DOING BUSINESS IN THE NETHERLANDS
DOING BUSINESS IN THE
NETHERLANDS
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Table of contents
1. RSW Accountants + Adviseurs ...... 3 1.1 Services ...... 3 1.2 Offices ...... 3 1.3 International department ...... 4 2. Memberships, alliances and licences ...... 5 2.1 INPACT International ...... 5 2.2 INPACT Audit ...... 6 2.3 SRA ...... 6 2.4 AFM ...... 7 2.5 Fiscount ...... 7 3. Doing business in the Netherlands ...... 8 3.1 Introduction...... 8 3.2 Starting business ...... 9 3.3 Finding a location ...... 16 3.4 Subsidies and financing ...... 17 3.5 Tax legislation ...... 20 3.6 Personnel ...... 38 4. Useful addresses ...... 44 5. Conclusion ...... 45
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1. RSW Accountants + Adviseurs
RSW Accountants + Adviseurs is an organization of accountants, tax advisors and consultants with our offices near Eindhoven in Helmond, Asten, Someren and Deurne. These offices cover a large nationwide area with an extensive range of services. There are approximately 65 people working at RSW under which registered accountants (RA’s and AA’s), qualified tax advisors and business economists.
The main target group is small and medium sized enterprises and independent professionals. RSW’s customer base not only includes nationally operating companies but also internationally operating companies. Among these are small and medium sized enterprises and subsidiaries of larger internationally operating companies.
RSW is a member of the SRA, a national interest group of independent accountancy firms. At an international level RSW is affiliated with INPACT International and INPACT Audit, international alliances of accountants and tax advisors with contacts in all important industrialized and commerce countries.
1.1 Services . RSW offers the following services:
Accountancy Tax Advice Drawing up annual accounts Tax planning Assessing annual accounts Estate planning Auditing annual accounts Filling in tax returns Statutorily required audits Representation before the tax authorities Company valuations Tax procedures Due Diligence studies Choice of enterprise forms Business economic issues Investment analysis Administrative services Handling accounts Payroll records Drawing up budgets Income tax and social contributions return Providing management Submitting annual work to tax authorities Secondment Salary audit/HR Supervision salary controls
1.2 Offices Helmond (head office) Asten Stapelovenweg 2, 5708 JW Helmond Wilhelminastraat 13, 5721 KG Asten PO Box 221, 5700 AE Helmond PO Box 221, 5700 AE Helmond Tel.: +31 (0)492 550 775 Tel.: +31 (0)492 550 775 Email: [email protected] Email: [email protected]
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Someren Deurne Witvrouwenbergweg 15a, 5711 CN Someren Heuvelstraat 12, 5751 HN Deurne PO Box 221, 5700 AE Helmond PO Box 221, 5700 AE Deurne Tel.: +31 (0)493 326 677 Tel.: +31 (0)493 314 885 Email: [email protected] Email: [email protected]
1.3 International department F.W.C.M. (Frans) Razenberg RA Accountant / managing director Contact person INPACT Email: [email protected]
Mr. P.J.J.G. (Pieter) Janssen RB Tax advisor / office manager Contact person INPACT Email: [email protected]
Drs. F.W.E. (Frank) Berkers AA Accountant / office manager Email: [email protected]
Mr. F.C. (Frank) van de Ven RB Tax advisor Email: [email protected]
Mr. K.F.T. (Kim) Vogels Tax advisor Email: [email protected]
Mr. T.H.W.M. (Ted) Swinkels Tax advisor Email: [email protected]
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2. Memberships, alliances and licences
2.1 INPACT International basis. By fostering good relationships and INPACT is an international alliance of developing an awareness of different working independent accounting firms affiliated to meet practices and business cultures, member firms the challenges of a global marketplace. aim to optimise the coordination of their clients’ As a member of the international INPACT projects and to work better together towards alliance, RSW is able to offer interdisciplinary achieving a high standard of service delivery in international services. Based on local expertise all member firms. PACT can help with your RSW offers international presence. INPACT is international accountancy and tax requirements a global alliance of independent accountants by providing solutions through our alliance of and tax advisors, based all over the world. independent offices worldwide. INPACT INPACT was founded in 1989 in order to meet member firms understand the needs of growing the growing demand for integrated international businesses and combine a high level of service services in the fields of accountancy and delivery with a friendly, caring and flexible taxation. This demand comes both from small approach. Whatever your business needs, with and medium sized enterprises who already over 160 member firms in over 60 countries, work internationally as well as companies yet to INPACT can help by providing access to local take this step. technical expertise, tailored to individual needs Through INPACT, RSW offers its clients a and delivered across international boundaries. framework to successfully support clients on In addition to having the appropriate their international markets. professional qualifications, member firms The founding members started to build INPACT ideally comprise at least three partners and (International Alliance of Professional provide a full range of audit, accountancy and Accountants) in 1989 with a European tax services. Our member firms are responsive perspective in response to a growing demand to the needs of growing businesses, to clients for integrated international services in corporate operating in unfamiliar territory. accounting, audit, taxation, consultancy, The business world is moving in favour of the financial planning and management. RSW is smaller enterprise as trade barriers are one of the founding members of INPACT. Then, removed. With appropriate advice and like today, this demand came from more guidance, not just large corporations but those companies on the point of entering the that are smaller and more flexible can take international arena, and from those already advantage of international economies of scale, operating in more than one country. It embraced and the globalisation of many markets in goods a like-minded association of CPA firms in the and services. Americas and linked up with an alliance of The clientele of INPACT range in size from high practices in the Asia Pacific region, hence net-worth individuals and small family-owned paving the way for new opportunities. businesses to large listed companies with The INPACT alliance aims to help members cross-border interests. ensure that their clients are able to draw on the Nevertheless, no matter their size, every local technical expertise of member firms INPACT client is given the same personal throughout the alliance and continues to provide attention and dedicated service. That is a framework for its members to assist their because INPACT members, individually and clients in meeting the challenges of today’s collectively, are large enough to provide the increasingly global business as well as high calibre of professional services that clients eliminating the barriers of language and need, yet small enough to care about the clients commercial customs throughout the world. as an individual. Partners of member firms throughout INPACT meet regularly on a national and international
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2.2 INPACT Audit INPACT Audit (IA), a new organisation (2007) created to assist independent accountancy firms as they conduct business across international boundaries. INPACT Audit is dedicated to providing quality transnational audit and assurance services through the international auditing and quality control standards and the code of ethics issued by the
International Federation of Accountants (IFAC). INPACT Audit is a global alliance of separate and independent accountancy and auditing firms. Members are partnerships or corporate 2.3 SRA entities in their own right. INPACT Audit is RSW is an SRA member. From a back office organised to facilitate services provided by its idea, SRA offers affiliated offices resources and members by coordinating membership support. This means they can perform their involvement with clients with multiple or new work qualitatively, efficiently and effectively and locations, exchanging practice management continuity and growth are promoted, whether it concepts and ideals, and providing assistance concerns a broad provision of services or beyond a firm’s normal service area. specialisations. INPACT Audit Limited is a member of the Forum Accountancy firms affiliated with the SRA may of Firms, an association of international use the SRA quality mark. This mark supports networks of accounting/auditing firms that the position of the office as a high quality service perform transnational audits. RSW is one of the provider on the market: a clear marking for founding members of INPACT Audit. (potential) customers, relationships and Disclaimer: intermediaries. INPACT is an international alliance of SRA offices are characterised by the high independent accounting firms affiliated to meet quality financial provision of services to small the challenges of a global marketplace with and medium sized enterprises. Independent, members throughout the world. It does not offer but strong due to the connection to a network of professional services in its own name. Each 400 Dutch accountancy firms. independent member of INPACT is a separate SRA is mainly used by RSW as an educational firm. These firms are not members of one institution, for example in the scope of the international partnership, or otherwise legal continuing education obligation. partners with each other, nor is any one firm responsible for the services or activities of each other. Each firm is organized under the laws of the territory in which it practices and is locally owned and managed. In most parts of the world, the practice of accounting and auditing is governed by local laws and regulations which determine professional standards and qualifications.
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2.4 AFM accountancy firms affiliated with the SRA The Audit Firms Supervision Act (“Wta”) means that the AFM, based on a collaboration introduced independent public regulation by the agreement, takes the outcome of the Netherlands Authority for the Financial Markets inspections by the SRA into account. The AFM (“AFM”) to accountancy firms providing audits does bear the final responsibility for regulation. which are significant for the Dutch capital The AFM monitors accountancy firms market. performing statutory audits. This does not entail The Netherlands Authority for the Financial all work or services offered by accountancy Markets is the body responsible for regulating firms. All other work besides statutory audits is behaviour on the financial markets in the therefore not subject to regulation by the AFM. Netherlands. In other words, the AFM regulates the behaviour of all parties involved with the savings, loans, investment and insurance markets. The AFM ensures that financial institutions in the Netherlands treat you correctly and provide you with the proper information about their financial products and services. A licence from the AFM has been a requirement 2.5 Fiscount to perform statutory audits in the Netherlands Since 1989, Fiscount has been the knowledge for some years now. Statutory audits are audits and advisory centre for the accountancy of the financial accounts of an enterprise or industry in the Netherlands. The services of the institution in accordance with Dutch law serving accountant are changing due to the increasing a social purpose, that have been made expectations of entrepreneurs and of society as mandatory by or pursuant to the statutory a whole. Entrepreneurs expect their accounting provisions stated in the appendix to the Audit firm to operate centipedes, which are widely Firms Supervision Act. developed and home to all markets. Fiscount is A registration with the AFM is needed to provide our knowledge and sparring partner, so RSW audit reports concerning the annual or has many specialties in-house. consolidated accounts for a company incorporated outside of the European Union or They offer accountancy, administration or (tax) the European Economic Area whose advice office maximum freedom of movement, transferable securities are admitted to trading so that we as RSW Accountants + Adviseurs on a regulated market in the Netherlands. can carry out our profession as optimally as Since 1 October 2006 only accountancy firms possible and undertake in a way where our own holding a licence may carry out statutory audits qualities are best seen. in the Netherlands. The Audit Firms Supervision Act differentiates between OOBs - listed Fiscount has extensive knowledge in complex companies, banks and insurers and other legal, tax and accountancy regulations. They companies and institutions (“non-OOBs”). have associated tools and skills and make this accessible to us. There are additional rules and accountancy firms who perform statutory audits for OOBS are subject to more intense regulation. Accountancy firms performing statutory audits for OOBs must have a licence explicitly stating that they may perform statutory audits for OOBs. RSW has a licence for non OOBs (licence number 13000321). An accountancy firm which has received a licence is subject to continual regulation for its observance of the norms in the Audit Firms Supervision Act. The supervision of
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3. Doing business in the Netherlands
3.1 Introduction Utrecht is a central traffic junction and Schiphol, the main Dutch airport, is growing at a rapid Doing Business in the Netherlands is rate. published by RSW Accountants + Advisors who is a member of the SRA network. The The Low Lands, as the Netherlands is also purpose of this detailed manual is to guide known, play an extremely important role in the you through the investment environment in functioning of the transport artery. the Netherlands. It offers practical information about the country and how to set up a business, adopt the ideal legal form, Export the subsidy schemes, the tax system, labour The country’s perfect location and healthy law and much more. For more detailed financial policy have helped to ensure that the information, please do not hesitate to Netherlands has grown into an important import contact your personal RSW accountant. and export nation. The country’s most important industrial activities include oil refineries, Economy chemicals, foodstuff processing and the development of electronic products. Germany, The Netherlands is an open economy, carried Belgium, Luxembourg, China, Great Britain, along by international economic trends. France and the United States are the country’s International economic or financial crises and main import partners. All the above-mentioned the Brexit process mainly affect the Dutch countries, including Italy, are also the country’s economy through exports, as a result of a most influential export partners. reduction in world trade. However these have a relatively limited direct real impact on Dutch exports. The financial situation of companies Finances (profitability and solvency) is on average in The Dutch National Bank (De Nederlandsche good heart, enabling companies to withstand Bank, DNB) is responsible for the money flow in the ups and downs in the global economy. the Netherlands. One of the government’s most important objectives is to keep prices stable and Country and Government thereby to contain inflation. Dutch banks offer an extensive range of financial services: some The Netherlands has a total population of 17.4 are specialized, while others offer an extremely million inhabitants (January 2020) and is wide range of services. Dutch banks are governed by a monarchy. The ministers are the reliable: most financial institutions use people’s representatives with respect to the organizational structures that prevent the actions of the government. The head of state possibility of entanglement of interests. The does not bear political responsibility and can general prohibition on commission also therefore not be held politically accountable by contributes to this. the parliament. The Netherlands has 12 provinces, each with its own local authorities. Since 2010 the Netherlands, together with the Right to establish a business countries of Aruba, Curacao and Sint-Maarten Foreign companies wishing to set up shop in the have formed part of the Kingdom of the Netherlands can set up the existing foreign legal Netherlands. The islands of Bonaire, Sint- entity in the country without the need to convert Eustatius and Saba have a separate status and it into a Dutch legal entity. They will however be form part of the Caribbean part of the Kingdom. required to deal with both international and Dutch law. All foreign companies with Location establishments in the Netherlands must be registered with the Chamber of Commerce. Most of the major industries in the Netherlands are situated in the country’s western regions. The Port of Rotterdam is one of the biggest A most competitive economy ports in the world. The railway line, the ‘Betuweroute’, ensures fast and efficient The Netherlands is an attractive base for doing transport from the port to the European business and for investment. Its open and hinterland. international outlook, well-educated work force and strategic location are contributors.
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The attractive fiscal climate and technological rights in the Netherlands. Further, this manual infrastructure create favourable propositions for will explain the advantages and disadvantages international business. of doing business through a subsidiary or a branch.
3.2 Starting business Branch, subsidiary Under Dutch law, a foreign individual or Branch company may operate in the Netherlands through an incorporated or unincorporated A branch is not a separate legal entity. A branch entity or branch. Dutch corporate law is a permanent establishment of a company provides a flexible and liberal framework for from which business operations are carried out. the organization of subsidiaries or As a result, the company that establishes a branches. There are no special restrictions branch in the Netherlands is liable for claims for a foreign entrepreneur to do business in incurred by actions carried out by the branch. the Netherlands. Subsidiary The business operations can be set up in the Netherlands with or without a legal personality. A subsidiary is a separate legal entity that may If a legal entity has legal personality, the be established by one or more shareholders. entrepreneur cannot be held liable for more The subsidiary is a legal entity that is controlled than the sum it contributed to the company’s by the (parent) company. Control of a subsidiary capital. is mostly achieved through the ownership of more than 50% of the shares in the subsidiary Dutch law distinguishes two types of companies by the (parent) company. However, under both of which possess legal personality: the certain circumstances it is also possible to private limited liability company (besloten obtain control by special voting rights or vennootschap met beperkte aansprakelijkheid - diversity of the other shareholders. These BV) and the public limited liability company shares or rights give the (parent) company the (naamloze vennootschap - NV). These forms of votes to determine the composition of the board legal entities are most commonly used for doing of the subsidiary and thereby to exercise business in the Netherlands. Other commonly control. Since a subsidiary has limited liability, a used legal entities in the Netherlands are the shareholder (the parent company) is generally cooperative (coöperatie) and the foundation only liable to the extent of its capital (stichting). The foundation is a common form contribution. used within the non-profit and health care sector. Private limited liability company (BV)
Other common business forms are sole Incorporation proprietorship (eenmanszaak), general A BV is incorporated by one or more partnership (vennootschap onder firma - VOF), incorporators pursuant to the execution of a (civil) partnership (maatschap) and limited notarial deed of incorporation before a civil-law partnership (commanditaire vennootschap - notary. The notarial deed of incorporation must CV). None of the latter forms possesses legal be executed in the Dutch language and must at personality and, as a consequence thereof, the least include the company’s articles of owner or owners will be fully liable for the association and the amount of issued share obligations of the entity. capital.
