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A. At a glance
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(a) A tax rate of 19% applies to the first EUR200,000 of taxable income. For further details, see Tax rates in Section B. An effective tax rate of 9% is available for qualifying income related to certain intellectual property (Innovation Box). For details regarding the Innovation Box, see Innovation Box in Section B.
(b) The 15% rate may be reduced to 0% if the recipient is a parent company established in a European Union (EU) Member State, European Economic Area (EEA) state or a country that has concluded a tax treaty with the Netherlands covering dividends, provided that certain anti-abuse requirements are met. Dividends paid by a Dutch Cooperative, which is a specific legal entity, are not subject to Dutch dividend withholding tax if the Dutch Cooperative does not predominantly operate as a holding or financing company. For further details, see Dividend withholding tax in Section B. In addition, the Dutch dividend withholding tax rate is typically reduced under the extensive Dutch tax treaty network (more than 100 tax treaties; see Section F) to as low as 0%.
(c) From 1 January 2021, a conditional withholding tax applies to intra-group interest and royalty payments to affiliated entities (defined as having “decisive influence” within the group) located in a low-tax or non-cooperative jurisdiction, to certain hybrid entities and in abusive situations. As of 1 January 2024, this conditional withholding tax is extended to (deemed) profit distributions. The rate of the withholding tax on profit distributions, interest and royalties is the same as the headline corporate income tax rate.
In the Innovation Box, net income from qualifying intellectual property is effectively taxed at a rate of 9%. The 9% rate applies only to the extent that the net earnings derived from the selfdeveloped intangible assets exceed the development costs. The development costs are deductible at the statutory tax rate of 25.8% and form the so-called threshold. The Innovation Box regime can be elected with respect to a particular intangible asset; it is not required to include all intangibles. Advance Tax Rulings (ATRs) and Advance Pricing Agreements (APAs) are available (see Administration).
An important condition for the application of the Innovation Box is that the taxpayer must have been granted an R&D declaration from the Netherlands Enterprise Agency (Rijksdienst voor Ondernemend Nederland, or RVO; part of the Ministry of Economic Affairs) for a qualifying intangible asset created by or for the risk and account of the taxpayer.
In line with recommendations by the Organisation for Economic Co-operation and Development (OECD), the definition of qualifying intangible assets is limited for so-called “large groups” (groups that have five-year revenues exceeding EUR250 million and stand-alone taxpayers that have five-year income from intangible assets exceeding EUR37.5 million). For large groups, qualifying intangible assets are limited to patents or plant variety rights, copyrights, software, marketing authorizations for human or animal medicines, intangible assets with a supplemental protection certificate from the Netherlands Patent Office, intangible assets with a registered utility model for the protection of innovation or an exclusive license for the use of the assets mentioned above.
For taxpayers that do not form part of a large group, other intangible assets can also qualify for the Innovation Box. In addition, other intangible assets can qualify for taxpayers forming part of a large group if such intangible assets are connected with intangible assets that fall within one of the above categories. For example, this connection between two or more intangible assets can be present if the intangible assets have been developed by the same research department or applied in the same product (group). Trademarks, logos and similar assets do not qualify.
The OECD’s modified nexus approach should be taken into consideration for purposes of calculating the income that can be taxed under the Innovation Box. Under the modified nexus approach, the proportion of eligible income is determined by reference to the ratio of “qualifying expenditures” compared to “overall expenditures” for the development of the qualifying intangible asset. This is expressed by the following formula:
Qualifying income =
Qualifying expenditures x 1.3 x Income from intangible assets
Overall expenditures
The income from intangible assets can include all types of income, including royalties, capital gains and embedded income (for example, the sales price of a product).
Foreign royalty withholding tax can normally be credited against Dutch corporate income tax, but the amount of the credit is limited to the Dutch corporate income tax attributable to the relevant net royalty income.
R&D tax credit. An employer established in the Netherlands that is performing R&D is eligible for the R&D tax credit (Wet Bevordering Speur-en Ontwikkelingswerk, or WBSO), regardless of its size or industry. The WBSO is a tax incentive, which offers an immediate benefit on wage costs and other costs and expenses for R&D activities. All R&D cost and expenses will be settled through a reduction of the payroll tax due from an employer.
An R&D declaration must be obtained from the RVO. The benefit from the WBSO can amount up to 40% of the qualifying costs and expenditures. For R&D costs and expenditures that are not labor costs, a company can choose a fixed rate or a calculation of the actual amount of costs and expenses.
