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. As of 2024, this WHT also applies to dividends. For more information, see Conditional WHT on interest, royalty, and dividend payments in the Withholding taxes section.

Pillars One and Pillar Two

The Netherlands implemented Pillar Two as of 1 January 2024, in line with the European Union (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 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. In October 2024, the members of the Organisation for Economic Co-operation and Development (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 - Carbon Border Adjustment Mechanism (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 Emissions Trading System (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), Energy Efficiency Directive (EED), Alternative fuels infrastructure Regulation (AFIR), Renewable Energy Directive III (RED 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 greenhouse gas (GHG) intensive goods into the European Union.

Read more on the EU Fit for 55 Package here.

2025 Tax Plan

The 2025 Tax Plan includes, amongst others, the following tax measures: 

• Reversal of the abolition of the dividend tax buyback facility.

• Interest deduction limitation on earnings stripping increase from 20% to 24.5%.

• Introduction of the General Anti-Abuse Rule (GAAR) of the Anti-Tax Avoidance Directive (ATAD).

• The earlier announced abolition of the reduced value-added tax (VAT) rate for cultural goods and services, with the exception of cinemas and daytime recreation (2026), will be reversed. However, pending on covering the budgetary deficit arising from this decision, it is still uncertain what compensating measures will take be taken.

• Abolition of the reduced VAT rate for accommodation, with the exception of camping sites (2026).

• Introduction of a specific general housing transfer tax rate of 8% from 2026. The transfer tax has a general rate of 10.4%. Additionally, there is a reduced rate of 2% for homes that serve as the main residence.

Read more on the 2025 Tax Plan here.

Abolition of 'open CV' as an independent taxpayer 

The distinction between open (i.e. non-transparent) and closed (i.e. transparent) CVs (Limited Partnerships or LPs) is eliminated. All LPs will now be transparent. The aim is to reduce the number of hybrid mismatches in an international context. Read our Tax News article for more information.

According to the Secretary of State, a limited partnership (CV) can still be independently taxable (non-transparent) under the proposed rules if it qualifies as a mutual fund (FGR).

In some cases, a currently transparent CV or similar foreign entity me be reclassified as a non-transparent FGR as of 1 January 2025 because it meets the criteria for an ‘open’ FGR. A transitional law provision will be introduced, which, under certain conditions, offers some time for the restructuring of an investment fund into a so-called ‘inkoopfonds’, which will then still be transparent. One of these conditions is that the fund already intends in 2024 to meet the conditions of an ‘inkoopfonds’ in the course of 2025.

Qualification of foreign legal forms 

The qualification of foreign legal forms will be regulated by law. There are several material changes. The qualification of foreign legal forms that are comparable to Dutch entities will continue to take place using the legal form comparison method. However, for foreign legal forms that are not comparable to Dutch entities, two additional methods are introduced: the 'symmetrical method' and the 'fixed method'. Read more in our Tax News article on this subject.

Amendments to the FBI regime 

Dutch Fiscal Investment Institutions (FBIs) are no longer allowed to directly invest in real estate located in the Netherlands. It remains possible for an FBI to be involved in the management of a real estate entity related to the FBI. It will also remain possible to directly invest in foreign real estate.

Business in Europe: Framework for Income Taxation (BEFIT)

BEFIT 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 seven-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 European Union. 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 government supports the European Commission's goals to strengthen the EU’s internal market and competitive position. The government 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 government 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 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 European Union. 

Transfer Pricing Directive Proposal

On 12 September 2023, the European Commission published a legislative proposal for a Directive on Transfer Pricing. 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 European Union on specific transfer pricing subjects. The proposal also looks to clarify the role and status of the OECD Transfer Pricing 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. Limited enthusiasm for the legislative proposal prompted the presidency to explore non-binding solutions, such as a Transfer Pricing Platform. Further efforts are required to move this file forward. 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 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 Transfer Pricing Directive and their impact for groups operating in the EU Member States. Each aspect is accompanied by our EU Gateway observations.

Head Office Tax (HOT) system proposal

The HOT system proposal aims to mitigate the compliance challenges that small and medium-sized enterprises (SMEs) face in the European Union. The optional system would allow permanent establishments (PEs) in the European Union 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 PE state. Yet, the proposal for SMEs failed to gain sufficient support. EU Member States suggested exploring alternative approaches to support SMEs beyond the legislative framework.

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 offsetable for up to 50% of that higher taxable profit, minus the amount of EUR 1 million that may always be offset.

The 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 the loss relief rules here.

The loss-relief scheme led to an unfortunate concurrence in the CIT with the debt cancellation profit exemption. In certain cases, this made it more difficult for a loss-making company to restructure, namely if the claims against that company are waived. A waived claim results in a debt cancellation profit that is (partially) exempted under certain conditions. Due to the current loss relief rules, this debt cancellation profit could still lead to CIT being levied despite the exemption. This was not the intention and led to problems. As of 2025, the legislator has decided to solve the undesirable consequences of this concurrence, and, from 1 January 2025, a separate scheme for write-off profits for CIT purposes will apply. In most cases, debt-cancellation profits will now be fully offsetable with losses (however, via quite complicated rules) and/or exempt for CIT purposes.

You can read more about the new rules for debt-cancellation profits in our Tax News article on this subject.

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. In addition, in a press release dated 14 March 2024, it was stated that the Netherlands strives to include anti-abuse measures in its tax treaties with developing countries.

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: new treaties were signed with Belgium (2023), Andora (2023), Kyrgyzstan (2023), Moldavia (2023), and Bangladesh (2024) (all are yet to come into effect). Currently, double tax treaties (DTTs) are being negotiated or renegotiated with 13 countries: Aruba, Benin, Brazil, Ecuador, Germany, Morocco, Mozambique, Portugal, Romania, Suriname, Sweden, and Uganda.

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. Negotiations about a final mutual agreement are still ongoing (the 13th treaty that is being [re]negotiated). 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 European Union. 

We offer tailored and coordinated guidance and expertise by working together with our network of tax and legal specialists across the European Union, Middle East, Asia, Africa, and the United States 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 European Union, and
• 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.