All entrepreneurs engaged in commercial While the BV is in the process of incorporation, business and all legal entities have to register business may be conducted on its behalf their business with the Trade Register provided that it adds to its name the letters, ‘i.o.’ (Handelsregister) at the Chamber of Commerce (for ‘in oprichting’), which means in the process (Kamer van Koophandel). This section covers of being incorporated. The persons acting on the abovementioned legal entities for doing behalf of the BV i.o. are severally liable for business in the Netherlands from a legal damages incurred by third parties until the BV perspective. After dealing with the distinction (after its incorporation) has expressly or between a subsidiary and a branch, the above implicitly ratified the actions performed on its mentioned entities will be described in greater behalf during the process of incorporation. detail. Finally, this will be followed by a summary of the status of intellectual property
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A similar liability arises for the persons also be able to include detailed rules on how the responsible if the BV is not incorporated or if the price of the shares will be determined. The BV fails to fulfil its obligations under the ratified articles of association may also include a lock- actions and the responsible persons knew that up clause prohibiting the transfer of shares for a the BV would be unable to do so. In the event of specific period. Furthermore, it is possible to bankruptcy within 1 year of incorporation, the include provisions in the articles of association burden of proof lies with the persons imposing additional obligations on shareholders responsible. (e.g. the obligation to extend a loan to the BV or to supply products to it). Members of the board of directors are also severally liable to third parties for legal acts Shares in a BV are transferred by a deed of performed after incorporation, but preceding the transfer executed before a civil-law notary. registration of the BV with the Trade Register. The board of directors of a BV must keep an up- to-date shareholders’ register, which lists the Share capital names and addresses of all shareholders, the A BV must have a share capital, divided into a number of shares, the amount paid-up on each number of shares with a par value expressed in share and the particulars of any transfer, pledge Euro, or a currency other than Euro. There are or usufruct of the shares. no requirements for a minimum share capital for a BV. It will be sufficient if at least one share with Management structure voting rights is held by a party other than the BV. The management structure of a BV consists of Payment for shares can be in cash or in kind. the board of directors and the General Meeting Payments in kind are contributions of property of shareholders. A BV can, in addition, under and/or other non-cash items. certain circumstances have a supervisory These payments are restricted to items that can board. be objectively appraised. If these payments take place upon incorporation of Board of directors the BV, the incorporators must describe the contributed assets. The board of directors is responsible for managing the BV. The members of the board of directors are appointed and removed by the Shares shareholders (unless the BV is a large BV). The A BV may only issue registered shares. Besides articles of association generally state that each ordinary shares, a BV may also issue priority director is solely authorized to represent the shares, to which certain (usually voting) rights company. However, the articles of association are allocated in the articles of association, and may provide that the directors are only jointly preference shares, which entitle the authorized. Such a provision in the articles of shareholder to fixed dividends that have association can be invoked against third parties. preference over any dividends on ordinary shares. Within a given type of share, the articles The articles of association may provide that of association may also create different classes certain acts of the board of directors require the of shares (e.g. A, B and C shares) to which prior approval of another corporate body such certain specific rights are allocated (e.g. upon as the shareholders’ meeting or the supervisory liquidation). board. Such a provision is only internally valid and cannot be invoked against a third party, The voting right is linked to the nominal value of except where the party in question is aware of the share. However it is possible to attach the provision and did not act in good faith. different voting rights to classes of shares (even A member of the board of directors of the when the nominal values of the various classes company can be held liable by the BV, as well are equal). Moreover, it is possible to create as by third parties. The entire board of directors non-voting shares and shares without any profit can be held liable to the BV for right. Non-voting shares must give a right to mismanagement. An individual member of the profit. board of directors can be held liable with respect to specific assigned duties. The shareholders It is not mandatory to include share transfer can discharge the members of the board of restrictions in the articles of association. directors from their liability to the company by However, if a BV opts to include such adopting an express resolution barring statutory restrictions in its articles of association, it will be restrictions. Besides the aforementioned liability
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prior to incorporation and registration, liability Supervisory board towards third parties can occur in several The supervisory board’s sole concern is the situations. For example, in case of the interest of the BV. Its primary responsibility is to bankruptcy of the BV, the members of the board supervise and advise the board of directors. of directors are severally liable for the deficit if Pursuant to the Large Companies Regime the bankruptcy was caused by negligence or (Structuurregime), the supervisory board is only improper management in the preceding 3 years. a mandatory body for a Large BV; however this An individual member of the board of directors is optional for other BVs. can exonerate himself by proving that he is not responsible for the negligence or improper management. Liability
The management board and supervisory board In order to combat possible bankruptcy fraud, may under certain circumstances be held more effectively, through the programme to personally liable for liabilities of the BV reassess the bankruptcy law legislation, legal (directors’ liability). For this to apply measures have now been taken with the aim of mismanagement must be involved. This may strengthening the position of the official receiver arise among other things if the management in a bankruptcy. has harmed the creditors’ interests by
deliberately and knowingly entering into As an alternative to the two-tier board structure unsecured financial obligations. where there is a management board and a separate supervisory board, Dutch law provides statutory provisions on the one-tier board In the absence of the minimum capital structure, a single board comprising both requirement in the BV creditors may be faced with limited security. In addition to the option of executive and non-executive directors. The law legal redress, in case of directors’ liability the provides a one-tier board structure for NV law on BVs also offers other legal redress companies, for BV companies and for options. Upon any distribution of funds whether companies that are subject to the Large Companies Regime (structuurregime). In a one- this involves repayment of capital or a profit tier board the tasks within the management distribution, the management board must first check whether the distribution is not at the board are divided between executive and non- expense of the interests of creditors. To do this executive members of the management board. there is first of all the equity test. Dividend The executive members will be responsible for the company’s day-to-day management, the distributions are only possible when the non-executive members have at least the shareholders’ equity of the BV is greater than the statutory reserves or the reserves that must statutory task to supervise the management be kept according to the articles of association. performed by all board members. Secondly a check must be made that after the The tasks of the non-executive members distribution the BV can continue to pay its debts therefore extend beyond those of the supervisory director. The one-tier board is even payable (distribution test). If the general chaired by a non-executive member. The meeting of shareholders decides to distribute a dividend the board must in principle approve the general course of affairs of the company will be distribution. If in the light of a distribution test the the responsibility of all board members board does however conclude that after (executive and non-executive). The non- distributing the dividend the BV can no longer executive members in a one-tier board are part of the management board and are therefore meet all its debts payable, the board must subject to director’s liability. refuse to cooperate. If the distribution still takes place, the directors and shareholders may be
held liable. They must reimburse the deficit. The General Meeting of shareholders law does not define any specific timeline for the At least one shareholders’ meeting should be amount of the debts repayable. It is assumed held each year. Shareholders resolutions are usually adopted by a majority of votes, unless that this involves debts over a period of at least the articles of association provide otherwise. As 12 months after the distribution. a rule, the shareholders may not give specific instructions to the board of directors with respect to the management of the company, but only general directions.
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Public limited liability company (NV) Large NVs and BVs: special In general, everything mentioned above that requirements applies to the BV also applies to the NV. This A company is considered a ‘large NV or BV’ section will outline the most significant (structuurvennootschap), and thus subject to differences between the NV and the BV. the ‘structure regime’ (structuurregime), if: ▪ The company’s issued share capital, Share capital and shares reserves and the retained earnings according to the balance sheet amount to An NV must have an authorized capital. At least at least 16 million Euro; 20% of the authorized capital must be issued ▪ The company, or any other company in and at least 25% of the par value of the issued which it has a controlling interest, has a shares must be paid up. The issued and paid- legal obligation to appoint a works council; up capital of an NV must amount to at least € and 45,000. ▪ The company, alone or together with a company (or companies) in which it has a Besides registered shares, an NV may also controlling interest, normally has at least issue bearer shares. Bearer shares must be 100 employees in the Netherlands. fully paid up and are freely transferable. Registered shares have to be transferred by Unless an exemption applies, such a company executing a deed of transfer before a civil-law is required to appoint a supervisory board notary. An NV is authorized to issue share (Raad van Commissarissen) which is given certificates (certificaten). specific powers, which are not granted to the If payment on shares is made in kind upon supervisory board of a relatively ’small’ B.V. incorporation of the NV, the incorporators must Such a supervisory board has the following describe the contributed assets and an auditor powers: must issue a statement to the effect that the ▪ Appointment/dismissal of the management value of the contribution is at least equal to the board; and par value of the shares. The auditor’s statement ▪ Approval of major amendments with is to be delivered to the civil-law notary involved respect to governance, including the prior to incorporation. proposal to amend the articles of association, a proposal to dissolve the The articles of association of an NV can company, the issuance of new shares, a stipulate limitations on the transferability of the proposal to increase the issued share shares. Dutch law provides for two possible capital. restrictions, which require the transferor either to: This structure regime is also not compulsory for ▪ offer his shares to the other shareholders, companies whose holding company is the right of first refusal, or; established in the Netherlands and the majority ▪ obtain approval for the transfer of shares of whose employees work abroad. In fact, such from the corporate body, as specified in the multinationals do have the option to apply the articles of association. structure regime voluntarily. The regulations of the structure regime may also apply for the Cooperative (coöperatie) to be discussed below.
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Cooperative (coöperatie) The cooperative is also used as a holding and financing company. The main reasons are the The cooperative is an association incorporated international tax planning opportunities via a as a cooperative by notarial deed executed cooperative and its corporate flexibility. before a Dutch civil law notary. At the time of incorporation the cooperative must have at least two members. These members can be legal Foundation (stichting) entities or natural persons. ▪ A foundation is a legal entity under Dutch
law with two main characteristics: The objective of the cooperative must be to ▪ A foundation does not have any members provide certain material needs for its members or shareholders and is therefore governed under agreements, other than insurance solely by its board; and agreements, concluded with them in the ▪ A foundation is incorporated with the aim of business it conducts or causes to be conducted realising a specific goal by using capital to that end for the benefit of its members. The designated for that purpose. The goals or articles of association of the cooperative may objective of a foundation are stipulated in stipulate that such membership agreements its articles of association. may be amended by the cooperative.
The name of a cooperative must contain the A foundation is incorporated by means of the word ‘coöperatief’ or ‘coöperatie’. execution of a notarial deed of incorporation,
which deed is executed before a Dutch civil law In general, the members of the cooperative are notary. not liable for the obligations of the cooperative during its existence. In case of dissolution or Pursuant to mandatory law a foundation may bankruptcy of the cooperative the members and not make distributions to its incorporators and the members who ceased to be members less the members of its corporate bodies and may than 1 year prior thereto, are liable for a deficit only make distributions to other persons if such on the basis provided for in the articles of distributions are of an ideal or social nature. association of the cooperative. If a basis for the liability of each member is not provided for in the The management board of the foundation may articles of association, all shall be equally liable. consist of individuals and legal entities. After A cooperative may, however by its articles of incorporation, members are appointed by the association (i) exclude or (ii) limit to a maximum, board itself, unless otherwise stated in the any liability of its members or former members articles of association of the foundation. The to contribute to a deficit. foundation is represented by the entire
management board or by board members In the first case it shall place at the end of its acting individually. name the letters ‘U.A.’ (Uitsluiting van
Aansprakelijkheid – exclusion of liability). In the Foundations are often used to create a second case it shall place at the end of its name separation between legal ownership and the letters ‘B.A.’ (Beperkte Aansprakelijkheid – beneficial ownership of assets. limited liability). In all other cases the letters
‘W.A’ (Wettelijke Aansprakelijkheid – statutory liability) shall be placed at the end of its name. Trust Most cooperatives choose a system of excluded or limited liability. It is also possible to create Under Dutch civil law the trust is unknown. different classes of members who are each Dutch civil law is familiar with the distinction liable to a different extent (or not at all). If the between personal rights and real rights, liability is not excluded ‘U.A’, a copy of the list however is unfamiliar with a distinction between stating the members must be filed with the legal interests in property and beneficial Trade Registry of the Chamber of Commerce. interests in property rights. On the other hand Any changes must be filed within 1 month after the Netherlands signed the 1985 Hague Treaty the end of each financial year. on the law to trusts and their recognition.
The cooperative has no minimum capital requirements and the capital does not have to be in Euro. The profits may be distributed to its members. The articles of association of the cooperative must also provide for a provision regarding the entitlement of any liquidation balance.
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Other common business forms Trust company Sole proprietorship (eenmanszaak) A trust company is entitled to perform corporate trust services for payment, such as the In the case of a sole proprietorship administration and management of a company (eenmanszaak), one (natural) person is fully that conducts business in the Netherlands. A responsible and liable for the business. A sole trust company can take care of (required) proprietorship does not possess legal capacity administrative services, such as the preparation and there is no distinction between the business of annual reports. In certain instances the trust assets and private assets of the (natural) company is the (sole) director of the company person. for which it provides the services. A trust
company offers expert guidance to tax General/commercial partnership (VOF) beneficial international structures and opportunities to foreign legal entities and private A general partnership can be defined as a public persons for their holding-, finance- or partnership that conducts a business instead of investment activities in the Netherlands. a profession. A VOF and its partners must be registered in the Commercial Register at the Chamber of Commerce. Branch or subsidiary
Many foreign companies make use of a Partnership (maatschap) subsidiary rather than a branch. The main legal reason to set up a subsidiary, instead of a Entrepreneurs in the liberal professions (such branch, is limitation of liability. As a shareholder as doctors, lawyers and graphic designers) of a subsidiary, the foreign company’s liability is often set up partnerships (maatschap). basically limited to the extent of its capital
contribution; whereas, if the foreign company A partnership is an arrangement by means of makes use of a branch, it is fully responsible for which at least all the obligations and liabilities of the branch. two partners, who may be individuals or legal entities, agree to conduct a joint business. Each One major advantage of setting up a branch is partner brings money, goods and/or manpower that it does not generally require the same legal into the business. Each partner is personally, formalities required for setting up a subsidiary. either jointly or severally, liable for all the However, the simplification and flexibilization of obligations of the partnership. A partnership the Dutch limited company law (as mentioned does not possess legal personality. Registration above) may well diminish this advantage. with the Chamber of Commerce is required for a partnership (maatschap), only if it enters into Another important aspect to consider with a business. respect to the choice of setting up a branch or a
subsidiary in the Netherlands is the matter of A public partnership (openbare maatschap) local tax regulations. The choice of setting up a participates in judicial matters under a common branch or a subsidiary will be determined based name. The possessions of a public partnership on the circumstances and relevant factors with are legally separated from the possessions of respect to the business as such, and the Dutch the partners. tax regulations and tax treaties. A limited partnership (CV) For more detailed information on tax legislation A limited partnership is a special form of the and participations, we refer to Section 5. general partnership (VOF) which has both active and limited (or sleeping/silent) partners. An active partner is active as an entrepreneur UBO register and is liable, as in the case of the general In order to prevent money laundering and partnership. The silent partner, however, tends financing of terrorism in a European context to finance the business and stays in the several anti-money laundering directives have background. The silent partner is liable only up now been approved. Part of this anti-money to the amount of his capital contribution. He is laundering policy is the introduction of a UBO not allowed to act as an active partner and his register. The latest anti-money laundering name cannot be used in the name of the directive states that some of the information partnership. If the silent partner enters the included in the UBO register must be public. business (to provide extra finance for growth) he becomes liable as an active partner.