Capital gains. No distinction is made between capital gains and other income. In certain cases, capital gains are exempt (for example with respect to share interests, if the participation exemption described in Section C applies) or a rollover is available based on a provision or case law or under the reinvestment reserve (see the discussion in Provisions in Section C). Subject to meeting the relevant criteria, certainty in advance on the applicability of the rollover facility can be obtained (such as the legal merger or demerger facility).
Administration. The standard tax year is the financial year (as indicated in the articles of association of a taxpayer).
Tax returns. An annual Dutch corporate income tax return must be filed with the tax authorities within five months after the end of the tax year, unless the company applies for an extension (normally, an additional 11 months based on an agreement between the tax advisors and the tax authorities).
Companies must make partial advance payments of corporate income tax during the year, based on preliminary assessments. The preliminary assessments are based on the expected final assessment. For 2024, assuming the tax year corresponds to the calendar year, the assessments are levied according to the following schedule:
• The first preliminary assessment is generally imposed on 31 January 2024. The tax administration may estimate the profit by applying a percentage to the average fiscal profit of the previous two years. If the taxpayer can plausibly show that the expected final assessment will be a lower amount, the preliminary assessment is based on that amount.
• The second preliminary assessment is generally imposed at the end of the eighth month of 2024. This preliminary assessment is derived from an estimate made by the taxpayer.
These preliminary assessments may be paid in as many monthly installments as there are months remaining in the year. It is important that taxpayers provide a timely and accurate estimate of the taxable income. If the preliminary corporate income tax liability is understated, this may result in a charge of tax interest when the tax assessment appears to be higher. Tax interest (with
a current rate of 10%) is calculated for the period that begins six months after the tax year to which the tax liability relates and is based on the amount of additional tax due. If the preliminary corporate income tax liability is overstated, this may not result in a tax interest refund when the tax assessment appears to be lower.
The final assessment is made within three years (plus any extensions granted) from the time the tax liability arises.
The tax authorities may impose ex officio assessments if the taxpayer fails to file a return or fails to meet the deadline to file a return. Penalties may apply.
Additional assessments may be imposed if, as a result of deliberate actions by the taxpayer, insufficient tax has been levied. A penalty of 100% of the additional tax due may be levied. Depending on the degree of wrongdoing, this penalty is normally reduced to 25% or 50%.
Rulings. Rulings are agreements concluded with the tax authorities confirming to the Dutch tax consequences of transactions or situations involving Dutch taxpayers. Rulings are based on Dutch tax laws that apply at the time of the request.
For certainty in advance regarding general transfer-pricing matters (see Section E), an APA can be concluded with the tax authorities. APAs provide taxpayers with up-front certainty regarding the arm’s-length nature of transfer prices. All Dutch APAs are based on OECD transfer-pricing principles and require the taxpayer to file transfer-pricing documentation with the tax authorities. APAs can be entered into on a unilateral, bilateral or multilateral basis (that is, with several tax administrations). APAs may cover all or part of transactions with related parties, including transactions involving permanent establishments.
For most other matters (for example, the applicability of the participation exemption or the dividend withholding tax exemption) or the existence or non-existence of a permanent establishment in the Netherlands or abroad, an ATR can be concluded.
The benefit of an APA or ATR is that companies can obtain certainty in advance regarding their Dutch tax position (for example, before the investment is made).
In case of uncertainty of the tax position or eligibility for a ruling, a pre-filing meeting can be requested with the Dutch tax authorities. In general, rulings are concluded for a period of four or five years, but facts and circumstances may allow for a longer or shorter term. If the facts and legislation on which the APA or ATR is based do not change, in principle, the APA or ATR can be renewed indefinitely. No fees are required to be paid when filing an APA or ATR request with the Dutch tax authorities.
The time required for the total process from initiation of the ruling process to conclusion of the ruling depends on the circumstances. However, in general, it takes between six to 10 weeks from the date of the filing of the ruling request to obtain the ruling. It is often possible to expedite the process if required from a commercial perspective (for example, merger and acquisition transactions).
As part of the Dutch policy in relation to rulings with an international character (latest update is from 1 July 2019), the Dutch “economic nexus” requirement should be met in order to be eligible for a tax ruling. To have sufficient nexus with the Netherlands, the Dutch taxpayer (or other Dutch group company) should conduct operational activities in the Netherlands relevant to the activities that form the subject of the ruling request. The group should have appropriate personnel in the Netherlands to manage the risks associated with these activities.
