Generally, the tax year is equal to the calendar year. However, corporate taxpayers may deviate from this by adopting a different financial year.
Corporate taxpayers are required to file a tax return annually. The due date is generally five months after the end of the company’s financial year. This filing due date may be extended upon the taxpayer's request.
The Dutch tax authorities generally make a provisional assessment before issuing the final assessment. The final assessment must be issued within three years following the financial year it concerns. This period is prolonged with the time of the extension for filing the tax return. The Dutch tax authorities may issue an additional assessment if it appears that the amount of CIT due (as calculated in the final assessment) is too low.
During the current tax year, a provisional assessment can be issued on the basis of prior years’ taxable income or on an estimation provided by the taxpayer.
Functional foreign currency regime
As a main rule, the CIT return should be filed in euros. Under certain conditions, however, the CITA allows the corporate taxpayer to file its tax return in a currency other than euros (the so-called 'functional currency regime'). The main conditions of the regime are as follows:
- A request must be submitted with the tax inspector prior to the year as of which the regime is requested. The decision made by the tax inspector on the request is open to appeal.
- If the request is granted, the functional foreign currency applies for at least ten years.
- The foreign currency to be applied for tax purposes is also applied in the commercial accounts of the taxpayer, which currency is justified by the business conducted by the taxpayer or the international position of the group the taxpayer is part of.
- The foreign currency to be applied is one of the currencies for which a ‘euro foreign exchange rate’ is published by the European Central Bank (ECB).
- A fiscal unity for Dutch CIT purposes is eligible for the functional foreign currency regime, provided that all of the companies that are part of the fiscal unity have obtained permission to apply that regime.
Under the functional currency regime, the taxable amount is annually converted from functional currency into euros against the average of the exchange rate during the financial year (as published by the ECB). Any conversion result of the foreign currency to euros is no longer recognised under this regime for Dutch tax purposes.
Payment of tax
The CIT assessed must be paid within six weeks from the date of the provisional or final assessment. Interest is payable on the CIT due. Interest on CIT assessments is calculated from six months following the financial year until the assessment is issued. This interest rate is 8%. Interest for late payment of a CIT assessment (calculated from six weeks after issuance) is 2% as of 1 January 2023 and 3% as of 1 July 2023. These lower rates are part of the COVID-19 measures. As of 1 January 2024, this interest rate will be back at 4%, as it was before the COVID-19 measures.
Refund of tax unduly levied
If a corporate taxpayer is entitled to a refund of Dutch CIT or dividend WHT because the levy appeared to be in conflict with EU law, the Netherlands might be obligated to repay the unduly paid tax with interest corresponding to the period from the payment of levy to the refund of such levy to the taxpayer.
Interest on late payment dividend WHT
Interest is calculated on late payments or refunds of Dutch dividend WHT.
Tax audit process
Corporate taxpayers might be subject to audits by tax inspectors. This forms part of the so-called vertical monitoring tasks of the national tax authorities. In recent years, there has been a tendency towards a more enhanced cooperation between tax authorities and taxpayers in the Netherlands (see Horizontal monitoring below).
Statute of limitations
Under certain conditions, the tax administration can, in case of domestic situations, impose an additional assessment within five years from the year in which the tax debt originated (if the filing due date was extended on request, this period is added). In case of income from abroad, the period for additional assessment is extended to 12 years.
Additional assessments may be imposed if the circumstances give rise to the additional tax assessment and the tax authorities have new knowledge about relevant facts that give rise to the additional tax assessment (a ‘new fact’ or ‘nieuw feit’ in Dutch).
Advance pricing agreement (APA)/Advance tax ruling (ATR)
Taxpayers are able to obtain (legal) certainty concerning their tax positions. They may request the Dutch tax authorities to conclude an APA with respect to the transfer pricing of controlled transactions. Taxpayers may also request the Dutch tax authorities to provide an ATR with respect to the CIT implications of a (contemplated) set of transactions.
In certain situations, no pre-consultation is allowed, namely when:
- there is no sufficient relevant economic nexus
- saving of Dutch or foreign tax is the sole or decisive reason for the transaction, or
- a transaction takes place with a country that is on the Dutch list of low-tax jurisdictions.
Rulings are published in summarised and anonymous form. Situations in which pre-consultation has taken place but where the ruling has not been concluded are also published in summarised form, including an explanation of why the ruling was not concluded.
In principle, the tax authorities will make an effort to conclude APAs bilaterally, provided that a tax treaty has been concluded with the other country and that country is willing to cooperate in this respect.
The Netherlands Tax and Customs Administration employs a cooperative compliance program dubbed ‘horizontal monitoring’ ('horizontaal toezicht' in Dutch). In 2020, a redesign of the program was announced to be effective as of 2023, grandfathering the period until then.
Under the new scheme, three groups of taxpayers are identified: (i) the so-called ‘Top 100’ of largest and/or most influential Dutch taxpayers, (ii) other taxpayers that are denominated by Book 2, Title 9 of the civil code (required to publish annual accounts), and (iii) other taxpayers. The first group will be served under a so-called ‘individual compliance approach’. The second group may apply for an individualised approach through covenants. The third group can only use the cooperative compliance program under covenants of Fiscal Service Providers. PwC is one of the qualified service providers. Only taxpayers who are willing to be transparent and cooperative, having a modern approach of tax control, and auditably proving this can enter the new cooperative compliance program.
In December 2021, the Tax and Customs Administration published the Good Practices. This is a long-awaited answer to the questions that arise in practice around the organisation of tax control. The publication contains no minimum requirement, limitative description, or legal obligation to set up a tax control framework but provides a picture of what the Tax and Customs Administration expects when setting up tax control within the organisation.
Benefits of the redesigned cooperative compliance program will be swifter-than-normal certainty and a better working relationship between taxpayer and tax administration.
The Dutch tax authorities will adjust the methods and intensity in which they perform their monitoring to the level of tax control of the taxpayer. Moreover, audits performed by the tax authorities may shift from reactive (tax audits over past years) to proactive (providing ‘assurance’ upfront and working with real-time data). Under horizontal monitoring, the company’s relationship with the Dutch tax authorities is based on trust, mutual understanding, and transparency. Horizontal monitoring can be applied to all tax types including, but not limited to, CIT, VAT, wage tax, and social security.
The Dutch Corporate Income Tax Act and Dividend Withholding Tax Act contain several anti-abuse provisions that aim to counter artificial arrangements. In these cases, the taxpayer can prove that the arrangement is not artificial if it meets certain relevant substance requirements. The relevant substance requirements serve as an indication that the arrangement is not artificial, leaving room for other facts and circumstances to play a role in determining whether or not there is abuse. There are similar regulations in the Conditional Source Taxation Act.
Topics of focus for tax authorities
The topics of focus for the Dutch tax authorities may vary.