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The legislative procedure in the Netherlands, A design is the new appearance of a utility which already provided for the introduction of a product. A registered design is protected for 5 public register, will be completed in Spring 2020 years from the registration date onwards and after which the introduction of the UBO register the protection can be extended by 4 periods of will be a fact. 5 years each, up to a maximum of 25 years. Renewal will be effective upon timely settlement In the fight against money laundering or of all fees due. The rightful owner is entitled to terrorism financing it is considered essential to claim damages for any infringement of its rights have sight of the ultimate stakeholder (UBO), (such as the use of the model or design by being the party that has the ultimate control or another party). who is entitled to the results of the corporate Copyright Act 1912 (Auteurswet 1912) contains body. The responsibility for investigating the provisions regarding the protection of correct UBO data is laid on the so-called copyrights. Copyright does not require institution falling under the WWFT (Wet ter registration in the Netherlands and applies voorkoming van witwassen en financieren van (amongst other things) to literature, dramatic, terrorisme - Act to prevent money laundering musical and artistic work, sound recordings, and financing of terrorism), which includes films and computer programs. A copyright among others members of professions such as expires 70 years after the author’s death. Films, auditor, lawyer, tax adviser and notary. The games, music and other works that fall under UBO is at all times a physical person, who can copyright may only be downloaded from legal exercise more than 25% of the voting rights in a sources. Downloading from an illegal source is corporate body or has an interest of more than not permitted, not even for own use. 25% in it or has the actual control over the corporate body. Direct and indirect interests The Council of the European Union created the must be totalled here. The UBO will be European Union trademark as a legal registered in the commercial register of the instrument in EU law and established the Chamber of Commerce. In the case of European Union Intellectual Property Office international structures the setting up of a UBO (EUIPO). The EUIPO (formerly the OHIM) has may not be easy. Consult your adviser on this. financial, administrative and legal autonomy. The result is that this Community trademark Intellectual property system of the European Union enables the The Benelux Convention on Intellectual uniform identification of products and services Property regulates the provisions regarding the of enterprises throughout the European Union. registration, use and protection of trademarks Requiring no more than a single application to and designs in the Netherlands, Belgium and EUIPO, the Community trade mark has a Luxembourg. unitary character in the sense that it produces the same effects throughout the Community. Trademarks can be names, drawings, stamps, The Community trade mark contains provisions letters, numbers, shapes of goods or packages concerning the registration and use of and all other signs used to distinguish the goods Community trademarks by (legal) persons and of one company from those of others. the protection of the rightful owners of such Community trademarks. The unitary patent for A registered trademark is protected for a period Europe offers protection in 28 countries. of 10 years from the registration date and the protection can be extended by a further 10 years. Renewal must be requested and all due fees paid. The rightful owner is entitled to claim damages for infringement of its rights (such as the use of the trademark by another party).
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3.3 Finding a location It can take several years to obtain approval for complex building plans in which public The office market in the Netherlands is authorities have a dominant role. decentralized, which results in each city having a more or less specific office market. Lease or buy Amsterdam focuses on finance and international trade and agencies, The Hague The general practice in the Netherlands is to is the national administration centre where lease office space: approx. 65% of all office the government and public departments are buildings are owned by investors. Owner- the main users of the local office buildings. occupier situations are more common in the Rotterdam has one of the largest ports in the industrial real estate market, although this has world, as a result of which the office market also changed over the past 10 years as a result has a traditional focus on insurance and of sale-and-lease back transactions. Leasing trade. Utrecht is located in the heart of the has advantages, such as a positive impact on country with a focus on transport and the company’s cash flow, flexibility, the domestic commercial services. In possibility of off-balance presentation and Eindhoven occupiers of office space have negotiation on incentives with landlords. Lease strong ties with electronics, chemicals, contracts can be subject to VAT; which may equipment and energy supply. result in VAT savings in specific situations. Depreciation is an important consideration with Rents for office space differ by region and within respect to the ownership of real estate. Since a region cover a certain range depending on the the beginning of 2007, the tax depreciation on subsectors and quality of the location and real estate is limited, both for BVs and for IB accommodation. For the main regions the range entrepreneurs (natural persons). Depreciation of rents is set out in the table below. for tax purposes is exclusively permitted where and in as far as the book value of the building exceeds the so-called base value. The level of Median rent demanded (Jan the base value depends on the intended use of Location 2020) Euro/sq.m./yr (source the building. Dynamis) In all instances: Amsterda 125 - 500 The tenant has security of tenure as the lease m automatically renews at expiry, bearing in mind Rotterdam 120 - 270 the notice period. The exception to this is if the landlord wishes to occupy, tear down or The Hague 90 - 250 redevelop the building. These conditions are rather strict and in reality the landlord’s options Utrecht 90 - 280 of terminating the lease are limited: ▪ The tenant pays for internal repairs and Eindhoven 100 - 235 utilities. ▪ The tenant is responsible for insurance of contents. Town planning ▪ The landlord pays for the external and The Netherlands has applied strict regulations structural elements of the building. with respect to the development of offices, ▪ The landlord is responsible for building retail, industrial and residential schemes since insurance and non-recoverable service 1950. The municipal system of zoning plans charge items. determines in detail what can and cannot be ▪ The landlord provides property built. In general, developers are only granted management services that are not building permits if their plans fit in with the recoverable through service charges. zoning plans or if an exemption has been granted. More about taxes
The zoning plans also apply to all The landlord and the tenant are each partly redevelopment projects. It is therefore not easy responsible for the property tax levied by the to change the use of the building without the local authority. Each property is assessed for cooperation of the local authorities. Municipal taxation purposes, known as ‘onroerende zaak approval is mandatory with respect to zoning belasting’ (OZB). The local government gives a plan changes. Procedures for obtaining permits value for the property and that value applies for are scheduled according to strict timetables. 1 year. Each year the authorities collect the tax.
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The rate depends on the local authorities and this is a percentage of the value according to the Immovable Property Act.
Leasing practises and taxes Offices and industrial
Typical lease length Negotiable, but the common practice is 5 years + auto-renewals for 5 years Typical break options Negotiable
Frequency of payment Negotiable, but generally wquarterly in advance Annual index Linked to consumer price index (CPI; all households)
Rent reviews To market prices only if agreed upon (frequency usually 5 years, by expert panel) Service charge Depending on contract
Tax (VAT) 21%, 9% for lease in the hospitality market
Real Estate Transfer tax Change of ownership; 2% for housing facilities, 6% for other real estate
Tax (others) Property tax, water tax and sewer tax
Purchase practises and taxes The purchaser is responsible for the so-called ‘kosten-koper’, which means that the buyer is liable for the payment of all additional costs. Those costs include transfer tax (6% for offices and industrial buildings), notary costs (0.2- 0.4%), legal costs (negotiable) and some minor administration costs, such as land registration (Kadaster).
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3.4 Subsidies and financing WBSO (Wet Bevordering Speur & Ontwikkeling) The Dutch government offers a number of WBSO stands for the Dutch Research and incentive schemes in various sectors to Development Act. Technological innovation is support companies in their business extremely important. The competitor never operations. Foreign entrepreneurs who set rests. The WBSO will help you if you wish to up companies in the Netherlands and who renew your technical processes or develop new register their companies with the Dutch technical products or software by tax Chamber of Commerce can also apply for a allowances for research and development number of incentive schemes. expenditure. The WBSO offers a tax benefit for wage costs and other R&D costs by setting off The most important subsidy agency in the a percentage of the costs against the wage tax Netherlands is RVO (Rijksdienst voor to be deducted. Up until 2016 the WBSO only Ondernemend Nederland), which is based in provided tax allowances for wage costs while The Hague. The latter organization is other R&D costs, such as the purchase of responsible for the execution of most of the equipment, were subsidised by the so-called schemes available in the Netherlands. In RDA (Research & Development Allowance). addition, there are also a number of important The RDA offered a tax benefit, namely an regional and provincial schemes available, as allowance in the income tax or corporate tax well as a number of international schemes return. The WBSO and RDA have been combined into one scheme under the name WBSO. The tax benefit under the WBSO can now only be effected via a wage tax rebate offered by the Ministry of Foreign Affairs, the (R&D rebate - S&O-afdrachtvermindering). Ministry of Economic Affairs and Brussels. There is a transitional regulation for R&D costs still outstanding from the previous RDA, where This section will outline a number of the these can be entered in the new scheme as schemes that are currently available. Obviously R&D costs in phases. this is not an exhaustive list, so we recommend that you contact your consultant for more The level of the R&D rebate depends on the detailed information. total qualifying R&D costs. R&D projects qualifying for the WBSO can be split into Innovation subsidies technical-scientific research (technisch- wetenschappelijk onderzoek - WTO), the Top Sector policy development of a product and development of a The Dutch government has defined 9 Top technically new physical product/production Sectors in which the Netherlands is strong process/new software. There are assessment worldwide and to which the government is criteria that apply for categories of R&D paying special attention. The Top Sectors are: projects. For pharmacy there is even a separate AgroFood, Horticulture, High Tech, Energy, list of R&D work eligible for the WBSO. Contact Logistics, Creative Industry, Life Sciences, your consultant for the specific options and Chemicals and Water. More venture capital and qualifying criteria. extra fiscal support should ensure more research and development in companies and The level of the R&D rebate depends on the institutions that fall within the above sectors. total R&D costs. From 2020 for the first tranche of € 350,000 the rebate is 32% and above this To achieve this, each top sector has signed an level 16%. For start-up entrepreneurs with a innovation contract in a PPS arrangement with personal enterprise the rebate is 40% on the the Dutch government, setting out the first € 350,000. An application period relates to innovation agenda. Special programs (MIT- a minimum of 3 and a maximum of 12 months. programs) are open for SMEs in each Top An application must be submitted online and at Sector for feasibility studies, research and least 1 month before the start of the application development, cooperation arrangements and period. research vouchers. If you are active in or with a project in a Top Sector, contact your adviser However for enterprises with personnel since about the current subsidy options. 2020 the application can be made up to the day before the start of the application period.
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Innovation box KleinschaligheidsInvesteringsAftrek (Small- scale Investment Deduction) The innovation box provides for a special tax regime for innovation profits to stimulate R&D- The Small-scale Investment Deduction entitles activities. This regime is explained under the entrepreneur to make deductions from section 5. investments in capital equipment between € 2,400 and € 323,544 in 2020. You invest in capital equipment in the year in which you buy Regional subsidies it and therefore incur a payment obligation. The Under the European EFRD (European Fund for investment deduction can be applied in the year Regional Development) programme for 2014- in question. If you do not intend to use the 2020, different regions in the Netherlands are capital equipment in the year in which the conducting their own incentive policy. Within investment is made, then part of the investment this programme the focus will be on subsidising deduction is sometimes carried forward to the projects on innovation and research, digital next year. agenda, SME support and low-carbon economy. Finance BMKB (Borgstelling MKB Kredieten) (Credit Investments Guarantee Scheme for SMEs) MIA (Milieu Investerings Aftrek) (Environment The purpose of the Credit Guarantee Scheme Investment Deduction Scheme) for SMEs (BMKB) is to stimulate credit provision The purpose of the Environment Investment to small and medium-size enterprises (SME or Deduction scheme (MIA) is to stimulate MKB in Dutch). The scheme is designed for investment in environmentally friendly capital companies with a maximum of 250 employees equipment in fields such as circular economy, (FTE) with a year turnover up to € 50 mln or a agriculture and horticulture, mobility, balance sheet total up to € 43 mln and includes sustainable buildings and climate and air. most professional entrepreneurs. If the Companies that invest in the environment are entrepreneur is unable to provide the bank with entitled to additional tax deductions at a sufficient security or collateral to secure a loan, percentage of the investment cost. The the bank can appeal to the BMKB for the Environment Investment Deduction scheme is necessary guarantees. The government will only available for capital equipment listed on the then, under certain conditions, provide the Environment List 2020 (Milieulijst 2020), which security for part of the credit amount. This is updated on an annual basis. reduces the level of the bank’s risk exposure and increases the creditworthiness of the entrepreneur. Start-up and innovative EIA (Energie Investerings Aftrek) (Energy companies can profit from additional favourable Investment Deduction Scheme) conditions. The maximum amount guaranteed The purpose of the Energy Investment by the government until 30 June 2022 is € 1.5 Deduction scheme (EIA) is to stimulate million. A government guarantee of 90% applies investment in energy-saving technology and for the Credit Guarantee Scheme for SMEs sustainable energy, i.e. so-called energy (BMKB). investments. Companies that invest in the energy industry are entitled to additional tax Because the banks are in a restructuring phase deductions at a percentage of the investment and additional requirements are being laid down cost. The energy investment deduction is only for capital and liquidity, business finance for available for capital equipment that complies starters and other small businesses, fast with the specified energy performance growers and innovative companies is becoming requirements. The energy performance more difficult and long term finance is under requirements and the capital equipment that are pressure. subject to the energy investment deduction are available in the Energy List 2020 (Energielijst 2020), which is updated on an annual basis.
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GO (Garantie Ondernemingsfinanciering) (Corporate Credit Guarantee) With the Corporate Credit Guarantee large and medium companies can borrow large amounts more easily. Financiers who provide capital get a 50% guarantee from the government. The maximum term of the guarantee is 8 years. You are only eligible for this scheme if your company is established in the Netherlands and if the business activities take place mainly in the Netherlands. You can borrow an amount from 1.5 to 50 million Euro.
MKB+ (Innovation Fund SME+) The SME+ Innovation Fund enables the businessman to convert ideas more easily and quickly into profitable new products, services and processes. The + means that this scheme is also open to companies bigger than the SME. The SME+ Innovation Fund includes financial instruments that are available for innovation and finances rapidly growing innovative enterprises.
