that were developed in Dutch case law.

Since 2020, the term ‘permanent establishment’ has been defined in the corporate income tax law (‘Wet Vpb 1969’). This legal concept of the term ‘permanent establishment’ applies mutatis mutandis to personal income tax (‘Wet IB 2001’) and wage tax (‘Wet LB 1964’), and to the unilateral measures to prevent double taxation (‘Bvdb 2001’).

For treaty situations, the definition of the term ‘permanent establishment’ follows the definition in the applicable tax treaty. For non-treaty situations, the definition of the term ‘permanent establishment’ follows the definition of this term in Article 5 of the OECD Model Convention 2017.

The reason why the term permanent establishment is defined in (corporate income tax) law, is due to the application of the MLI to Dutch tax law. The MLI, which entered into force in the Netherlands on 1 July 2019 and which applies from 1 January 2020, contains several provisions relating to the term ‘permanent establishment’.