Rulings are not issued if the sole or predominant purpose of the relevant case or structure is to reduce Dutch or foreign taxes or if the entities involved are established in non-cooperative tax jurisdictions (EU list) or in a low-tax jurisdiction (jurisdictions with a corporate income tax rate below 9%; see Controlled foreign companies in Section E for the list).
In addition, the Dutch tax authorities publish anonymized extracts as well as an annual overview of the number of issued rulings. Also, in case of a ruling process not resulting in a ruling, there will still be a summary published providing the reason why no ruling was concluded. This is not the case if a pre-filing meeting is held only (that is, no formal ruling request is filed). The extracts are highly abstracted in order to make sure that the facts do not allow for taxpayers to be identified indirectly.
In line with the OECD’s Base Erosion and Profit Shifting (BEPS) Action 5 and the EU directive on the automatic exchange of information on tax rulings, the Netherlands has commenced the exchange of information with respect to certain tax rulings in 2016. To facilitate the exchange of information on tax rulings, specific templates that cover generic information and a highlevel summary of the agreed-upon ruling should be submitted to the Dutch tax authorities during the ruling process.
Dividend withholding tax. The statutory withholding tax rate for dividends is 15%. However, several exemptions and reductions, as described below, can apply. Under the extensive Dutch treaty network (more than 100 tax treaties; see Section F), the Dutch dividend withholding tax rate is typically reduced to a rate as low as 0% for qualifying participation dividends. Under the participation exemption (see Section C) or within a Dutch fiscal unity (see Section C), dividends paid by resident companies to other resident companies are usually exempt from dividend withholding tax.
A broader domestic dividend withholding tax exemption is available for dividend distributions made by Dutch resident entities to the following:
• EU/EEA Member State resident corporate investors (for this purpose, the EEA is limited to Iceland, Liechtenstein and Norway)
• Corporate investors that are resident in a country that has concluded a tax treaty with the Netherlands covering the treatment of dividends, provided that these corporate investors are not treated as a resident outside the EU/EEA or the respective tax treaty jurisdiction under a tax treaty between the EU/EEA or treaty state and a third state
The domestic dividend withholding tax exemption applies if the recipient holding an interest in the Dutch dividend distributing entity would qualify for the Dutch participation exemption (or credit) benefits if that investor resided in the Netherlands and if certain anti-abuse rules that target, among other items, hybrid recipients, are met. The withholding tax exemption does not apply if the foreign shareholder fulfills a function similar to a Dutch fiscal investment company or tax-exempt investment company.
To apply the domestic withholding tax exemption for dividend distributions to foreign recipients, the Dutch taxpayer should notify the Dutch tax inspector that all of the requirements listed above are met. Such notification should take place within one month after declaring the dividend.
The dividend withholding tax rules are not applicable to Dutch Cooperatives (specific legal entities) that do not predominantly perform holding and/or financing activities and that have operational activities and the relevant substance to carry out these activities. Dividend distributions made by this type of Dutch Cooperatives are not subject to Dutch dividend withholding tax based on domestic law. This exemption does not apply for the conditional withholding tax on dividends (see Conditional withholding tax on dividends).
As part of the implementation of the EU ATAD 2, reverse hybrid entities (see definition in Corporate income tax) are withholding agents for Dutch dividend withholding tax as from 1 January 2022.
Measures to combat dividend stripping. The Dividend Withholding Tax Act provides measures to combat dividend stripping. Under these measures, a reduction of dividend withholding tax is available only if the recipient of the dividends is regarded as the beneficial owner of the dividends. The measures provide that a recipient of dividends is generally not regarded as the beneficial owner if the following cumulative criteria are met:
• The dividend recipient entered into a transaction in return for the payment of the dividends as part of a series of transactions.
• As part of the series of transactions, the payment of the dividends indirectly benefits a person who would have been entitled to a lesser (or no) reduction, exemption or refund of dividend tax than the recipient.
• The person indirectly benefiting from the dividends maintains or acquires an interest in the share capital of the payer of the dividends that is comparable to the person’s position in the share capital before the series of transactions.
Share repurchases. Publicly listed companies are not required to withhold dividends tax when they repurchase their own shares if certain requirements are met. One of these requirements is that the company must not have increased its share capital in the four years preceding the repurchase. This requirement does not apply if the share capital was increased for bona fide business reasons. Per the 2024 Budget Plan, effective from 1 January 2025, this exemption for share repurchases for publicly listed company is being abolished (but further changes to the 2024 Budget Plan may be forthcoming).