Contact your consultant for detailed information on the current subsidies and financing options.
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3.5 Tax legislation agree an ATR/APA with the Tax Authorities where transactions are involved that relate to The tax system in any given country is companies established in countries included in invariably an extremely important criterion the Dutch list of low tax countries or the EU list when it comes to companies finding a of non-cooperative jurisdictions for tax country of incorporation. The view taken by purposes. Low tax countries are defined as a the Dutch government is that the tax system country with an income tax rate of less than 9%. may under no circumstances form an The relevant bill is being discussed by impediment for companies wishing to Parliament. incorporate in the Netherlands. In addition, the Netherlands has also signed tax treaties The Dutch government wants the current fiscal with many other countries to prevent the establishment climate as far as possible to occurrence of double taxation. At the same serve the business community with a realistic time, its vast network of tax treaties offers economic presence in the Netherlands. instruments for international tax planning. . In this context, it is possible to obtain The Dutch tax system can be divided into taxes advance certainty regarding the fiscal based on income, profit and assets, and cost qualification of international corporate price increasing taxes. structures in the form of so-called Advance Tax Rulings (ATR) / Advanced Pricing Corporate income tax Arrangements (APA). Moreover since 2019 the Dutch ruling policy is still only aimed at Corporate income tax is charged to legal making agreements in advance with entities of which the capital is partially or fully companies who make a considerable divided into shares. Examples of such legal contribution to the national economy with entities are the Dutch NV and BV. Companies an establishment – branch or subsidiary – in based in the Netherlands are taxed on the basis the Netherlands and this establishment in of the companies’ local revenues. The question the Netherlands is not primarily for tax as to whether a company is in effect based in reasons. the Netherlands (resident companies) for tax purposes is assessed on the basis of the factual The following are a few of the benefits offered circumstances. The relevant criteria are issues by the Dutch tax system: such as where the actual management is ▪ The Netherlands does not charge based, the location of the head office and the withholding tax on interest and royalties. place where the annual General Meeting of ▪ In most cases all the profits that the Dutch shareholders is held. Entities set up under parent company receives from foreign Dutch law are deemed to be established in the subsidiaries are exempted from tax in the Netherlands. A resident company is in principle Netherlands (participation exemption). subject to Dutch corporate income tax for its ▪ The Netherlands offers attractive tax-free profits received worldwide. compensation in the form of the 30% rule for some foreign personnel who are Non-resident companies may be subject to temporarily employed in the Netherlands. corporate income in the Netherlands on Dutch- source income. This is outlined later. Moreover it should be noted that the fiscally attractive establishment climate in the Non-resident companies Netherlands does however also have a shadow side because it can be abused to avoid taxation. Non-resident companies may be subject to Partly due to great international and national corporate income tax in the Netherlands on political pressure, the Dutch government is at Dutch-source income. A non-resident company present tackling companies and individuals that receives Dutch-source income in three ways. have set up or wish to set up via the Netherlands tax avoidance schemes, to The first way is if the non-resident company conduct a tax disincentive policy. In addition to operates in the Netherlands using a Dutch the introduction of various European anti- permanent establishment or permanent avoidance laws, in the fight against tax representative. The determination of taxable avoidance a Controlled Foreign Corporation profits of a permanent establishment regime has been introduced with effect from /representative is similar to the rules applicable 2019. In addition with effect from 2021 a to a subsidiary. conditional withholding tax on interest and royalties will apply and it is no longer possible to
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A second way to receive Dutch-source income be taken into account as soon as possible. The arises if a non-resident company has a so- system of valuation, depreciation and called substantial interest representing at least reservation that has been chosen must be 5% of the shares in a company established in fiscally acceptable and, once approved, must the Netherlands, if the main aim or one of the be applied consistently. The tax authorities will main aims of holding a substantial interest is to not subsequently accept random movements of avoid the levying of Dutch personal income tax assets and liabilities. at (in)direct shareholder level and there is an artificial arrangement or a series of artificial As a general rule all business expenses are arrangements which are not put in place for deductible when determining corporate profits. valid commercial reasons reflecting economic There are however a number of restrictions with reality. The taxation applies to dividend income respect to what qualifies as business expenses. and capital gains derived from its Dutch subsidiary. Valuation of work in progress and orders in
progress In addition, non-resident companies could be liable to corporate income tax on the In work and/or orders in progress profit taking remuneration for formal directorship of may not be postponed. Work in progress should companies residing in the Netherlands as well be valued at the part of the agreed payment as for fees received for executive management attributable to the work in progress already services. Under a tax treaty the taxation right for carried out. The same applies for orders in these remunerations are mostly allocated to the progress. state of residence of the non-resident company.
Arm’s Length Principle Tax base and rates The Dutch corporate income tax legislation Corporate income tax (CIT) is charged on the includes an article that determines that national taxable profits earned by the company in any and foreign allied companies are entitled to given year less the deductible losses. The charge one another commercial prices for following are the applicable corporate income mutual transactions. This is however subject to tax rates for 2020: an obligation to keep due documentation of all relevant transactions. This enables the Dutch Profit from Profit up to and Rate tax authorities to determine whether the including transaction between the applicable allied companies are conducted based on market - € 200,000 16.5% prices and conditions. It is possible to obtain More than 25.0% prior assurance of the fiscal acceptability of the € 200,000 internal transaction with the use of the so-called ‘Advance Pricing Agreement’.
Through 2021, the government announced a gradual reduction of the CIT rates to 15% on the Limited depreciation on buildings first € 200,000 of profit and 21.7% for profits The annual depreciation is deductible from the exceeding this amount. annual profits from business operations. The taxpayer is entitled to depreciate the building For financial years up to and including 2018 until the book value has reached the so-called losses incurred in any given year can be set off base value. The base value is determined with against the taxable profits of the previous year reference to the WOZ value. The base value is and the 9 subsequent years.As of 2019 the equivalent to the WOZ value (WOZ for ‘Wet carry forward is reduced to 6 years. Part of this waardering onroerende zaken’ or Real Estate reduction is the introduction of a transitional Valuation Regulations). Based on the latter measure, based on which the losses of 2019 regulations, the value of a building for tax and 2020 can be used before the 2017 and purposes is determined, to the greatest extent 2018 losses. possible, on the basis of its value in the economic environment. The tax base value for The company profits must be determined on the buildings used as investments is 100% of the basis of sound commercial practice and on the WOZ value, which as of 2019 also applies to basis of a consistent operational pattern. This owner-occupied buildings. The previous tax means, among other things, that unrealized base value of this type of building was 50% of profits do not need to be taken into the WOZ-value. consideration. Losses, on the other hand, may
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There is a transitional ruling for buildings taken Furthermore for access to the innovation box into use before 2019 and which have not yet from now on a distinction is made between been written down over 3 full financial years small and bigger taxpayers. Bigger taxpayers before 2019. In this case for the remaining (consolidated group turnover of more than € 50 period a building in own use can be written million per year and turnover from intangible down on the basis of 50% of the WOZ. This fixed assets of more than € 7.5 million per year) further restriction in writing down does not apply must in addition to an R&D declaration have a as of 2019 for the entrepreneurs/natural recognised legal access ticket. This includes persons discussed above. among other things patents, rights similar to patents such as utility models, cultivator rights, drugs and software. Intangible assets that relate Arbitrary depreciation to biological crop protection products based on In the Netherlands the rule is that no more than live (micro-)organisms may also qualify for the 20% per year of acquisition or production costs innovation box. These stricter access may be depreciated on operating assets, other requirements of a recognised legal access than buildings and goodwill. The minimum ticket do not apply for smaller qualifying depreciation period is therefore 5 years. Under enterprises as such. certain conditions goodwill can be depreciated by a maximum of 10% per year. Up until the last financial year ending before 1 July 2021 the ‘old’ innovation box scheme remains in force, but only for innovations to Innovatiebox (Innovation box) which the innovation box scheme already Companies that have developed intangible applied as of 30 June 2016. The result of this is assets (an invention or technical application) that all intangible fixed assets qualifying before can deduct the development costs from the 1 July 2016 for which the innovation box applied company’s annual profits in the year in which in the declaration for the financial year in which the asset was developed. Under international 1 July 2016 falls, calculated from this date may pressure, including the OECD initiatives relating still avail themselves of the old scheme for a to Base Erosion and Profit Shifting, the maximum of five more years. Innovation Box regulations have been tightened up. The new rules for access to the innovation The rate for corporation tax for innovative box apply from 1 January 2017 and their activities amounts to 7% (2020). From 2021 this application has been to intangible fixed assets will rise to 9%. Losses on innovative activities produced after 30 June 2016. The innovation can from now on be deducted at the normal box as a facility is in principle now only open to corporate income tax rate. The outsourcing of enterprises with actual economic activities in R&D work is also possible if the principal has the Netherlands, where the intention is now only sufficient activities and knowledge present. It is to grant a tax subsidy for an innovation also possible to include innovation advantages developed in the own enterprise in the obtained between the application for a patent Netherlands. The innovation box benefits are and the granting of a patent in the innovation then determined in the light of a ratio between box. There is no maximum to the profit taxed at qualifying and non-qualifying innovation the special rate of 7% (2020). expenditure (nexus break). The company has the option to declare an Only ‘intangible fixed assets’ produced by the innovation box benefit equal to 25% of the enterprise itself can qualify for the innovation company’s total profit instead of complex profit box. Purchased intangible fixed assets do not allocation to the qualifying intangible asset(s). qualify, except that a purchased intangible The benefit is however limited to the amount of asset that is then developed further may again € 25,000. The option is valid in the investment qualify if the further development results in a year and in the following 2 years. ‘new’ intangible asset. A number of additional technical and Under the new rules access to the innovation administrative conditions must however be box is only open to intangible assets for which a fulfilled to be able to qualify for the so-called R&D declaration was issued by the aforementioned tax benefits: For example, to Netherlands Enterprise Agency (RVO). This is make use of the innovation box the intangible a departure from the legislation applicable up to assets must contribute at least 30% to the profit 2017, under which holding a patent was already that the company receives from the intangible sufficient for the company’s option to place the asset. benefits in the so-called innovation box.
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The innovation box does not apply to brands, A participation in a company whose balance logos, TV formats, copyrights on software and sheet consists for example of liquid assets, so on. The choice must be specified in the debentures, securities and debts is regarded as corporate income tax declaration. an investment. In the latter case the participant is not entitled to participation exemption, but is however entitled to apply for a tax credit. It is Participation exemption common practice to apply for an Advance Tax Participation exemption or substantial holding Ruling on the qualification of the participation exemption is one of the main pillars of corporate under the participation exemption provision. income tax. The scheme was introduced to prevent double taxation. Profit distribution Because a number of conditions have to be between group companies is exempted from satisfied in order to apply for a tax credit tax. exemption, factual and circumstantial changes can affect the tax (exempt) status of a A participation refers to a situation where a participation. In this case, the capital gains or company (the parent company) is the owner of losses on this participation must be partitioned at least 5% of the nominal paid-in capital of a into a taxable and non-taxable part (partitioning company that is based either in the Netherlands doctrine). In addition, tax law provides for a or abroad (the subsidiary). A cooperative participation to be revalued at fair market value membership qualifies as well regardless its once the participation tax regime changes. The share in the cooperatives capital. revaluation result (positive or negative) is, amongst other qualifying occurrences, added to Under the participation exemption, all benefits a separate reserve (partitioning reserve). The derived from the participation are tax exempt. reserve must be released upon disposal of the The benefits include dividends, revaluations, corresponding participation. A partial disposal profits and losses in the sale of the participation triggers a pro rata release. and acquisition and sales costs. The participation exemption also applies to As a result of an amendment in the European revaluations of assets and liabilities from earn- Parent/Subsidiary Directive intended to combat out and profit guarantee arrangements. If the abuse and undesirable schemes, with effect value of the participation falls due to losses from 2016 the participation exemption no longer incurred, devaluation by the parent company is applies to benefits from foreign enterprises, if in principle not permitted. Losses arising on these benefits consist of fees or payments that liquidation of a participation can under certain can be deducted by the participation when conditions be deducted. determining its profit for tax purposes and are hence regarded as deductible interest charges. As a general rule participation exemption does The place of establishment of the participation not apply if the parent company or subsidiary is is not relevant here. The exclusion of the an investment institution. It is however possible participation exemption is also aimed at benefits to appeal for a ‘reduced tax investment received that serve to replace the fees referred participation’. To determine whether the to in the previous sentence. This relates to so- participation exemption applies an intent test is called hybrid finance. This restriction of the used. This means looking at whether or not the participation exemption does not in principle participation is held as an investment. apply for the benefits obtained with the disposal of the enterprise and currency results obtained.
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Controlled Foreign Companies tax purposes. The 95% shareholding should represent 95% or more of the voting rights and As of 2019 CFC rules have been introduced, at least a 95% entitlement to the subsidiary’s which (further) aim to prevent profit shifting to capital. The subsidiary is thereby effectively low taxed jurisdictions. The new CFC ruling absorbed by the parent company. One of the ensures that certain ‘tainted’ income categories most important advantages of fiscal unity and its of a CFC are included directly in the Dutch tax tax consolidation of companies, is the fact that basis. Examples are income in the form of the losses of one company can be set off interest, royalties and dividends. against the profits of another company in the A corporation qualifies as a CFC if: same group. The companies are thereby also 1. the Dutch tax paying body – together with a entitled to supply goods and/or services to one related body or natural person – has a direct another without fiscal consequences, and they interest of more than 50% in a foreign ` body, are also entitled to transfer assets from one or if this is a permanent establishment; and company to another. 2. the foreign body or the permanent
establishment is in a country with a low Fiscal unity is only permissible where all of the statutory income tax rate (less than 9%) or in companies concerned are effectively a country included in the EU list of non- established in the Netherlands. The current cooperative jurisdictions for tax purposes. legislation provides the option to include in the If the foreign company or permanent tax consolidation of the fiscal unity a Dutch establishment is qualified as a CFC, permanent establishment of a non-resident undistributed ‘passive’ income (including group. In addition, the parent company and the interest, royalties, dividends and leasing subsidiaries must also use the same financial income) of the CFC are taxed at the level of the year and be subject to the same tax regime. Dutch controlling company, unless the activities of the CFC include significant economic On the basis of legal precedents in 2014, Dutch activities. The latter is the case when the CFC legislation now also permits a fiscal unity via a (a) receives at least 70% non-passive income foreign company. As a result fiscal unity is or (b) meets the Dutch relevant substance permitted between: requirements, or the CFC qualifies as a ▪ A Dutch parent company and a Dutch sub- financing vehicle for which at least 70% of the subsidiary with a foreign intermediate tainted benefits are received from third parties. company established in an EU/EEA
member state; For profits that on the basis of the CFC ▪ Two Dutch sister companies with a foreign legislation are already taxed in the Netherlands parent company established in an EU/EEA and later paid out to the Dutch parent company member state. the avoidance of double taxation is provided.
