Netherlands

The corporate tax system of the Netherlands contains a number of well-known features providing for an attractive investment climate, such as: the fiscal unity regime with tax consolidation for group companies, a full participation exemption for capital gains and dividends from qualifying participations, and several favourable tax regimes (e.g. for patent income, investment vehicles, and income from ocean shipping activities). As of 2021, a withholding tax (WHT) on interest and royalties is due in certain situations, namely where the recipient is based in a low-tax jurisdiction or a non-cooperating jurisdiction in respect of information exchange, or in cases of abuse (see Conditional WHT on interest and royalty payments in the Withholding taxes section). As of 2024, this WHT will also apply to dividends. Finally, a legislative initiative is currently pending that aims to prevent the avoidance of dividend WHT by emigrating or cross-border merging of large companies with foreign entities (see Conditional dividend exit tax on relocation of head offices - proposal below).

Pillars One and Two

The Netherlands implemented Pillar Two as of 1 January 2024, in line with the EU Pillar Two Directive. The Dutch legislation l is almost entirely in line with the Directive. Entities established in the Netherlands that are part of a (multinational or large domestic) group with a consolidated group turnover of at least EUR 750 million will fall within the scope of the new legislation. Certain sectors, such as investment funds and pension funds, are outside the scope of Pillar Two.

Pillar One aims to allocate new taxing rights to market jurisdictions, even in absence of physical presence, via the introduction of a new set of tax rules potentially operating on top of the existing ones. Pillar One will apply to MNEs with profitability above 10 per cent and global turnover initially above EUR 20bn. In October 2024, the members of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (Inclusive Framework) published the text of the Multilateral Convention to Implement Amount A of Pillar One with additional guidance.

Currently, the Netherlands does not levy a digital service tax.

Conditional source taxation on dividends

The conditional source taxation regarding interest and royalties includes dividends as of 1 January 2024 (see the Withholding taxes section).

Fit for 55: EU climate agreement - CBAM transition phase applies from  October 2023 until December 2025

The European Union aims to reduce its net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels, and reach climate neutrality by 2050. On 14 July 2021, the European Commission presented the Fit for 55 Package with proposals aiming to deliver the 2030 CO₂ reduction target and to pave the way to become the world's first climate-neutral continent by 2050.

A number of key proposals from this package have been adopted, namely Revision of EU ETS, Carbon Border Adjustment Mechanism (CBAM), Effort Sharing Regulation, CO₂ emissions standards for cars and vans, LULUCF, Social Climate Fund, Fuel Maritime (Sustainable maritime fuels), ​EED (Energy Efficiency Directive), AFIR (Alternative fuels infrastructure Regulation), RED (Renewable Energy Directive III) and  ReFuelEU Aviation.

On 1 October 2023 CBAM came  into effect. After the transitional phase (October 2023 through 2025) with administrative and reporting obligations, CBAM provides for a levy on the importation of certain GHG (Greenhouse Gas) intensive goods into the EU.

Read more on the EU Fit for 55 Package here.

Outline agreement Dutch government 2024

The outline agreement of the new Dutch government includes a.o. the following tax measures:

• Reversal of the abolition of the dividend tax repurchase facility;
• Interest deduction limitation on earnings stripping from 20 per cent to 25 per cent;
• Introduction of the General Anti-Abuse Rule (GAAR) of the Anti-Tax Avoidance Directive (ATAD);
• The announced increased CO2 levy for industry will be reversed;
• Abolition of reduced VAT rate for cultural goods and services - with the exception of cinemas and daytime recreation (2026);
• Abolition of reduced VAT rate for accommodation - with the exception of camping sites (2026).

Read more on the Outline agreement here.

Anti-Tax Avoidance Directive (ATAD) II ('hybrids')

The Dutch ATAD II legislation entered into force on 1 January 2020 (Anti-Tax Avoidance Directive, concerning hybrid mismatches within the European Union and with third countries), and the tax liability measure (for ‘reverse hybrids’) followed from 1 January 2022. The legislation largely follows the EU Directive but is stricter in some instances (e.g. Dutch taxpayers must document the applicability of the neutralising measure for payments, losses, etc.). In addition, the Netherlands did not make use of the possibility to delay the application of the ATAD measures in relation to financial institutions, nor does controlled foreign company (CFC) inclusion always qualify as sufficient inclusion.

Read more on this subject here.

Business in Europe: Framework for Income Taxation

BEFIT, short for “Business in Europe: Framework for Income Taxation”, is a Directive proposal by the European Commission issued on 12 September 2023. BEFIT introduces an aggregated common company tax base for the so-called “BEFIT groups” that is distributed among the EU Member States on the basis of a 7-year transitional allocation rule for the further application of domestic Corporate Income Tax (CIT) rules.

If adopted, BEFIT will enact substantial alterations to the corporate tax system across the EU27, impacting both domestic, EU, and non-EU headquartered groups doing business in the EU. Consensus among all EU Member States is necessary for the adoption of BEFIT. In such a case, BEFIT would apply in parallel with the Pillar Two rules in EU27 and national CIT systems.