Tax rate. The rate of the withholding tax is equal to the headline corporate income tax rate (25.8% in 2024). It is not relevant whether the interest and/or royalty payments are deductible for corporate income tax purposes.
Tax treaty with low-tax or non-cooperative jurisdiction. With respect to low-tax or non-cooperative jurisdictions with whom the Netherlands has concluded a tax treaty, a three-year grandfathering period will apply before the withholding tax is levied. For jurisdictions that are or were included on the list of low-tax and non-cooperative jurisdictions after 2021, the three-year grandfathering period will start in the year of the first inclusion on the aforementioned list. Within this three-year period, the Netherlands will approach the treaty partner to renegotiate and amend the respective treaty. This grandfathering period ended on 1 January 2024 for jurisdictions that were already included on the list of low-tax and non-cooperative jurisdictions in 2021, and is as such no longer applicable for these jurisdictions. Regardless, and pending the treaty renegotiations, the applicable tax treaties may still provide protection to potentially reduce the (conditional) withholding tax.
Conditional withholding tax on dividends.
As of 1 January 2024, the conditional withholding tax on interest and royalties, as described above, also applies to (deemed) dividends in a similar fashion (including grandfathering rules for tax treaty jurisdictions). Any conditional withholding tax on dividends due will be reduced by any dividend withholding tax due under the existing Dividend Withholding Tax Act (that is, the regular dividend withholding tax is creditable against the conditional withholding tax on dividends).
Foreign tax relief. Under unilateral provisions in the Corporate Income Tax Act, the Netherlands exempts foreign business profits derived through a permanent establishment, profits from real estate located abroad and certain other types of foreign income from corporate income tax. If the income is derived from a tax treaty jurisdiction, the exemption applies with consideration of the relevant treaty provisions (for example, a “subject-to-tax” requirement may be applicable). If such foreign income is derived from a non-treaty jurisdiction, and the branch activities do not predominantly comprise of certain passive activities, no “subject to tax” requirement applies. To the extent that the foreign business income is negative, this amount does not reduce Dutch taxable income unless the foreign business is terminated (object exemption/territorial system). A credit is available for profits allocable to low-taxed portfolio investment/passive branches.
C. Determination of taxable income
General. The fiscal profit is not necessarily calculated on the basis of the annual financial statements. In the Netherlands, all commercial accounting methods have to be reviewed to confirm that they are acceptable under fiscal law. The primary feature of tax accounting is the legal concept of “sound business practice.”
Expenses incurred in connection with the conduct of a business are, in principle, deductible. However, certain expenses are not deductible, such as fines and penalties, and expenses incurred
others, a tax holiday, a cost-plus tax base with a limited cost base and the absence of anti-abuse limitation provisions with respect to the interest deduction.
The asset test is satisfied if less than half of the assets of the direct subsidiary usually consists of, directly or indirectly, lowtaxed “free” portfolio investments on an aggregated basis. The portfolio investments are considered “free” if the investments are not used in the course of the business of the company or if the investments are part of certain intra-group transactions. Real estate and rights directly or indirectly related to real estate are in principle excluded from the definition of a portfolio investment. As a result, the participation exemption normally applies to benefits from real estate participations.
Subject to prior approval of the Dutch tax authorities, a taxpayer can apply the participation exemption to the foreign-exchange results relating to financial instruments that hedge the foreignexchange exposure on qualifying participations.
Compartmentalization reserve. The application of the participation exemption is a continuous test. If during the time the participation is held, the participation exemption was not applicable during one or more periods, then it should be determined which part of the income derived from the participation accrued during the period the participation exemption was applicable, and which part of the income accrued during the period the participation exemption was not applicable. Only the part of the income (or loss) that during the period that the participation exemption applied, is exempt for Dutch corporate income tax purposes. This is also known as the concept of compartmentalization.
Hybrid loans. The participation exemption is not available for certain benefits derived from so-called hybrid loans. Under this measure, the participation exemption does not apply to income derived from participations to the extent that the corresponding payments under a hybrid loan are, directly or indirectly, deductible from a profit tax.
Tax depreciation. In principle, depreciation is based on historical cost, the service life of the asset and the residual value. Depreciation is limited on buildings, goodwill and other assets.