On 22 February 2018 the Court of Justice of the Object exemption for permanent European Union (CJEU) concluded that the establishments Dutch fiscal unity is in violation of the EU freedom of establishment. According to the An object exemption exists for foreign CJEU ruling the Dutch fiscal unity regime may permanent establishments of companies based not favour domestic groups by allowing a in the Netherlands. As a result the profits and benefit that is not open to cross-border groups, losses of a foreign permanent establishment do while such a fiscal unity in cross-border not affect the Dutch tax basis. Final losses of situations is not permitted. As a result, the Dutch foreign permanent establishments that remain government has introduced repair me asures upon cessation (termination) can however still which adjust the fiscal unity regime with be deducted. The object exemption does not retroactive effect to 1 January 2018. It is apply to profits from so-called passive expected that this will ultimately lead to an permanent establishments in low-taxation alternative fiscal consolidation regime. countries and to passive income of permanent establishments qualifying as CFCs.
Fiscal unity If the parent company owns at least 95% of the shares of a subsidiary, the companies can submit a joint application for fiscal unity to the tax authorities, whereby the companies will be viewed as a single entity for corporate income
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Limitations of Interest deduction Earnings stripping rule OESO standard transfer pricing documentation and country-by-country reporting The earnings stripping rule came into effect from 1 January 2019 and applies for financial Commencing in 2016 additional documentation years beginning on or after this date. The obligations apply for multinationals regarding earnings stripping rule is a generic interest their internal transfer prices used between deduction for the balance of the interest payable enterprises in the different countries. New on third-party and group loans. It concerns the obligations relating to the submission of a difference between the interest charges and country-by-country report, a master file and interest income relating to loans and similar local file. This applies if the consolidated group agreements (balance of interest). Using a fixed revenue is more than € 750 million. The ultimate percentage of earnings before interest, tax, parent company submits the country-by-country depreciation and amortisation (roughly report in the country where it is established. The speaking the gross operating result, EBITDA) master file contains a summary of the transfer the balance of interest is subject to restricted pricing policy of the group. The local file sets out deduction. the intracompany transactions of the local enterprise(s). These documentation obligations Effective as of 1 January 2019, the earnings apply for financial years commencing on or after stripping rule limits the deductibility of net 1 January 2016. Companies established in the interest expenses to the higher of (i) 30% of the Netherlands that form part of a multinational EBITDA or (ii) a threshold of € 1 million. The rule group with a consolidated turnover of at least € does not make a distinction between third party 50 million in the previous year must draw up an and related party interest and is therefore a OECD-based master and local file for transfer generic limitation of interest deduction. By pricing and branch profit documentation taking the EBITDA for tax purposes as the purposes. These files must be present in the starting point, the interest deduction is thus records at the latest on the last day for linked to the taxable economic activity of a submitting the return (after any extension taxpayer. In the case of fiscal unity the earnings granted) for the relevant year. stripping rule is applied at fiscal unity level. Finally the earnings stripping rule applies to Tax declarations both existing and new loans. Interest that cannot be deducted based on the earning The corporate income tax declaration must be stripping rule can be carried forward indefinitely. submitted to the tax authorities as a rule within 5 months of the end of the company’s financial year. If a firm of accountants submits the return Anti-base erosion regulation a postponement scheme applies. The ultimate The anti-base erosion rules in Dutch deadline for filing, including extension, is 16 corporation taxation restricts the deduction of months after the end of the financial year. financing costs of intragroup loans if these loans in essence relate to the conversion of equity into Income tax financing through debt without sound business motives. This comprises loans relating to inter Income tax is a tax levied on the income of alia dividend distributions, repayment of formal natural entities with domicile in the Netherlands and informal capital and capital contributions. (domestic taxpayers). They are taxed on their On the other hand, the anti-base erosion rules full income wherever it is earned in the world. also entail the possibility to overrule this Any natural person who is not domiciled in the restriction in tax deduction of the relating Netherlands, but earns an income in the financing costs if the taxpaying company can Netherlands, is liable to pay income tax on demonstrate that the sound business motive for Dutch source- income (foreign taxpayers). this debt financing exists or the interest Foreign taxpayers may be eligible for the status payment is effectively taxed at a rate of 10% or of ‘qualifying foreign taxpayer’ if at least 90% of more. However, the Dutch tax authorities may their world income according to Dutch demonstrate that in the case of a group assessment principles is taxable in the transaction no business considerations are Netherlands. This status gives an entitlement to involved, even if the recipient pays 10% or more the same deductions as applicable for domestic tax abroad. In that case the interest paid within taxpayers, like the own home scheme the group is not deductible. The interest for discussed below. ordinary business transactions does however remain deductible.
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One of the conditions is to submit the annual The following allowances apply to the above- report on non-Dutch income using an income mentioned income components: return format signed by the tax authority of the ▪ Expenses for income provisions (e.g. country of residence. premiums paid for an annuity insurance In principle, income tax is charged on an policy or a disability insurance); and individual basis: married persons, registered ▪ Personal deductions. This concerns costs partners and unmarried cohabitants (under related to the personal situation of the certain conditions) can however mutually taxpayer and his family that influence his distribute certain joint income tax components. ability to support himself and his dependents (e.g. medical expenses, school fees and specific living expenses for Tax base children). Income tax is charged on all taxable income. The different components of taxable income are A non-resident taxpayer who performs the broken down into three ‘closed’ boxes; each at function of director or member of the a specific tax rate. supervisory board of a body established in the Netherlands is always deemed to have Each source of income can only be entered in performed this function in the Netherlands one box. A loss in one of the boxes cannot be either using a permanent Dutch establishment deducted from a positive income in another box. or by virtue of a Dutch employment relationship A loss generated in Box 2 can be deducted from or a result obtained in the Netherlands from a positive income in the same box in the other work. In this way the scope of the tax levy previous year (carry back) or in one of the 9 for foreign taxpayers is extended, barring the subsequent years (carry forward). The carry effect of a tax treaty on Dutch tax jurisdiction. forward period of 9 years has been reduced to 6 years for 2019 and following years. Where a For the supervisory director and the non- loss in Box 2 cannot be compensated, the tax executive member of a one-tier board more or law offers a contribution in the form of a tax less comparable with them, their working credit. This means that 25% of the remaining relationship is not regarded as employment and loss is deducted from the tax burden payable, is not therefore subject to wage tax. A tax on condition that no substantial interest exists in obligation for income tax does however apply the current tax year and the previous year. for their respective income. The tax credit amounts to 25% of the remaining loss. A loss in Box 1 can be deducted from a The tax rate in Box 1 is progressive and can positive income in the same box in the 3 accumulate to a maximum of 49.50% (2020). preceding years or in one of the subsequent 9 years. Box 3 does not recognize a negative Profit from business activities income. A natural person who derives income from business activities qualifies for tax allowances Box 1: Taxable income from work and for entrepreneurs under certain circumstances. home The tax allowances for entrepreneurs include The income from work and home is the sum of: self-employed allowance, research and ▪ The profit from business activities; development allowance, tax deductible ▪ The taxable wages; retirement allowance (FOR Allowance), ▪ The taxable result of other work activities discontinuation allowance and SME allowance. (e.g. freelance income or income from In addition, a starting entrepreneur is also assets made available to entrepreneurs or entitled to a start-up allowance. companies); ▪ The taxable periodic benefits and The SME Allowance (MKB-winstvrijstelling) provisions (e.g. alimony and government means that entrepreneurs will be entitled to an subsidies); additional exemption of 14% (2020) of the ▪ The taxable income derived from the own profits following deduction of the above home (fixed amount reduced by a entrepreneur’s allowance (tax allowances). The deduction equivalent to a specified interest tax advantage of this and the tax allowances for paid on the mortgage bond); entrepreneurs mentioned above will with effect ▪ Negative expenditures for income from 2020 effectively be limited by the new rate provisions (e.g. repayment of specific structure and phasing out of allowances annuity premiums); and discussed below. ▪ Negative personal tax deductions.
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The fiscal profit concept in income tax is virtually deduction of Own Home costs is being reduced identical to the profit concept in corporation tax. in stages. For example the provisions discussed under Corporation Income Tax relating to the New rate structure and phasing out of valuation of work in progress and orders in allowances progress, arm’s length principle, limited depreciation on buildings, arbitrary depreciation The government introduced a new rate and WBSO (see under section 4) apply structure in income tax and payroll tax starting accordingly. in 2020. Now there is a two-tranche rate, a basic rate of 37.35% (for an income up to € 68,507) and a maximum rate of 49.50%. On the other Private house and the Own Home Scheme hand, a further phasing out of allowances is (Eigenwoningregeling) coming into effect. From 2020 there will be a A private house is viewed as the complete unit reduction of 3% per year over 4 years in the of the house with the garage and other buildings maximum deduction rate of virtually all on the property. Houseboats and caravans are allowances (including Own Home financing also viewed as private houses. The only costs and entrepreneur’s allowances) to the condition being that they are permanently basic rate of 37.35%. bound to a single address.
A private house is only considered as such Box 2: Taxable income from substantial where the house is owned by the occupant interest (taxpayer) and where it serves as permanent Substantial interest applies where the taxpayer, domicile and not as temporary domicile. The with or without his partner, is a direct or indirect purchase of a private house is subject to holder of a minimum of 5% of the issued capital transfer tax of 2%. in a company of which the capital is distributed in shares. The income from substantial interest Once it has been determined that a house can is the sum of the regular benefits and/or sales be viewed as an ‘Own Home’, the house benefits reduced by deductible costs. Regular automatically qualifies for tax purposes for the benefits include dividend payments and Own Home Scheme based on Box 1 (Work and payments on profit-sharing certificates. Sales Home: maximum tax rate 49.50%). benefits include the gains or losses on the sale of shares. Examples of deductible costs include The Own Home scheme works as follows: The the following: consultancy fees and the interest fixed sum assumed by the legislator for the on loans taken out to finance the purchase of enjoyment derived from the own home is the shares. expressed for tax purposes in the Own Home fixed sum. The Own Home fixed sum is A non-resident taxpayer is subject to tax for determined on the basis of a fixed percentage income from substantial interests if the interest of the value of the house in question. The basis is held in a company residing in the for determining the value of the Own Home is Netherlands. If this company was resident in the the value of the property, as determined on the Netherlands for a minimum of five years in the basis of the WOZ value. The WOZ value is past ten years, the company is regarded to be determined by municipal decree. Certain costs resident in the Netherlands. like financing costs (for example interest paid on the mortgage) are under certain conditions The tax rate in Box 2 is 26.25% (2020). deductible from the above-mentioned Own According to government plans the rate will be Home fixed sum. The financing costs (including increased in stages in the coming years, namely interest paid on a mortgage bond) are tax to 26.9% in in 2021. deductible where the loan qualifies as an Own Home Debt. The tax deduction is restricted to mortgages with a minimum annuity repayment scheme of 30 years. In other words to qualify for tax deduction the mortgage scheme should guarantee full mortgage payment within 30 years or less.
The Own Home financing costs are tax deductible at a tax rate of up to 46.00% (2020; 49.00% in 2019). Starting in 2014 the tax
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Box 3: Taxable income from savings Advance tax payments and investments Tax is withheld in advance over the course of Box 3 charges tax on the taxpayer’s assets. The the tax year for income deriving from work taxable base is based on a fixed return on activities and from dividends. Both wage investment of the yield base. The yield base is withholding and dividend tax are advance tax the difference between the assets and the payments on income. The withheld amount may liabilities. The yield base is determined on 1 be deducted from the income tax due. January of the calendar year. The reference date of 1 January also applies if a taxpayer does Tax declaration not yet owe any inland tax on 1 January or if the inland tax obligation ends during the calendar The income tax declaration for any given tax year for reasons other than death. year must be submitted to the tax authority in principle before 1 April of the next year. For the The assets in box 3 include: Savings, a second return for 2019 the deadline has been extended house or holiday house, properties that are until 1 May 2020. If a firm of accountants leased to third parties, shares that do not fall produces the return an extension scheme under the substantial interest regime and capital applies. This means that the return may also be payments paid out on life insurance. submitted later in the year.
Liabilities in box 3 include: Consumer loans and Dividend tax mortgage bonds taken out to finance a second house. Per person, the first € 3,100 (2020) of Companies often pay out profits to the the average debt is not deductible from the shareholders in the form of dividends. The assets. following are further examples of dividend situations: ▪ Partial repayment of the moneys paid-up Untaxed assets on shares by shareholders; All taxpayers are entitled to untaxed assets in ▪ Liquidation payments above the average Box 3 of € 30,846 (2020). The amount is paid-up equity capital; intended to reduce the yield base. A fixed ▪ Bonus shares from profits; return, depending on the assets, is calculated ▪ Constructive dividend. This concerns on the amount remaining after deduction of the payments made by a corporation primarily exemption. Three tranches apply for the fixed for the benefit of a shareholder as opposed return. In the first tranche (after deduction of the to the business interests of the corporation; tax-free assets of € 30,846 for taxable box 3 ▪ Interest payments on qualifying hybrid debt assets) up to € 72,797 the fixed return is 1.80% as such debt are treated as informal equity (2020). In the second tranche (€ 72,797 - € of the borrowing company. 1,005,572) the fixed return is 4.22% (2020) and above this the fixed return is 5.33% (2020). Cooperatives These fixed returns are adjusted annually in the light of the statutory returns in prior years. The Up to 2018 cooperatives were in principle not tax rate is then paid on this return. The tax rate obliged to deduct dividend tax on profit in Box 3 is 30%. distributions to a holder of a membership right, unless the main objective or one of the main objectives of the membership of the cooperative Tax allowances is to avoid dividend tax or foreign tax and the Once the due tax has been calculated for each chosen structure has not been set up for box, certain tax allowances are deducted from business reasons that reflect the economic those amounts. All domestic taxpayers are reality. This anti-abuse regulation was replaced entitled to a general tax allowance of € 2,711 with effect from 1 January 2018 by the (2020). The general tax allowance is reduced by introduction of a more generic dividend tax 5.672% of the taxable income from work and obligation for qualifying holder cooperatives home exceeding € 20,711 (2020), as a result of established in the Netherlands. These are which the general tax credit may ultimately be holder cooperatives established in the zero for an income of € 68,507 (2020). Netherlands whose actual work includes at Depending on the personal situation of the least 70% holder work in the year preceding the taxpayer and the actual amount of the annual profit distribution. income, the taxpayer may also be entitled to specific tax deductions.
