5. Tax legislation The tax system in any given country is invariably an extremely important criterion when it comes to companies finding a country of incorporation. The view taken by the Dutch government is that the tax system may under no circumstances form an impediment for companies wishing to incorporate in the Netherlands. In addition, the Netherlands has also signed tax treaties with many other countries to prevent the occurrence of double taxation. At the same time, its vast network of tax treaties offers instruments for international tax planning. In this context, it is possible to obtain advance certainty regarding the fiscal qualification of international corporate structures in the form of socalled Advance Tax Rulings (ATR) / Advanced Pricing Arrangements (APA). Moreover since 2019 the Dutch ruling policy is still only aimed at making agreements in advance with companies who make a considerable contribution to the national economy (so-called economic nexus presence) with an establishment – branch or subsidiary – in the Netherlands and this establishment in the Netherlands is not primarily for tax reasons. The following are a few of the benefits offered by the Dutch tax system: • The Netherlands does not charge withholding tax on interest and royalties, except for payments to lowtaxation countries and in situations of abuse. • In most cases all the profits that the Dutch parent company receives from foreign subsidiaries are exempted from tax in the Netherlands (participation exemption). • The Netherlands offers attractive tax-free compensation in the form of the 30% rule for some foreign personnel who are temporarily employed in the Netherlands. • A highly competitive system of rates for tax on profits. Moreover it should be noted that the fiscally attractive establishment climate in the Netherlands does however also have a shadow side because it can be abused to avoid taxation. Partly due to severe great international and national political pressure, the Dutch government is at present tackling companies and individuals that have set up or wish to set up via the Netherlands tax avoidance schemes, to conduct a tax disincentive policy. In addition to the introduction of various European anti-avoidance laws, in the fight against tax avoidance a Controlled Foreign Corporation regime has been introduced with effect from 2019. In addition it is no longer possible to agree an ATR/APA with the Tax Authorities where transactions are involved that relate to companies established in countries included in the Dutch list of low tax countries or the EU list of non-cooperative jurisdictions for tax purposes. Low tax countries are defined as a country with an income tax rate of less than 9%. In the fight against undesirable tax evasion, as a result of European legislation since 01 January 2021 Mandatory Disclosure Rules apply for taxpayers and their consultants. The Dutch government wants the current fiscal establishment climate as far as possible to serve the business community with a realistic economic presence in the Netherlands. The Dutch tax system can be divided into taxes based on income, profit and assets, and cost price increasing taxes.
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