New tax treaties in 2012

Dutch tax treaties

New tax treaties with Hong Kong, Switzerland, Oman, Panama and Japan officially came into force on 1 January 2012. The Dutch Ministry of Finance announced the news via its website, together with an updated overview of all tax treaties that the Netherlands operates with other countries.

The Netherlands boasts a very well developed network of tax treaties with other nations, minimising the risk of double taxation for businesses operating across borders. Advanced tax rulings or advance pricing agreements can also be agreed upon with the Dutch tax inspector, which can be a great advantage for international companies. This benefits both local businesses and international investment in the Amsterdam Metropolitan Area.

Attractive fiscal climate

The Dutch tax climate is one of the reasons why numerous international companies invest in or via the Netherlands.

Companies established in the Netherlands benefit from various tax advantages, including:

• A competitive 20% corporate income tax rate over the first 200,000 euros of taxable profit, and 25.5% on the excess over that amount.

• The Dutch ruling practice, as a result of which, advance certainty can be obtained on future transactions, investments or corporate structures.

• Horizontal supervision: the Dutch tax authority is the first in the world to make prior arrangements with large and medium-sized taxable businesses on the tax liabilities expected in the course of the year, and how they are going to manage them. When the resulting ‘Tax Framework’ satisfies the requirements of the inspector, in principle, no further fiscal controls are required for the year in question.

• Participation exemption, meaning that all benefits relating to a qualifying shareholding (including cash dividends, dividends-in-kind, bonus shares, hidden profit distributions and capital gains) are exempt from Dutch corporate income tax.

• Double taxation relief via the Royal Decree for the Avoidance of Double Taxation.

• The Innovation Box: profit resulting from Research & Development that leads to patents will only be taxed against an effective tax rate of 5%, rather than the statutory rate of 25.5% (certain conditions apply).

• Absence of withholding tax on outgoing interest and royalty payments.

• No capital-tax levy on the contribution of capital to a company and any later expansion of share capital.

• The 30% ruling for expats: tax-free reimbursement of 30% of an employee’s salary, provided that the employee has been recruited or assigned from abroad and has specific expertise which is scarce in the current Dutch labour market.

• Wage tax credit on qualifying wages relating to technical innovation. Provided certain conditions are met, it is possible to obtain the wage tax credit when the Research & Development activities lead to the development of an intangible asset.

Related topics

Fiscal advantages of investing in the Amsterdam Area

Netherlands - Japan tax treaty into force

Easier income tax for expats