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The deduction of dividend tax moreover only Step-up tax basis of cross-border legal merger concerns membership rights that give a right to and division at least 5% of the annual profit or profit on In the case of a cross-border merger or division liquidation, irrespective of whether this an unintentional Dutch dividend tax claim on entitlement falls independently to the holder of foreign profit reserves may arise. To prevent the membership right or in combination with the this on certain conditions the value of the assets rights of associated persons or the cooperating that are transferred as a result of a legal merger group. or division to the acquiring corporate body in the
Netherlands is regarded as (untaxed) paid-up Exemption capital for dividend tax purposes. This does not apply for assets that consist of shares in a Dutch No tax is withheld, among others, in the corporate body. following situations: ▪ Where, in inland relationships, benefits are Refund scheme for foreign taxpayer enjoyed from the shares, profit-sharing The law includes a provision that provides for certificates and cash loans of participations the refund scheme for dividend tax for foreign to which the participation exemption taxpayers (natural person or a legal entity). For applies; foreign taxpayers with a holding in Dutch shares ▪ If a Dutch company pays out dividends to under certain conditions it is possible to request a company established in a member state a refund of dividend tax deducted. The of the European Union/EER and the shareholder must qualify as beneficial owner of participation exemption would have been income from shares for which a foreign taxpayer applicable in case the shareholder was a exists. A refund is possible where the dividend resident in The Netherlands. tax is higher than the income or corporation tax
that would be payable if the relevant taxpayer As of 2018, the exemption has been extended had been resident or established in the to qualifying dividends paid to residents (for tax Netherlands. Refund of dividend tax is not treaty purposes) in a state with which the granted if the foreign taxpayer is entitled to a full Netherlands has concluded a tax treaty offset of the Dutch tax in the state of residence including a dividend provision; or establishment based on a tax treaty signed ▪ The dividend withholding tax exemption is between the Netherlands and the relevant state subject to anti-abuse regulations, which of residence or establishment. entail that the beneficiary of the dividends dividend should not be considered to hold Tax rate the interest in the distributing entity with the main purpose to avoid taxation with The tax rate for dividends is 15% (2020). The tax is withheld by the company that pays out the another entity or individual (subjective test) dividends and pays it to the tax authorities. The and the arrangement transaction should dividend tax withheld serves as an advance tax not be considered artificial (objective test). payment on income and corporate income tax. ▪ In addition, several specific provisions have been introduced in case the shareholder of the Dutch entity is a hybrid The Netherlands has signed tax treaties with various other countries, as a result of which a entity. If the distributing entity applies to the lower tax rate will apply in many instances. withholding tax exemption, the tax authorities should be notified of this within one month after payment.
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Prevention of double taxation relationship, whether or not a notional one. One of the characteristics of an employment Residents of the Netherlands and companies relationship is the employer-employee that are registered in the Netherlands must pay relationship. With the big increase in the labour tax on all revenue generated worldwide. This market of freelancers and self-employed sole could result in any given income component traders (ZZP), the importance of delimiting being taxed both in the Netherlands and ‘whether or not’ there is an employment abroad. To prevent this kind of double taxation, relationship and the associated withholding the Netherlands has signed tax treaties with obligation and social security obligation has many other countries. The treaties are largely grown considerably. modelled on the OESO Model Treaty for the prevention of double taxation. To this end, the so-called law on the Deregulation of the Assessment of Employment If an income tax component is nevertheless Relationships (DBA ) was adopted and formally double-taxed as income or corporate income came into force in 2016. Government came up tax, the taxed amount is reduced based on the with the law on the Deregulation of the exemption method. The method entails a Assessment of Employment Relationships reduction of the Dutch tax related to the foreign (DBA) to replace the so-called Declaration of income. The exemption on the income tax is Independent Contractor Status (VAR). The VAR calculated per income tax box. in principle indemnifies the client from the risk of a withholding obligation. Under the DBA the Double taxation of dividend payments and client can only still get an indemnification for the interest payments and royalties is prevented absence of a withholding obligation when using with the use of the settlement method. The use the (model) agreements assessed and of this method means that the Dutch tax is approved by the tax authority. However, reduced by the amount of tax charged abroad. because of the apparent social impact and the implementation problems for this law, the In certain situations it is also possible to deduct habituation period has been extended the foreign tax directly from the profits or as repeatedly. Meanwhile the government has costs related to income. decided to replace the current DBA law with the aim of bringing in new measures in 2021. Until In 2017 the government signed the multilateral then the DBA law remains in force. Enforcement treaty on international tax evasion (Multilateral of the law (i.e. imposing penalties and Instrument or MLI). This treaty is a result of the retrospective assessments) is only aimed at BEPS project against tax avoidance. This treaty malicious parties and serious cases. offers the opportunity to implement measures against tax evasion in one go, without the need As regards the function of supervisory director for separate negations and also provides for or non-executive member of a one-tier-board, faster mutual agreement procedures. The MLI the income tax section above has already bill came into effect as of 01 July 2019 . stated that for both relationships from 2018 there will no longer be a fictitious employment Wage tax relationship and corresponding withholding obligation. There will however still be the option As explained earlier in this section wage via the opting-in regulation to create or maintain withholding tax is an advance tax payment on an employment relationship, for example in the income tax. Anyone deriving an income from case of a non-executive board member who employment in the Netherlands is liable to pay qualifies for the 30% scheme discussed below. income tax on the income. In addition, employees in the Netherlands are generally covered by social security. The employer Tax rate withholds the social security premium and wage The wage tax rates in 2020 are: tax due from the wages as a single amount and ▪ On the first € 34,712 of taxable income: a subsequently pays this to the tax authorities. percentage of 37.35% is withheld (9.70% The combined amount is referred to as wage wage tax and 27.65% social security tax. The wage tax is subsequently settled premium); against the amount of income tax due. ▪ On the next € 33,795 of taxable income: a percentage of 37.35% (37.35% wage tax); Withholding obligation ▪ On all additional income: a percentage of 49.50% is withheld. The Wage Tax Act links the withholding obligation with the presence of an employment
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When withholding the wage tax, the employer (taxed at 80%) where and insofar as the must also take into account the general tax compensations and provisions do not belong to allowance and the labour allowance. The latter the following categories: discounts are discussed above. 1. Compensations and provisions that are exempted from final levy payment Taxable wage This includes among other things private For wage tax a broad wage definition is used. use of company car, company bike and Dutch tax legislation allows numerous options reimbursement of fines. for rewarding personnel in fiscally friendly ways. Wage tax is calculated on the full value of the 2. Compensations and provisions belonging to remunerations received by the employee based another final levy payment on the employment contract. The remuneration This category includes for example gifts and may take the form of cash, such as a salary, provisions to a third party and additional holiday allowances, overtime, commissions and assessments not recovered from the payments for a thirteenth month. Employees employee. can however also receive remuneration ‘in kind’, such as products from the company or 3. Specific exemptions of work expenses holiday trips. The concept of remuneration also Exempted work expenses include includes various other claims, compensations compensations and provisions for business and provisions. travel expenses by public transport (100% compensation), travel expenses by own All compensations and provisions from the transport (max. € 0.19 per km), course employer to the employee form the taxable costs, study and training, meals during wages. Exceptions to this are: overtime and business travel (see below), ▪ Fringe benefits (e.g. attention in case of extraterritorial costs (e.g. 30% rule; see illness); below), costs of tools and ICT equipment ▪ Intermediary costs, being costs incurred by (see below) and products from the the employee on behalf and for the account company’s own sector (see below). For of the employer; some of the specific exemptions a lump ▪ Exempt claims and benefits (e.g. pension sum applies (see below). claims, benefits on death, travel allowance). 4. Provisions to be valued at zero This includes provision of work clothing, The other compensations and provisions in provisions in the workplace, refreshments principle form part of the taxable wage. provided in the workplace. Depending on the category of the compensations and provisions the employer If and insofar as compensations and provisions has the option to include compensations and do not fall under the above-mentioned provisions in the final levy payment. Wage tax exemptions, the employer then has the choice is then paid by the employer. of regarding the (remaining) compensations and provisions as final levy payment or as regular wage (with the deduction of wage tax Work expenses scheme from the employee). The employer may indicate Compensations and provisions to employees compensations and provisions as a component are subject to the work expenses scheme. of final levy payment on condition that these do Through this scheme an employer may in 2020 not differ substantially from what is usual in spend a maximum of 1.7% of the total wage for similar circumstances. This means that tax purposes (the ‘free scope’) up to a total depending on the nature it is usual to indicate wage bill of € 400,000 and 1.2% on the the relevant compensation or provision as a additional wage bill on untaxed compensations component of the final levy payment. A and provisions for employees. On the amount compensation or provision relating to costs above the free scope, the employer pays wage incurred by the employee in relation to the tax in the form of a final levy of 80%. proper exercise of the employment relationship will be qualified as usual rather than the Not all compensations and provisions are or can indication of pure salary elements, such as be included in the free scope. Under the work bonuses. expenses scheme compensations and provisions are only included in the free scope and successively qualify as final levy payment
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With regard to the scope of the compensation market value (including VAT) of the or provision this may not be substantially (30% product; or more) higher than are indicated as usual in ▪ The total value of the discount or comparable circumstances. The additional compensation may not exceed € 500 amount shall be included in the levy as regular (2020) per calendar year. wage. For some work expenses such as meals This may also extend beyond the termination of at the workplace, which are taxed by the the employment contract due to disability or employer as regular wage different lump sum retirement. valuations apply in addition.
Relocation The final levy payment is then first deducted from the free scope and the additional amount If an employee is required to relocate for work taxed by the employer at 80%. purposes, the employer is entitled to compensate the employee free of tax for the moving costs for his household goods. In Group scheme addition the employer may give a tax-free The final levy under the work expenses scheme moving expenses allowance of a maximum of € is in principle calculated per employer. There is 7,750 (2020). The condition is however that this the option to calculate the final levy at group is a move that is entirely related to the level. For an employee who works for more than employment. This in any case applies if the one group member, groups no longer have to employer gives the allowance within 2 years calculate the compensations and provisions per after the employee accepts the new group member (employer). employment (or after transfer) and the employee lives more than 25 kilometres from his work and moves, as a result of which the In addition under this scheme the use of the free distance between his new home and his work is scope can be optimized for all group members reduced by at least 60%. by paying all compensations and provisions designated as final levy payment from the total free scope. The final levy payable on the total The 30% ruling amount that exceeds the collective free scope Foreign employees who come to work in the is then paid by the group member with the Netherlands temporarily qualify for the 30% highest pay taxed for the employees. ruling under certain circumstances. The ruling entails that the employer is entitled to pay the Tools and ICT equipment employee a tax-free remuneration to cover the extra costs of their stay in the Netherlands Compensations and provisions relating to this (extraterritorial costs). The compensation equipment are exempt if they meet the amounts to 30% of the salary, including the ‘necessity criterion’. This means that the compensation, or 30/70 of the salary excluding exemption applies if in the opinion of the the compensation. The condition is that, based employer the compensation or provision is on this salary, the employee is not entitled to necessary for proper performance of the work. prevention of double taxation. If the employer The costs must be paid by the employer without reimburses more than the maximum amount, being charged on to the employee. In addition this salary is subject to wage tax. The employer the employee must return the equipment used may deduct a final levy on this additional or pay the employer the residual value once the amount. Since 1 January 2019 the disposition is equipment is no longer necessary for the work. only valid for a maximum period of 5 years. Up until 2019 this was 8 years. A transitional ruling Company products applies for employees who already used this scheme before 2019. For this group the change Employers are entitled to offer their employees comes into effect on 1 January 2021. discounts or compensation for purchasing products produced or manufactured by the company. This can be done tax-free subject to Conditions for qualification for the 30% rule the following conditions: 1. The employee is hired from abroad; and ▪ These must be products that are not from 2. The employee has a specific expertise that another sector; is scarce or not available at all on the Dutch ▪ The maximum discount or compensation employment market. This is called the per product must be 20% (2020) of the scarcity and expertise requirement.
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For this the specific expertise the legislator Extraterritorial costs introduced a salary norm; and The extraterritorial costs consist of the 3. The employee has lived in the 24 months following, among other things: preceding the first working day in the ▪ extra cost of living because of the higher Netherlands more than 150 km from the cost of living in the Netherlands than in the Dutch border. country of origin (cost of living allowance);
▪ the cost of an introductory visit to the An employee is regarded as fulfilling the Netherlands, with or without the family; conditional specific expertise if the employee’s ▪ the cost of the application for a resident’s remuneration exceeds a defined salary permit; standard. The salary standard is indexed ▪ double housing costs (for example hotel annually. For 2020 the salary standard is fixed costs), because the employee will continue at a taxable annual salary of € 38,347 (2019: € his or her residence in the country of origin. 37,743) or € 54,781 including the 30% allowance (2019: € 53,918). The following aspects are not covered by the
extraterritorial costs and can therefore not be This salary standard of € 38,347 (2020) is compensated or granted untaxed: excluding the final levy components and thus ▪ the overseas posting allowance, bonuses excluding the 30% allowance. In most cases no and comparable compensations (foreign more specific check is made for scarcity, but this service premium, expat allowance, is done if for example all the employees with a overseas allowance); particular expertise meet the salary standard. ▪ loss of assets; the purchase and sale of a
house (reimbursement of house purchase The following factors are then taken into expenses, agent’s fee); account: ▪ the compensation for higher tax rates in the a. he level of the training followed by the Netherlands (tax equalization). employee;
b. The experience of the employee relevant If the employee has children, the employer is for his job; entitled to offer the employee tax-free c. The pay level of the present job in the compensation for school fees at an international Netherlands in relation to the pay level in school in addition to the 30% rule. Other the employee’s country of origin. professional costs can be compensated
untaxed based on the normal rules applicable to For scientists and employees who are the Wages and Salaries Tax Act (Wet op de physicians in training as specialists there is no loonbelasting). salary standard. For employees coming in who are aged under 30 years and have completed If the extraterritorial costs add up to more than their Master’s degree there is a reduced salary 30%, then the actual costs that have reasonably standard of € 29,149 for 2020 (2019: € 28,690) been incurred can also be compensated tax- or € 41,641 (2020) including the 30% free. It must however be possible to allowance. demonstrate that the costs incurred are
justifiable. The 30% ruling contains a rule on post- departure remuneration. As a result the 30% To be able to make use of the 30% rule, the rule also applies effectively until the end of the employer and the employee must jointly submit wage tax period that follows the wage tax period an application to the Foreign Office of the tax in which the employment has ended. authorities in Limburg (Belastingdienst/kantoor
Buitenland). If the application is approved, the 150 Kilometre limit tax authorities will issue a decision.
The 30% rule only applies if the incoming The decision is valid for a maximum period of 5 employee can substantiate that the employee years (8 years until 2018). Should the request has lived for a minimum period of two thirds of be made within 4 months after the start of 24 months (i.e. 16 months) outside the 150 employment as an extraterritorial employee by kilometre area from the Dutch border preceding the employer, the decision shall be retroactive the start of the employment in the Netherlands. to the start of employment as an extraterritorial
employee. If the request is made later, the decision shall apply starting the first day of the month following the month in which the request
is made.
