International Company Relocation Opportunities: The Netherlands
Business and investment:
- Euro (€) is the monetary unit;
- The economic system is stable;
- Political stability in relation to enhanced business climate;
- Has a growing workforce that is highly-educated, productive, and with world class knowledge and language skills;
- Has strong labor laws which can make things difficult for a company hiring more than 50 people.
Quality of life and living conditions:
- Ranks top in Europe in almost all indicators because of its welcoming environment to expatriates or skilled foreign employees, based on living conditions and the quality of life;
- The crime rate is significantly low;
- Flexible, resilient infrastructure, and superior logistics;
- The quality of education is high;
- A tax ruling ensuring clarity and certainty of tax consequences, even before the investment is established;
- Under certain circumstances and under participation exemption, outgoing dividends from the Dutch Coop are not subject to a dividend withholding tax.
The Netherlands has the most favorable legal framework and is a geographically strategic spot, being located in the center of Europe and attracting multinationals to place holding companies. There is a competitive tax treatment, significant by the exemption of dividend and capital gains on disposal of shares by foreign corporate shareholders and the nonexistence of Controlled Foreign Corporation (CFC) legislation.
In addition, the Netherlands has a favorable tax regime excellent for a legal and fiscal infrastructure. It has become a common site for finance and license companies, because it has a far-reaching tax treaty network and no statutory withholding tax on dividends, royalty payments, and outgoing interests.
The manufacturing sectors in the Netherlands are dependent on raw imported materials because they lack natural resources. That is why the availability of raw materials is limited. Petroleum, gasoline, food, pharmaceutical, telecom, office equipment and electronics are often imported.
There is a growing pool of flexible, multi-lingual, productive, and highly skilled workers that assures foreign companies labor is ready when they need it.
The Netherlands is known as a tax haven because of its favorable expat tax program for qualified and skilled foreign employees.
Corporation Tax Rate: The Dutch corporate tax rate depends on the taxable amount. Whereas the standard CIT rate is 25 percent, the rate applies to the excess of taxable income or exceeding €200,000, and can be 20 percent if the taxable income is less than or equal to €200,000. The interest on company loans is sometimes partly tax deductible.
Because the Netherlands does not levy a withholding tax on royalty payments and outgoing interest, it stimulates foreign investment and has become a site for licensing and international debt financing activities. The tax ruling or the advance pricing agreement is possible for financing activities. This is done between the Dutch tax authorities and the taxpayer on the application of Dutch tax law.
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The Dutch government began to abolish the thin capitalization rule from January 1st of 2013. It was replaced with specific deduction limitation rules, whereas the excess acquisition price of the participation is deemed to be financed with “participation debt” and may result in excessive interest. If the excessive interest amount exceeds €750,000, then it is non-deductible.
Capital and Stamp Duties: The Netherlands does not levy any capital or stamp duty.
Exemptions from Corporate taxation: A company may be entitled to a full exemption from dividend tax if the shareholding or ownership of the share capital of the subsidiary is at least 5 percent.
Without a minimum holding period in the participation exemption, a company can share some of their profits or capital gains of at least 5 percent as dividend to their shareholders.
Real Estate companies are usually the ones involved in the participation exemption because of their assets. If the activities qualify for “passive investment activities” then the subsidiary is subject to a normal profit tax of 10 percent.
Anti-Tax Avoidance Directive (ATAD)
Traditionally, the Netherlands has a reliable, efficient and extensive advance-ruling practice intended for various rulings for different types of structures or activities. The Dutch subsidiary must receive an arm’s length compensation for the service it performs.
The Netherlands does not have a CFC legislation that attributes the income of foreign subsidiaries.
There is an agreement between the taxpayer and the Dutch authorities on the advance tax ruling. However, it is not mandatory and usually the price is reasonable.
The Dutch government implements the Advance Pricing Agreement (APA) or Advance Tax Ruling (ATR), making the Netherlands attractive to multinational companies due to the possibility of being able to conclude tax rulings.
The Advance Pricing Agreement (APA) provides certainty in advance regarding the transfer pricing issues of a taxpayer to specific transactions (ex. Sales and marketing activities). While the Advance Tax Ruling (ATR) provides certainty in advance considering the tax effects of a specific transaction or certain international structures. It can be requested in the diligence of the participation exemption.
Withholding tax (WHT)
The Dutch withholding tax rate for dividend distribution is 15 percent. Dividends paid to qualified shareholders in the EU are exempted from the Dutch dividend WHT, and the rate for inter-company dividends from foreign investors or shareholders are often reduced. In most cases, no dividend WHT becomes due if the dividend is dispersed by a corporation that owns the legal form of Co-operative.
The Netherlands does not have a withholding tax on royalty payments and interest payments.
- Turnover Tax / Value Added tax (VAT): As of 1st of October in 2012, the general VAT rate has increased to 21 percent. There is an exemption from VAT for Medical and financial services, while the 6 percent reduced rate is for accommodation, transport, magazines, medicines, books and food.
- Taxation Treaties: There are a hundred nations with which the Netherlands has double taxation agreements (for the avoidance of double taxation).
- Disposal of Shares by Foreign Shareholder: Capital gains from the disposal of foreign companies owning shares in Dutch companies and cooperatives may not be taxed if they have an active enterprise as a shareholder.
Intellectual Property Regime
Legal: Patents, copyrights, industrial designs, models, and trademarks are recognized and legally protected in the Netherlands.
Intellectual Property (IP) and Research and Development (R&D): The innovation box is a special regime to stimulate R&D activity, whereas an effective tax rate of 5 percent is applicable if the profits exceed the production expenses of the intangible assets. The innovation box is not applicable to marketing intangibles, such as trademarks and goodwill.
Tax rate reduction on Intellectual Property: Profits and income related to IP are levied at a tax rate of 25 percent.
Moreover, there is a possibility for a company to get a significant reduction in social security contribution and payroll if some measures are met under the innovation box.
The RDA was introduced in 2012. It allows an extra corporate income tax reduction for R&D investments and costs gained after the 31st of December in 2011.
- Income tax: There is a maximum tax rate of 52 percent of income from employment, profits, and home ownership, including contributions to Social Security.
- Allowances and Tax Benefits: The expatriates could be eligible for a tax break or a labor tax credit and benefits, such as healthcare, childcare, school fees, housing and living allowance, pensions, moving/relocation allowance, etc.
- The 30% Tax Ruling: The availability of a 30 percent tax free-allowance is provided to people moving to the Netherlands for employment. However, this allowance is mainly for workers who can meet certain requirements and have specific and exceptional skills which are rare within the local labor market.
Under this regime, the employment income is taxable at progressive rates. The employee will be taxed 36.4 percent of income taxes and SS contributions. The expats may also be eligible for travel or for a moving allowance and other expenses related to it.
Corporate Entity: BV is the most used legal entity in the Netherlands for business activities, while Cooperatives are for worldwide tax formation activities and profit distributions outside the EU with non-WHT.
A BV can only have 1 shareholder even without the director requirements. Since the 1st of October 2012, transfer restrictions are no longer required. However, a capital share of at least €0,01 is required.
Nike and Coca Cola are 2 companies that have established headquarters in the Netherlands.
Cost: A company formation can be done in 2 weeks and with a minimum cost of €3,500.