The Working Group on the Assessment of New Commission Proposals (BNC) reports that the abinet supports the European Commission's goals to strengthen the EU’s internal market and competitive position. The Cabinet views the proposed harmonised basis on annual accounting standards as a potentially positive step towards this goal and a simplification of tax legislation. However, the Cabinet considers the proposed method of profit allocation to EU Member States disproportionate in its current form. The working group would have preferred a proposal limited to a truly harmonised basis. Additionally, the working group emphasises that BEFIT will have significant implementation consequences for the Dutch tax authorities. 

See here our EU Gateway publication “BEFIT proposal: a new company tax system in the EU?” for more information on BEFIT as well as its parallel application with Pillar Two laws in the EU. 

Transfer Pricing Directive Proposal

On 12 September 2023, the European Commission published a legislative proposal for a Directive on Transfer Pricing, also known as the “TP Directive”. This Directive (if adopted) would incorporate the arm’s length principle into EU law and EU Member States’ domestic legislation, harmonise key transfer pricing rules, and create the possibility to establish common binding rules in the EU on specific Transfer Pricing (“TP”) subjects. The proposal also looks to clarify the role and status of the OECD TP Guidelines. 

The proposal will undergo negotiation by the EU Member States with the goal of achieving the required unanimous approval. This is expected to be a challenging process: early reactions have been mixed. If approval is obtained, the Directive will come into force as of 1 January 2026.

The Dutch government understands the problem statement in the Directive proposal, which states that the options and possibilities for interpreting the OECD guidelines can lead to less certainty for companies. However, it questions whether a solution is achieved if limiting options and possibilities for interpretation is only designed within the EU context. In addition, the Netherlands has questions about the implications of the proposal concerning the position of individual EU Member States in the OECD meetings on Transfer Pricing.

See here our EU Gateway publication “The Transfer Pricing Directive: The Fundamental Changes and Impact on Groups Operating in the EU”. In this EU Gateway publication, we present the fundamental aspects of the proposed TP Directive and their impact for groups operating in the EU Member States. Each aspect is accompanied by our EU Gateway observations.

Head Office Tax system proposal

The Head Office Tax system proposal aims to mitigate the compliance challenges that SMEs face in the EU. The optional system would allow permanent establishments in the EU to compute their profits according to the rules of the head office state. Moreover, it would create a one-stop-shop in the head office state for filling, assessment and collection of tax. 

The Dutch government supports the Commission's aim to assist SMEs but raises concerns about the proposal’s effectiveness and scope, including the sidelining of Dutch policy when the Netherlands is the permanent establishment state.

Loss relief

An unlimited-in-time loss carryforward rule is applicable as of 1 January 2022. However, carryback and carryforward losses are only deductible up to an amount of EUR 1 million in taxable profit. In the event the taxable profit in one year exceeds EUR 1 million, the losses are only offsettable for up to 50% of that higher taxable profit, minus the amount of EUR 1 million that may always be offset.

The new scheme also contains transitional law. For the carryforward of losses, losses incurred in financial years that started on or after 1 January 2013 fall under the new scheme that came into effect on 1 January 2022.

You can read more about these loss relief rules here.

Reporting obligations for digital platform operators (DAC7)

Through the DAC7 Directive, the European Union is introducing new measures to increase tax transparency in the digital economy. Digital Platform Operators are targeted to identify, trace, and report on revenues made by sellers on their digital platforms. DAC7 is implemented in national law as of 1 January 2023. Digital Platform Operators are required to report on the year 2023 for the first time in 2024. Digital Platform Operators should already have seller due diligence procedures and controls in place as of 1 January 2023.

Treaty developments

The Netherlands pursues an active tax treaty policy in order to maintain and extend its wide tax treaty network. Most Dutch bilateral tax treaties are based on the OECD Model Tax Convention. The government has expressed that treaties with developing countries will be based on the United Nations (UN) Model Convention more often than was the case. The Netherlands has concluded bilateral tax treaties for the avoidance of double taxation on income and capital with over 90 countries worldwide. As of 1 July 2019, the multilateral instrument (MLI) has entered into force for the Netherlands. It first had effect on 1 January 2020.

New treaties are concluded regularly. E.g. in  2023, a new treaty with Belgium and in 2024 a new treaty with Bangladesh were signed (both not yet in effect). 

As of 8 December 2023 an additional mutual agreement with Belgium is in effect, which provides certainty in situations of cross-border employees who are working a part of their working time from their respective homes for employers that are based in the other country. Currently, discussions are ongoing with Germany about the same topic. This is to result in a new Protocol to the current treaty.

EU Gateway: a coordinated support for non-EU clients

EU Gateway – an initiative of PwC Netherlands – is dedicated to provide coordinated support for non-EU clients to navigate through the complex EU tax and legal landscape. Through our extensive network of tax and legal specialists we offer coordinated assistance, helping non-EU clients understand and comply with the complex tax and legal regulations in the EU. 

We offer tailored and coordinated guidance and expertise by working together with our network of tax and legal specialists across the EU, Middle East, Asia, Africa and the US, to assist non-EU clients with navigating the complexities of EU tax and legal matters and explaining the implications for them.  

Our insights and services empower our clients to:

• anticipate the ever-evolving EU regulations;
• create opportunities and long-term value for their business in terms of establishment in the EU; 
• minimise risks as a result of continuous transformation of EU tax and legal developments and act effectively in response.

Take a look at our dedicated website for more information on how we can assist you.