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The five-year period is reduced by previous above returns and declarations help the EU periods of stay or employment in the authorities to keep track of goods and services Netherlands. and whether sufficient tax has been paid. It is becoming more common for a member state to In addition, the employee with the 30% ruling request specific data from another member can also submit an application for registration state to tax and penalize a taxable person that as a partial foreign taxpayer for tax purposes in did not pay tax or did not follow procedures. the Netherlands. This entails that he will be Data analysis is often the basis for the requests. entered as a foreign taxpayer in Box 2 and 3. In that case, as a foreign taxpayer the income to Exemptions be reported is limited to Dutch source income and not to its worldwide (investment) income. Not all goods and services in the Netherlands are subject to VAT. The following services are VAT exempt: medical services, services Value Added Tax (VAT) provided by educational institutions, most The Dutch turnover or value added tax system banking services, insurance transactions, is based on Directive 2006/112/EC - the EU’s services performed by sports organizations and common system of value added tax (VAT) or property rentals. Taxable persons that provide ‘BTW’ in Dutch). This means that tax is charged exempted services are not entitled to charge at each and every stage of the production chain VAT for their services. In addition, they are also and in the distribution of goods and services. not entitled to deduct the VAT charged to them Taxable persons (VAT-registered businesses) for goods and services, however there are charge one another VAT for goods and/or some exceptions. Taxable persons that perform services provided. both VAT liable and VAT exempt services will The taxable person that charges the VAT is assign VAT to those specific services on which required to pay the VAT amount to the tax VAT is due. A specific pro rata percentage may authorities. in that case determine the reclaim rate of VAT on general costs. If a taxable person is charged VAT by taxable person, it is entitled to reclaim this VAT if the Capital goods taxable person performs VAT taxable activities itself. By doing so, the system ensures that the The legislation also includes various provisions end user is effectively responsible for paying the to limit the VAT deductible. One important VAT. provision aims to review VAT on capital goods sold. In the case of tangible capital goods the Foreign taxable persons that perform taxed deductible VAT must be reviewed for a period services in the Netherlands are in principle also of 5 years and for 10 years in the case of liable to pay VAT. Those taxable persons, too, immovable goods. This is called ‘the capital will be required to pay the VAT due in the goods scheme’ or ‘revision period’. The Netherlands and will therefore also be able to entrepreneur that reclaimed VAT on such claim the VAT invoiced to it by taxable persons. acquisitions needs to re-establish the right to The VAT system entails formal invoicing rules. reclaim VAT in each of the revision years. The rules are determined by the EU Directive on Following the first year of use, 20% or 10% of VAT Invoicing rules and implemented by EU the reclaim basis is attributed to each year. In Member States in their national VAT Law. the first year, the full amount may have to be revised. The reclaim percentage is usually As a basic rule, VAT returns have to be filed determined on the basis of the revenue (VAT quarterly. On request or as a ‘penalty’ for late taxable revenue divided by total revenue) or payment, returns may also have to be filed actual use (square meters, time, etc.). The rules monthly or yearly. For services and goods and case law are quite specific and should be moving from one EU member state to another closely monitored on a case by case basis. So EU member state, an intracommunity listing has far this ‘revision period’ does not apply for to be filed. In principle this return also has to be expensive services. The government has filed quarterly. However, if the threshold (per meanwhile launched a proposal to apply this quarter) of € 50,000 for goods is met, monthly review provision for this category of expenditure returns have to be filed. If a taxable person as well. No commencement date has yet been acquires more than € 1,000,000 of goods or has fixed. This new measure will mainly be for transferred more than € 1,200,000 of goods to sectors with a relatively big purchases of other countries per year, Intrastat declarations expensive services, such as the health care, have to be filed (in principle monthly). All the financial and real estate sectors.
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The VAT system in the internal European These proposals will have a major impact for EU market and non-EU suppliers of goods to private consumers, as well as for market places The European Union has recognized the free facilitating such supplies. traffic of goods, persons, services and capital in the EU. Performances within the European Community are referred to as the intra- VAT deferment community supply and acquisition of goods and The Netherlands has implemented a so-called intracommunity services. VAT is charged based deferment system. This system offers cash-flow on the destination country principle. advantages. This system’s benefit involves
payment of VAT to be moved from the time of This means that goods that cross the border to import to when the company declares taxes, another EU country are taxed in the destination usually monthly. The VAT due for the import will country. The rules strongly differ for business to be recorded in the declaration as payable, while business and business to consumer activities. at the same time, amounts will be subtracted as
pre-paid taxes. To obtain this deferment, the Digital services importer must apply for a license from the tax department. To obtain this license the company Digital services (communication, broadcasting (importer) has to be registered for VAT in the and electronic services) are taxed in the country Netherlands as a domestic taxable person or as where the customer is resident. It is not relevant a foreign taxable person with a fiscal whether or not the customer is (a business) establishment for VAT in the Netherlands. In registered for VAT. addition this company (importer) should have To facilitate the administration of this, at the regular imports to the Netherlands and the same time the ‘mini One Stop Shop scheme’ bookkeeping is subject to meet specific has been introduced. This scheme offers the requirements. business registered for VAT the option to declare the VAT in one EU member state for the It is also possible to appoint a fiscal digital services provided to private customers in representative to make use of the deferment all Member States. Note that taxable persons licence. In some cases it is even restricted to supplying digital B2C services in general need use a fiscal representative. two separate and non-contradictory pieces of evidence to determine where their customers are resided (billing address, IP address, bank Tax rates details, etcetera). The general VAT tax rate is 21%. The
Netherlands also has a low VAT rate of 9%. As of 1 January 2019, additional simplifying Goods and services falling under the low tax rules have been implemented for taxable rate are specified in Table 1 of the Turnover Tax persons providing digital services, specifically Act (Wet op de omzetbelasting 1968). This electronic services: applies, among other things, to foodstuffs, 1. Taxable persons supplying B2C electronic medicines and services in the leisure and services in the EU with a turnover under hospitality area. The zero rate is mainly EUR 10,000 may apply the VAT rate intended for goods exported to outside the EU applicable in their own Member State and for goods exported to other EU members 2. The MOSS scheme can also be used, states. unlike previously, by taxable persons that
are not established in the EU, nor have a fixed establishment Excise and other duties and taxes 3. Taxable persons using the MOSS scheme may apply the invoicing rules of their own Excise duty Member State instead of the customer’s The Netherlands charges excise duties on Member State alcohol-containing beverages, tobacco, fuel and 4. Taxable persons supplying B2C electronic other mineral oils. Manufacturers, traders and services in the EU with a turnover under importers pay excise duties to the tax EUR 100,000 can determine the residence authorities. The Excise Duty Act (Wet op de of their customers with one piece of accijns) in the Netherlands is fully harmonized evidence. with the applicable EU directives.
The other (bigger) part of the e-commerce proposals related to distance sales of goods should be implemented as of 1 January 2021.
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Environmental taxes Waste tax The Netherlands charges the following The tax rate for 2020 is € 32.63 per 1,000 kg of environmental taxes: landfill. ▪ Tax on mains water ▪ Fuel tax Bank tax ▪ Energy tax ▪ Waste tax Legal entities carrying out banking activities inside the Netherlands are subject to bank taxation. The bank tax is levied on unsecured Tax on mains water debt. The rate is 0.044% (2020) for short term The Netherlands charges tax on mains water. debt (term of less than 1 year) and 0.022% for All companies and households pay tax on a longer term debt. maximum amount of 300 cubic metres of water per connection per annum. The rate is € 0.348 Insurance premium tax (2020) per m3. The insurance premium tax is levied upon the conclusion of an insurance contract with an Fuel tax insurer. The insurance premium tax rate Fuel tax is paid by the producers and importers amounts to 21% of the premium due. Some of coal. The rate is € 15.05 (2020) per 1,000 kg types of insurance contracts are exempt from coal. this taxation, such as health insurance, unemployment insurance, accident, transport, Energy tax disability and life insurance. The insurance The purpose of energy tax is to reduce CO2 premium tax imposed is paid by the designated emissions and to reduce energy consumption. intermediaries and insurers. The energy tax is charged to the user of the energy (natural gas, electricity and certain mineral oils). The rates are related to the amounts used, whereby the rates are progressively reduced as consumption increases.
By means of a Climate Agreement the government is promoting an energy transition from the use of fossil fuels to sustainable energy with the ultimate aim of being CO2-neutral in 2050. The rate is expected to be used as a policy tool in the coming years.
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3.6 Personnel Furthermore, Dutch labour law takes the legal Finding and retaining personnel is an presumption of an employment agreement as a essential condition for the existence and starting point if a person has performed labour growth of an organization. Companies stand every week for 3 consecutive months, with a out through the personnel they employ. minimum of 20 hours a month. The contracted Dutch tax legislation (see section 5) allows work in any given month is presumed to amount numerous options for rewarding personnel to the average working period per month over in fiscally friendly ways. the 3 preceding months.
The Dutch legislation includes various Governing law provisions to secure the rights and obligations of both employer and employee in the Dutch As a rule, an employment relation is governed employment market. As a general rule, the by the law of the country to which it is most employer and employee should behave closely connected (typically: the country where according to the standard of good employership the labour is performed). As a rule, parties to an or employeeship respectively. The employer employment agreement are free to choose a has a number of specific legal obligations with different law to apply to their relationship. respect to work and rest times, leave and However, according to European legislation, the working conditions. effect of any choice of law in international employment agreements is limited to the extent that the employee will not lose protection on the Employment relationships basis of mandatory provisions of the law of any According to Dutch law, three different general member state which would apply if no choice of types of agreements are used to determine the law had been made. rights and duties of persons performing activities in the course of a business for another Mandatory rules are legal provisions which party. The employment agreement cannot be contracted out. For example, many (‘arbeidsovereenkomst’) is the most common provisions of Dutch labour law regarding the agreement. The assignment agreement termination of an employment agreement are (‘overeenkomst van opdracht’); for example, a considered to be mandatory. freelance agreement, consultancy agreement or a management agreement is used often in an The parties to an employment agreement are attempt to avoid an employment agreement limited to negotiations of their own terms and coming into being. A third agreement is the conditions by both Dutch labour law and any contracting agreement applicable collective labour agreement, since (‘aannemingsovereenkomst’). This agreement these contain many mandatory rules on terms is concluded between parties if the purpose of and conditions of employment. the activities is to construct an item with a physical nature. Employment law regulations
Essential features of the employment Employment relations in the Netherlands are agreement are: the obligation to perform labour mostly regulated by the Dutch Civil Code in person in return for pay, and the authority of (‘Burgerlijk Wetboek’). An important principle of the other party to give instructions as to how the the employment provisions of the Dutch Civil labour is to be performed. Other agreements Code is the protection of what is known as the lack one or more of these features. The weakest party, i.e. the employee. Apart from the employment agreement itself is not subject to Dutch Civil Code, regulations concerning labour rules as to its form (oral agreements are law can be found in several other regulations perfectly valid, although problems as to proof and legislative acts, such as the Works Council may arise). However, according to Dutch labour Act (Wet op de ondernemingsraden), Work and law the employer is under the obligation to Care Act (Wet Arbeid en Zorg) and the Working provide certain information in writing to the Conditions Act (Arbowet). As a result of the employee with respect to the employment unification of Europe, Dutch regulations are agreement. This relates among others to place increasingly influenced by European treaties of work, job title, the date the employment and case law of the European Court of Justice. agreement enters into force, remuneration, Furthermore, employment regulations are laid working hours, terms and conditions relating to down in the Collective Labour Agreements. holidays and the applicability of any collective labour agreement.
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Minimum wage Employment agreements There is a statutory minimum wage for An employment agreement may be agreed for employees aged 22 or over. In addition there is an indefinite or fixed period of time. If an a minimum wage for employees aged between employment agreement for a fixed period of 15 and 21, the level of which varies according time is continued, a new agreement will then be to age. These minimum wages are indexed and deemed to have been entered into under the may be adjusted twice a year on January 1 and same conditions and for the same period of time July 1 (as of January 2020, the statutory (subject to a maximum of 1 year) as the former minimum wage for employees aged 22 or over employment agreement. is € 1,653 gross per month, excluding 8% Parties are free to enter into consecutive holiday allowance). This amount applies for a employment agreements for a fixed period of full working week. The duration of a working time, ending by operation of law, however two week may differ by type of business sector and restrictions (chain provision) apply: is normally between 36-40 hours. Since 2018 ▪ Since 01 January 2020 the aggregate there has also been a minimum wage for self- duration of the consecutive employment employed contractors. These are people who agreements (with interruptions of not more do not have an employment contract, but work than 6 months) may not exceed 36 months; on the basis of a specific agreement, such as if the aggregate duration is longer than 36 the above-mentioned contracting agreement months (interruptions included), the last (‘aannemingsovereenkomst’). The new employment agreement shall be deemed regulation does not apply for self-employed to be an employment for an indefinite contractors who are hired. period of time. ▪ The number of consecutive employment agreements must be less than 4. If the Collective labour agreements (‘CAOs’) number of consecutive employment As mentioned above, employment agreements agreements exceeds 3 (while there are no are also influenced by collective labour interruptions of more than 6 months in agreements (‘CAOs’). Collective labour between the employment agreements), the agreements are negotiated between fourth employment agreement will be representatives of employers and employees considered to be an employment and are intended to provide consistent agreement for an indefinite period of time. employment conditions within specific branches. Collective labour agreements can be Under strict conditions exceptions may only be negotiated for an entire branch or be limited to made to the Collective Labour Agreement for a company (also called the company Collective the new chain provision. In the Collective labour agreement). Furthermore, the Minister of Labour Agreement however no more than 6 Social Affairs can impose the application of a temporary contracts over a period of 4 years are collective labour agreement on the entire permitted. The gap of 6 months is also binding industry or sector by declaring a collective for the Collective Labour Agreement. labour agreement generally binding. Any provision in an individual employment The chain provision described above forms part agreement, which restricts the rights of the of a wider revision package of the labour and employee under an applicable collective labour dismissal law, the Balanced Labour Market Act agreement, is void. In such cases the provisions (Wet Arbeidsmarkt in balans/WAB) came into of the collective labour agreement prevail. effect as of 01 January 2020. The new legislation also includes the introduction of limiting conditions for so-called standby Trade unions contracts. Although the influence of trade unions in the Netherlands is generally waning, Trade unions With the introduction of the WAB it has been are still well organised in the manufacturing decided to make a considerable amendment to industry and the semi-public sector or privatised labour law. The WAB aims for a better balance sector. The most important trade unions are the between permanent and flexible contracts. National Federation of Christian Trade Unions Flexible work will be more expensive, dismissal (‘Christelijk Nationaal Vakverbond’ (CNV)) and slightly easier and as a result cheaper than The Netherlands Trade Unions Confederation before. In addition it will be made more (‘Federatie Nederlandse Vakbeweging’ (FNV)). attractive for employers to offer employees a The main employers’ association is the permanent contract at a sooner stage. Confederation of Netherlands Industry and Employers (VNO-NCW).