Buildings. Buildings (including the land and surroundings on which they were erected) can be depreciated only for as long as the tax book value does not drop below the threshold value. Buildings may not be depreciated to a tax book value lower than the threshold value. The threshold value of buildings held as a portfolio investment equals the value provided in the Law on Valuation of Real Estate (Wet Waardering Onroerende Zaken), known as the WOZ value. Effective from 1 January 2019, the threshold value of buildings used in the taxpayer’s business or a related party’s business equals 100% of the WOZ value. If a building that has been acquired before 1 January 2019 and that is less than three years old has been depreciated, a grandfathering rule applies, and it can be depreciated down to 50% of the WOZ value within three years. In principle, the WOZ value approximates the fair market value of the real estate. The local municipality determines the WOZ value annually. If the threshold value increases, tax depreciation that had been previously claimed is not recaptured.
Goodwill and other assets. Goodwill must be depreciated over a period of at least 10 years. As a result, the maximum annual depreciation rate is 10%. If the goodwill is useful for a longer period, this period must be taken into account. These rules apply only to acquired goodwill. Costs in relation to self-developed goodwill can be deducted when incurred. For other assets such as inventory, cars and computers, the depreciation is limited to an annual rate of 20% of historical cost.
Limitations on the depreciation and amortization of business assets. Effective from 1 January 2022, the Dutch government has introduced certain limitations to the depreciation and amortization of assets and the adjustment of its tax basis. See Transfer pricing in Section E.
Groups of companies. Under the Dutch fiscal unity regime, a group of companies can be treated as one taxpayer for Dutch tax purposes. The fiscal unity regime has the following characteristics:
• To elect a fiscal unity, among other requirements, Dutch taxpayers must be connected to each other through at least 95% of the entire legal and economic ownership of shares. A connection can be established through a common (indirect) parent company that is either a Dutch resident company that forms part of the fiscal unity itself, or a common (indirect) parent that is resident in an EU/EEA country. In the case of indirect ownership, the intermediate owner of the shares must also either be a Dutch resident company that forms part of the fiscal unity itself or a company resident in an EU/EEA country.
• Both Dutch and certain foreign companies may be included in a fiscal unity if their place of effective management is located in the Netherlands and if the foreign company is comparable to a Dutch besloten vennootschap (BV) or naamloze vennootschap (NV).
• A permanent establishment in the Netherlands of a company with its effective management abroad may be included in, or can be the parent of, a fiscal unity. A cooperative can be the parent of the fiscal unity.
• A subsidiary may be included in the fiscal unity from the date of acquisition or incorporation.
Advantages of such group treatment include the following:
• Losses of one subsidiary may be offset against profits of other members of the group.
• Reorganizations, including transfers of assets with hidden reserves from one company to another, have no direct fiscal consequences.
• Intercompany profits between members of a Dutch fiscal unity may be fully deferred.
Because only Dutch resident entities can be included in a Dutch fiscal unity and this can have several advantages, two cases were initiated at the European Court of Justice (ECJ). In these cases, the ECJ needed to decide whether the Dutch fiscal unity is in accordance with EU rules and the EU freedom of establishment.
In response to the ECJ court cases, the Dutch government introduced emergency legislation. Under this emergency legislation, certain tax rules (such as the interest deduction limitation rule to prevent base erosion, excessive participation debt rules and loss
relief rules in case of a change in ownership) apply as if no fiscal unity exists.
Relief for losses. Effective from financial years starting on or after 1 January 2022, losses of a company may be carried back one year and carried forward indefinitely (previously six years). However, the offset of tax losses against taxable income are limited. Such losses can be fully offset against the first EUR1 million of taxable income, and, for taxable income in excess of EUR1 million, losses may only be offset up to 50% of this excess. This applies to both the carryback and carryforward of tax losses. Tax losses, including tax losses incurred through the 2021 financial year and still available for carryforward as of the 2022 financial year, are available for carryforward indefinitely.
Effective from 1 January 2019, there are no longer restrictions on losses incurred by holding and financing companies. However, restrictions on loss relief remain with respect to losses of holding and financing companies incurred before 2019. The restrictions apply to a company if holding activities and direct or indirect financing of related parties accounted for at least 90% of the company’s activities during at least 90% of the financial year.
The Corporate Income Tax Act contains specific rules to combat the trade in so-called “loss companies.” If 30% or more of the ultimate interest in a Dutch taxpayer changes among ultimate shareholders or is transferred to new shareholders, in principle, the losses of the company may not be offset against future profits. However, various exceptions to this rule exist (for example, the going-concern exception). The company has the burden of proof with respect to the applicability of the exemptions. A similar rule applies to companies with a reinvestment reserve and other attributes (such as tax credit carryforwards). The Dutch government has introduced legislation providing that these rules need to be applied as if no fiscal unity exists (if applicable).
