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).

Position of the Netherlands on the Organisation for Economic Co-operation and Development's (OECD’s) Pillars One and Two

On 19 December 2023, the Netherlands adopted the ‘Minimum Tax Act 2024 (Pillar Two)’. By doing so, the Netherlands implements Pillar Two as of 1 January 2024, in line with the adopted Pillar Two Directive. The legislative proposal 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 750 million euros (EUR) 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 multinational enterprises (MNEs) with profitability above 10% and global turnover initially above EUR 20 billion. The Pillar One rules are expected to be introduced by a Multilateral Convention (MLC). In addition, the MLC will also contain provisions requiring the withdrawal of all existing digital service taxes and relevant similar measures with respect to all companies, as well as a commitment not to enter into such measures in the future.

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: European Union (EU) climate agreement - Carbon Border Adjustment Mechanism (CBAM) transition phase started October 2023

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, namely Revision of EU Emissions Trading System (ETS), Carbon Border Adjustment Mechanism (CBAM), Effort Sharing Regulation, CO₂ emissions standards for cars and vans, LULUCF and Social Climate Fund, Fuel Maritime (Sustainable maritime fuels), Energy Efficiency Directive (EED), Alternative fuels infrastructure Regulation (AFIR), Renewable Energy Directive III (RED III), and ReFuelEU Aviation, have been published in the Official Journal of the European Union in 2023 , after adoption by the European Parliament and the Council of the European Union. 

On 1 October 2023, CBAM entered 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 greenhouse gas (GHG) intensive goods into the European Union.

Read more on the EU Fit for 55 Package here.

2024 Tax Plan: Several new rules to be introduced for 2025

The 2024 Tax Plan that was adopted 19 December 2023 includes several legislative changes for 2025. Considering a new government is currently forming, there is a chance that these changes are altered before they become effective.

• Introduction of tax qualification policy for legal forms Act.

• Strengthening of approach to dividend stripping (burden of proof shifts to taxpayer).

• Abolition of repurchase facility dividend WHT (repurchase of own shares by listed companies).

• Adjustments to FBI regime (regarding Dutch real estate) and mutual fund transparency rules.

Read more on the 2024 Tax Plan 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.

Unshell Directive / ATAD III (Preventing the misuse of shell entities)

The Netherlands generally supports the proposal for the EU Directive aimed at preventing the misuse of shell entities for tax purposes, known as the Unshell Directive or ATAD III. According to the Directive proposal, entities at risk need to report that they meet certain indicators of minimum substance to the tax authorities. Failure to do so (in an adequate manner) means that the entity shall be considered to be a shell. The Directive proposal prescribes concrete tax consequences for situations involving a shell entity. 

Negotiations on the Unshell Directive are still ongoing. Progress has been made on matters that previously caused controversy among member states, such as the scope of the Directive, determining accurate minimum substance indicators and associated tax consequences, and the issuance of tax residence certificates. In November 2023, a proposal was submitted that includes a minimum standard approach combined with a toolbox of tax consequences. Despite this progress, no agreement is reached as yet.

All EU member states need to agree on the Directive proposal to be adopted.

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 June 2023, a new treaty with Belgium was signed (not yet in effect) and the treaty with Cyprus came into 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.

Conditional dividend exit tax on relocation of head offices - proposal

In July 2020, the Dutch political party ‘GroenLinks’ published a bill to counter the loss of the Dutch dividend WHT claim that may occur when companies/head offices are relocated from the Netherlands to certain other jurisdictions. By proposing this bill, GroenLinks aims to discourage companies from relocating their headquarters outside the Netherlands in order to avoid dividend WHT.

The exit tax is conditional, and, as such:

• The final settlement in the dividend tax is only invoked when a company leaves the Netherlands for a country that is not an EU member state or a European Economic Area (EEA) country that does not levy a dividend tax itself or does not provide a step-up upon entry.
• The final settlement in the dividend tax is only levied on portfolio investors who are residents of a country that is not an EU member state or an EEA country and with which the Netherlands has not concluded a tax treaty. 

This own-initiative bill was amended several times. With the last amendment, the retroactive effect of the bill was set to 8 December 2021. The proposal is currently pending, although mid-2022 the government advised the lower house against passing this law. The likelihood of this proposal being successfully adopted remains ambiguous.