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As from 01 January 2020, flexible work that absence of the notice obligation the employee meets the new legal definition of ‘on-call worker is entitled to compensation of 1 gross all-in contract’ creates specific new employer’s monthly salary or in case of late notification a obligations, including the duty to offer an on-call pro rata part of the monthly salary. worker a new employment contract each year with a fixed number of hours. The incentive for During the probation period both the employer offering a permanent contract has been created and the employee can terminate the by introducing a differentiation in employer’s employment contract directly at any time. In charges, where the social insurance order to be valid, the probation period has to be contributions applicable for employees with a expressly agreed upon by parties in writing. permanent contract is more favourable than for Any deviation from the aforementioned rules will an employee without a permanent contract. result in a void probation period.
Termination of an employment Lapse of the agreed period agreement An employment agreement for a fixed period of With respect to termination of an employment time will terminate by operation of law at the end agreement, a distinction must be made between of the agreed period of time without formalities. an employment agreement for a fixed period of time and an employment agreement for an Summary dismissal indefinite period of time. There are several ways for employment agreements to terminate. The employment agreement can be terminated for urgent cause; for instance, if the employee has committed a serious crime, such as, but not Probation period limited to, theft, fraud, etc. Before a summary Parties can agree upon a probation period. dismissal can be given, all circumstances must However, it should be noted that a probation be taken into consideration. Dismissal must be period is subject to strict rules. It is not permitted given without delay, only the time necessary for to include a probation period in temporary an investigation into the facts is usually allowed. employment contracts of a maximum of 6 The grounds for the dismissal must be months. This also applies for a subsequent conveyed to the employee at the moment of contract unless the content of the contract dismissal. The employment ends immediately, differs in essence from the old contract. In a without notice, and the employee is not entitled Collective Labour Agreement different rules to compensation. Usually, payment of may apply for probabtion periods for temporary unemployment benefits is denied. The courts do employment contracts. not easily accept that sufficient grounds are present to deem a summary dismissal valid. Also under the rules a probation period for Before deciding on a summary dismissal, maximum 2 months can only be concluded if therefore always consult a legal advisor. parties have agreed upon an employment contract for a fixed period of at least 2 years, or The employee may challenge the dismissal in case of an employment contract for an itself within 2 months, stating that he is still indefinite period of time. An employment employed and is thus entitled to pay. contract for the limited period exceeding 6 Alternatively, the employee may acquiesce in months but less than 2 years and an the termination of the employment, but claim employment for a specific project, where a damages for reasons that the grounds for the termination date is not indicated, may only dismissal were not valid. As a risk containment contain a probation period of 1 month. measure, it is advisable to file for dissolution of the employment (see below). For temporary contracts with a term of at least 6 months a notice period has been introduced. As regards the grounds for dismissal the WAB At least 1 month before the expiry of the introduced aims to simplify the dismissal agreement term the employee must be procedure. The employer can now also informed of an extension or termination of the combine several grounds for dismissal and in employment contract. Upon extension the this way (before the court) provide one valid employer is obliged to indicate the extension reason for dismissal. conditions. In the absence of this the employment contract is deemed to have been extended for the same period and conditions but for a maximum period of 1 year. In the
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Death of the employee monthly salary includes gross hourly pay, plus holiday allowance (8%) and other fixed wage The employment agreement will terminate by components multiplied by the contractual operation of law in case of death of the duration of employment per month. The employee: the family of the employee is entitled allowance is payable from the 1st day of to be paid approximately 1 month’s gross employment. salary.
Notice Mutual consent The employer, who wishes to terminate an The employment agreement can be terminated employment agreement for an indefinite period by mutual consent; the entitlement to of time, can give notice to the employee unemployment benefits still exists unless the observing the notice period – employment employee him/herself has taken the initiative for agreements for a fixed period of time can only termination or he/she has acted in such a way end by giving notice if this possibility is explicitly that there is an urgent cause for summary stated in the employment agreement. dismissal. From the time of agreement the However, in order to be able to do so, the employee has a statutory cooling off period of 2 employer must first obtain approval of the UWV weeks. This period is extended to 3 weeks if the (labour office) before serving the notice of employer fails to include the statutory cooling off termination, stating the reason(s) for the period in the agreement. intended termination. The UWV approval
procedure will usually take about 2 months Dismissal procedure provided that the reasons for termination are clear. With effect from the entry into force of the Work and Security Act from 1 July 2015 the dismissal After having obtained such approval to procedure is subject to a clearly defined terminate the employment agreement, the process: dismissal for economic reasons and notice period may be shortened by 1 month. dismissal in case of long-term sickness will be The statutory notice period that has to be via the UWV and dismissal for all other reasons, observed may vary from 1-4 months, depending such as personal reasons, is reviewed by the of the duration of the employment. district court. In all cases the employee has the An employee whose employment has been right to a statutory transitional allowance. properly terminated (i.e. after consent of the
UWV and with due observance of the applicable Until the introduction of the WAB employees notice period) may nevertheless claim damages had the right to a transitional allowance on the grounds that he has been unreasonably intended to be used for training and transferring dismissed (comparable to ‘unfair dismissal’). to a different profession or employer after an There is no general rule for the calculation of employment contract (temporary or permanent) such damages. of a minimum of two years. The transitional allowance ruling was also amended with the arrival of the WAB. With effect from 01 January Sham Employment Arrangements Act (Wet 2020 all employees have the right to a aanpak schijnconstructies) transitional allowance if the employment To combat exploitation, underpayment of contract ends on the initiative of the employer. personnel and unfair competition on the labour This also applies for notice of termination during market with effect from 1 July 2015 the Sham the probation period discussed above. Before Employment Arrangements Act (WAS) has the introduction of the WAB, for both employees been in force. The law provides for various aged 50 years or older and who had been measures, some of which came into effect as employed for more than 10 years under certain from 1 July 2015 and some from 1 January conditions a different scheme applied which 2016. Other measures came into effect as from could result in a higher transition allowance than 1 July 2016 and 1 January 2017. One of the for other employees. This difference in measures that came into effect on 1 July 2015 treatment will lapse as from 01 January 2020. concerns the supply chain liability for clients to The amount of the transitional allowance will make the correct payment of the agreed wage. with effect from 2020 be calculated based on This is the case for the hiring of personnel from the actual number of days that the employment another employer or in the performance of work contract has lasted. The formula for the by an employee of another employer based on calculation is equal to A x B, where A stands for an assignment agreement or contracting the duration of the employment (in days) and B agreement. for 1/3 of the gross monthly salary. The gross
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If the latter employee does not receive the (full) Foreign Nationals (Employment) Act (Wet wage from his formal employer, this employee arbeid vreemdelingen) must make a claim against his employer and in Workers from the European Union, EEA the absence of (full) payment this employee countries (Norway, Iceland and Liechtenstein) has the option of then holding the client jointly and Switzerland do not need special permits to and severally liable. The court rules on the joint work in the Netherlands. As of 1 July 2018 and several liability of the client. In practice, by employees from Croatia can be employed in the assessing contractors for reliability a liability Netherlands without the requirement for a work risk may be reduced or avoided. permit. To work legally in the Netherlands,
depending on their work situation non-qualifying Another obligation for employers applicable nationals, however, do need either a work from 2016 is that they must as a minimum permit (TWV) or a combined permit for transfer the net legal minimum wage to the residence and work (GVVA). employee by bank giro. The net legal minimum wage is equal to the gross legal minimum wage Under the Foreign Nationals (Employment) Act (see above) less the compulsory and permitted the employer applies for the residence permit. deductions, such as pension contributions and There are different types of permits, including wage tax payments. The excess may however for regular employment, as a highly skilled be paid in cash. As of 1 July 2016 an additional migrant, holder of a European blue card, prohibition on deductions and offsets (e.g. for a lecturer, (guest) lecturer, trainee doctor or traffic penalty or damages charged to the scientific researcher. If several permits are employee) applies for the minimum wage or the possible, the employer must make a choice. For payment of part of the minimum wage as the highly skilled with no employer a permit for reimbursement of expenses. From 2017 an a search year is possible. This residence permit exception to the ban on deductions and offsets gives the right to find an appointment as a highly has been introduced. Under certain conditions skilled migrant within one year. the ban does not apply to the costs of accommodation and healthcare insurance. When applying for the permit, the employer acts
as sponsor. The sponsor is responsible for the Working conditions employee complying with the conditions. A permit for regular employment can be applied By comparison with international worker for by any employer with a branch or protection standards, the Dutch regulations are commercial agent in the Netherlands. of a high standard. In view of an action plan of Registration of the employer with the Chamber the Dutch Government (Simplifying Social of Commerce is required. Affairs and Employment Regulation), it is expected that these regulations will be To be admitted as a highly skilled migrant simplified to bring them more in line with the income requirements are laid down. To be international worker protection standards and to admitted as a trainee doctor or (guest) lecturer, strengthen the position of the Netherlands on the employer making the application must be a the international labour market. sponsor authorised by the IND (Immigration and Naturalisation Service of the Ministry of Security Under Dutch law, the employer is responsible and Justice). Authorisation is carried out by the for organizing work in such a way that it protects IND. The authorisation as a sponsor is in a the safety, health and well-being of the number of cases a condition for the application employees in accordance with a statutory set of for the residence permit. standards and criteria. In principle, all employers are highly recommended to avail Employees with a European blue card are themselves of the professional assistance of a employees who carry out highly qualified work certified occupational health service within the European Union and meet the salary (‘Arbodienst’) in respect of the implementation and training requirement. For the scientific of a significant part of the applicable health and researcher admission to the Dutch labour safety measures (for example the occupational market is regulated by EU Directive health medical examination). Under certain 2005/71/EC. circumstances, the employer’s own employees may provide this assistance, providing that they are certified to this end.
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The UWV is obliged every year to check a job taken by a foreign employee (from outside the European Union, EEA countries or Switzerland) against the labour market status. The recruitment efforts of employers who wish to recruit or continue to employ foreign workers required by law issue no more than an employment permit for a maximum of one year. After five years labour migrants gain free access to the Dutch labour market. After that a permit may be refused if an employer has in the past been sentenced for infringing labour legislation.
The government considers it necessary to make the Foreign National Employment Act more flexible and future-resistant and at the same time to strengthen the position of employees. A proposal to amend the law is expected in the near future.
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4. Useful addresses Ministerie van Financiën (Ministry of Rijksdienst voor Ondernemend Nederland Finance) (most important subsidy agency in the P.O. Box 20201 NL-2500 EE Den Haag Netherlands) www.government.nl/ministries/fin or phone +31 P.O. Box 93144 NL-2509 AC Den Haag 70 342 80 00 www.rvo.nl or phone +31 88 042 42 42 Ministerie van Binnenlandse Zaken en Belastingdienst/kantoor Buitenland Koninkrijksrelaties (Ministry of the Interior (Foreign office of the Department of Inland and Kingdom Relations) Revenue) P.O. Box 20011 NL-2500 EA Den Haag P.O. Box 2865 NL-6401 DJ Heerlen www.government.nl/ministries/bzk or phone www.belastingdienst.nl or phone +31 555 385 +31 70 426 64 26 385 Ministerie van Buitenlandse Zaken (Ministry Benelux Merkenbureau (Benelux Trademark of Foreign Affairs) Agency) P.O. Box 20061 NL-2500 EB Den Haag P.O. Box 90404 NL-2509 LK Den Haag www.government.nl/ministries/bz or phone +31 www.boip.int or phone +31 70 349 11 11 70 348 64 86
CNV (National Federation of Christian Trade Ministerie van Economische Zaken (Ministry Unions the Netherlands) of Economic Affairs) P.O. Box 2475 NL-3500 GL Utrecht P.O. Box 20401 NL-2500 EK Den Haag www.cnv.nl or phone +31 30 751 10 01 www.government.nl/ministries/ez or phone +31 70 379 89 11 CPB (Netherlands Bureau for Economic Policy Analysis) Ministerie van Sociale Zaken en P.O. Box 80510 NL- 2508 GM Den Haag Werkgelegenheid (Ministry of Social Affairs www.cpb.nl or phone +31 88 984 60 00 and Employment) P.O. Box 90801 NL-2509 LV Den Haag Douane (Customs and Excise Department) www.government.nl/ministries/szw or phone P.O. Box 3070 NL-6401 DN Heerlen +31 77 333 44 44 www.douane.nl or phone +31 45 574 30 31 MKB-Nederland (Dutch agency for Small European Patent Office (EPO) and Medium-size Enterprises or SMEs) P.O. Box 5818 NL-2280 HV Rijswijk P.O. Box 93002 NL-2509 AA Den Haag www.epo.org or phone +31 70 340 20 40 www.mkb.nl or phone +31 70 349 09 09
FNV (The Netherlands Trade Union Netherlands Foreign Investment Agency Confederation) (NFIA) P.O. Box 8456 NL-1005 AL Amsterdam P.O. Box 93144 NL-2509 AC Den Haag www.fnv.nl or phone +31 88 368 03 68 www.nfia.nl or phone +31 88 602 11 42
IND (Immigratie- en Naturalisatiedienst) ACM (Autoriteit Consument en Markt) (Immigration and Naturalisation Service) (Authority for Consumers & Markets) P.O. Box 287 NL-7600 AG Almelo P.O. Box 16326 NL-2500 BH Den Haag www.ind.nl or phone +31 88 043 04 30 www.nma.nl or phone +31 70 722 20 00
Kamer van Koophandel Nederland UWV (Employee Insurance Schemes (Chamber of Commerce) Implementing Body) P.O. Box 29718 NL-2502 LS Den Haag P.O. Box 58285 NL-1040 HG Amsterdam www.kvk.nl or phone +31 88 585 15 85 www.uwv.nl and www.werk.nl or phone +31 88 898 20 10 SRA (Umbrella body for accountants) Rijnzathe 14, 3454 PV Utrecht www.sra.nl or phone +31 30 656 60 60
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DOING BUSINESS IN THE NETHERLANDS
5. Conclusion
Doing Business in the Netherlands is a practical guide to help you to deal effectively and efficiently with the most important issues that you might face upon your arrival in the Netherlands. Obviously the information contained in this manual is not exhaustive. In many instances, only the main points are mentioned due to lack of space, as a result of which you may still need to consult a specialist. Your RSW consultant will be able to advise you so, please do not hesitate to contact your consultant for more detailed information.
Colophon
Publisher: RSW T 0492 – 550 775 E [email protected] I www.rsw.nl
© 2020, RSW. None of the material appearing in this publication may be duplicated or copied without the publisher’s written consent. Although the publisher has taken extreme care with respect to the accuracy and completeness of the material covered in this publication, it will accept no liability for possible inaccuracies or incompleteness or the consequences thereof.
The Netherlands is amongst the leading European countries when it comes to favourable business climate. This makes it particularly attractive for you, as an entrepreneur, to do business in the Netherlands. This manual, made available by your accountant who is a member of to the SRA network, will help you to find your feet in the Netherlands easily. The manual explains the local tax system, the things to consider when setting up a business in the Netherlands, how to find qualified personnel and local subsidies. For more detailed information, please do not hesitate to contact your RSW accountant.
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