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) is due in certain situations, namely where the recipient is based in a low-tax jurisdiction, a non-cooperating jurisdiction in respect of information exchange, or in cases of abuse (see Conditional withholding tax on interest and royalty payments below). As of 2024, this WHT will also apply to dividends. Additionally, a legislative initiative is 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 1 and 2
The Netherlands supports both OECD’s Pillars 1 and 2. In relation to OECD’s Pillar 1, the Netherlands emphasises that the further roll-out and implementation should be as simple as possible. Further, the Netherlands strives for a robust dispute resolution mechanism in cases where countries do not agree on the manner in which Pillar 1 is to be applied. In relation to OECD’s Pillar 2, the Netherlands endorses the 15% minimum level of taxation to ensure effectiveness in combating tax competition and tax avoidance.
Read more on OECD’s Pillar One proposal here.
Read more on the EU's proposal for adopting OECD's Pillar Two here.
Informal capital situations (preventing mismatches when applying the arm's-length principle)
The so-called ‘arm's-length principle’ aims to ensure a market-conforming distribution of profits within groups. Since not every country applies this principle (in the same manner), this can lead to a part of the profits of a multinational company not being taxed. The Netherlands addresses this type of mismatch with new legislation as of 1 January 2022. In short, the measure entails that no 'minus' can be claimed for tax purposes in the Netherlands if there is no corresponding 'plus' abroad.
Read more on this subject here.
Fit for 55: EU climate agreement
The EU aims to reduce its net greenhouse gas emissions by at least 55 percent 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.
On Wednesday 22 June 2022 the European Parliament adopted the proposal for a revised EU Emissions Trading System (ETS) as well as the proposals for the Carbon Border Adjustment Mechanism (CBAM) and the Social Climate Fund. The next step is negotiation with the Council of the European Union. An important part of the measures are intended to enter into force by 1 January 2023, meaning the Netherlands will have to implement suitable legislation by then. Read more on Fit for 55 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 [EU] and with third countries). 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. The tax liability measure (for 'reverse hybrids') was approved as part of the 2022 Tax Plan and will apply from 1 January 2022.
Read more on this subject here.
ATAD III/Unshell Directive (Preventing the misuse of shell entities)
ATAD 3 concerns a proposal for a Directive in the field of direct taxation and has as its objective to a) identify the so-called shell entities with no minimal substance and economic activity and b) define common tax related substance requirements for these entities operating within the EU. According to the EC, these entities continue to pose a risk of being used for improper tax purposes, such as tax evasion and avoidance. ATAD 3 stems from the EC’s Communication on Business Taxation for the 21st Century where the EC pledged to tackle the abusive use of entities and arrangements that have no or little substance. ATAD 3 attempts to address this by denying certain tax benefits and imposing disclosure requirements and automatic exchange of information between Member States. It follows the earlier adopted ATAD 1 and ATAD 2 to further counter tax avoidance in the EU.
Provided that ATAD 3 is adopted by all EU27, it will take effect as of 1 January 2024. However, please note that the proposal is subject to changes.
An unlimited-in-time loss carry forward rule is introduced per 1 January 2022. However, carry-back and carry-forward losses are only deductible up to an amount of 1 million euros (EUR) in taxable profit. In the event of profit in one year that 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 carry-forward 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 to be implemented in national law by 1 January 2023. In the fourth quarter of 2021, the Dutch government held an Internet consultation for its proposed Dutch DAC7 implementation, which is intended to follow the Directive closely.
Read more on the Dutch Internet consultation here.
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.
Amendments to liquidation and cessation loss rules
As of 1 January 2021, the regime for liquidation and cessation losses has changed. Dutch corporate income taxpayers can take foreign liquidation losses (in the case of legal entities) and foreign cessation losses (in the case of permanent establishments [PEs]) into account; however, they are subject to stricter limitations.
Losses arising from both EU/European Economic Area (EEA) and non-EU/EEA interests, up to the amount of EUR 5 million, will remain deductible. However, the liquidation or cessation loss can only be taken into account if the liquidation or cessation is completed within three years after the activities stopped or after the decision to stop them has been made. There is a three-year transitional period for unrealised liquidation losses incurred before 1 January 2021.
Losses exceeding the EUR 5 million mark are subject to the following limitation:
- The liquidation loss provision would be applicable only:
- in EU/EEA situations, and
- with regard to interests giving rise to decisive influence on the participation’s activities (generally in case of ownership of more than 50% of the voting rights).
- Cessation losses of PEs (within the so-called 'object exemption') are also only deductible in EU/EEA situations.
Temporal limit set-off of dividend WHT
Following the Sofina judgment (C-575/17), a more generous granting of refunds regarding dividend WHT was temporarily possible, especially to foreign companies. However, a repair that was announced earlier is effective as of 1 January 2022, meaning that, both in domestic (Dutch) and in foreign situations, the set-off of dividend WHT (and gambling tax) against CIT is limited to the amount of CIT due before the set off. Effectively, this means that companies are no longer entitled to refunds of dividend WHT (and gambling tax). Taxes that cannot be set off in a year are carried forward to future years without time limitation.
Also, the term within which the Tax Inspector can adopt a (revised) decision regarding WHTs to be carried forward is extended from 5 to 12 years in the event of an additional claim from CIT on foreign profits.
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 an 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.