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Corporate Income Tax System in the Netherlands

National Corporate Income Tax Rate at a Glance

Corporate Income Tax Rate (%) 25.5
Capital Gains Tax Rate (%) 25.5
Branch Tax Rate (%) 25.5
Withholding Tax (%)
Dividends 15
Interest N.A.
Royalties N.A.
Branch Remittance Tax N.A.
Net Operating Losses (Years)
Carryback 1
Carryforward 9Outline of Dutch Corporate Tax System

Taxable Income
Dutch resident companies are subject to corporate income tax on their worldwide income. Furthermore, foreign companies, holding 5% or more in the issued share capital of a Dutch resident company could also become subject to Dutch corporate income tax on Dutch-source income. The latter only applies in case the corporate shareholder cannotbenefit from any treaty protection.

Participation exemption
Double taxation is eliminated through the participation exemption. The following requirements need to be met in order to benefit from the participation exemption:

- The entity in which the participation is held must have a capital divided into shares;
- The shareholder should have an interest in the share capital of the entity ofat least 5%, and;
- The entity in which the participation is held may not qualify as a low taxed portfolio investment participation.

With respect to the latter requirement, a participation is considered to be a low taxed portfolio investment company if the assets of the participation (directly or indirectly) consist for more than 50% of portfolio investments and the effective tax rate of theparticipation is less than 10%.

Furthermore, if an EU/EER or Dutch resident company holds 5% or more in the issued share capital of a Dutch resident company, under strict conditions no withholding tax will be levied upon dividends distributed to this qualifying shareholder. In all other cases, the double tax treaty applies with a maximum of 15%. This maximum rate thus also applies if no doubletax treaty protection can be invoked.

Transfer Pricing Rules
The transfer pricing regulations stipulate that pricing between affiliated entities should be determined based on the at arm’s length principle. Entities are considered affiliated if a company directly or indirectly participates in the board of, has a substantial control over or participates in another company.

Dutch taxpayersare obliged to keep records in their administration substantiating the at arm’s length character of intercompany pricing agreements.

Anti-abuse provisions
Dutch corporate tax law contains anti-abuse provisions in respect of interest deductions on loans taken up by affiliated companies relating to certain transactions, such as capital contributions in other affiliated companies, acquisition,dividend distributions and repayments of capital.

Furthermore, limitations, other than in time, could apply with respect to the possibility to compensate net operating losses. Special attention should be drawn in case of change of ownership and in case of holding- or finance companies.

Thin Capitalization
The general thin-capitalization rules limit interest deduction for as far as thedebt-to-equity ratio exceeds 3:1, for as far as the excessive part exceeds € 500.000. The applied debt and equity amounts are the annual average amounts. The limitation itself is limited to the sum of interest payments to related entities and interest income received form related companies.

Upon request, a Dutch taxpayer may under strict conditions opt to apply a group debt-to-equity ratio.Foreign Tax Credit
An unilateral tax relief is granted to a Dutch company in case income is derived from a foreign permanent establishment or a permanent dependant representative. A Dutch company can deduct corporate income and withholding tax paid abroad as expenses in case no other double taxation relief can be applied.

Exempt Investment Company
Dutch investment companies that are...