D. Value-added tax
Value-added tax is imposed on goods delivered and services rendered in the Netherlands other than exempt goods and services. The general rate is 21%. Other rates are 0% and 9%.
E. Miscellaneous matters
Controlled foreign companies. Effective from January 2019, the Netherlands introduced the controlled foreign company (CFC) rule as outlined in the EU Anti-Tax Avoidance Directive.
Under the Dutch regime, a foreign company or a permanent establishment qualifies as a CFC if both of the following conditions are satisfied:
• A Dutch taxpayer has a permanent establishment or owns an interest of more than 50% in a foreign company.
• The entity or branch is tax resident in a jurisdiction listed on the EU list of non-cooperative jurisdictions or in a low-tax jurisdiction (that is, a jurisdiction with a statutory corporate income tax rate below 9%).
The relevant EU prohibited list jurisdictions and low-tax jurisdictions are published annually on a list issued by the Dutch
loan are positive (that is, in such case, this positive income is taxable). This should be determined per loan.
This interest deduction limitation does not apply if the taxpayer can demonstrate that either of the following conditions is satisfied:
• The loan and the related transaction are primarily based on business considerations. Effective from 1 January 2018, Dutch tax law specifically states that the test as to whether the loan is predominantly business driven and based on business considerations should be satisfied for both loans to related entities and loans that can be indirectly linked to third parties.
• At the level of the creditor, the interest on the loan is subject to a tax on income or profits that results in a levy of at least 10% on a tax base determined under Dutch standards. In addition, such interest income may not be set off against losses incurred in prior years or benefit from other forms or types of relief that were available when the loan was obtained. In addition, the loan may not be obtained in anticipation of losses or other types of relief that arise in the year in which the loan was granted or in the near future. Furthermore, even if the income is subject to a levy of at least 10% on a tax base determined under Dutch standards at the level of the creditor, interest payments are not deductible if the tax authorities can demonstrate it to be likely that the loan or the related transaction is not primarily based on business considerations.
Hybrid loans. Interest expense incurred on loans that are (deemed) to function as equity for Dutch tax purposes is not deductible and reclassified as a dividend and may therefore be subject to Dutch dividend withholding tax.
Earning stripping interest limitation rule. Effective from 1 January 2019, the Netherlands introduced the 30% Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) rule in line with the interest deduction limitation rules as outlined in the EU Anti-Tax Avoidance Directive. However, for financial years starting on or after 1 January 2022, the threshold of 30% is reduced to 20% of the EBITDA. The earning stripping rule is a general limitation of the deduction of the net balance of interest paid and interest received, under which the deduction is limited to 20% of the EBITDA. This rule is applied at the level of the Dutch fiscal unity, taking into account the taxable EBITDA of the fiscal unity for tax purposes.
The Netherlands has taken the following approach in implementing the 20% EBITDA rule:
• The earning stripping rule does not contain a group escape.
• The threshold for deductible interest is set at EUR1 million.
Any nondeductible interest expenses can be carried forward indefinitely (subject to the below rule) and will be available to offset future taxable income in other years (to the extent that a taxpayer has sufficient EBITDA). Effective from 1 January 2020, specific rules to combat the trade in so-called “interest companies” have been introduced. If 30% or more of the ultimate interests in a Dutch taxpayer changes among ultimate shareholders or is transferred to new shareholders, in principle, similar to losses, the carryforward of nondeductible interest expenses of the company can become restricted.
• Hybrid financial instruments and payments made thereunder
• Hybrid permanent establishments
• Deemed branch payments
• Hybrid transfers
• Imported mismatches
• Dual residency cases
Affiliated entities. The anti-hybrid rules apply only in case of mismatches between affiliated entities or in a so-called structured arrangement. Entities are affiliated if (directly or indirectly) a percentage of 25% is held or if they are part of an affiliated group. This latter criterion depends on facts and circumstances, but parliamentary proceedings refer to coordinated decisions. If entities are not affiliated but have made an arrangement with a double deduction or a “deduction no inclusion” (see Neutralization of hybrid mismatch benefit) aimed at obtaining a tax benefit (a socalled “structured arrangement”), the anti-hybrid rules also apply. Effective from financial years starting on or after 1 January 2022, the hybrid mismatch rules are also applicable in case of mismatches between a Dutch taxpayer and affiliated individuals, as opposed to affiliated corporate entities only. The scope of the anti-hybrid rules has been broadened with affiliated individuals to align the existing rules with the requirements under ATAD 2. To determine whether an individual or an entity is affiliated to the Dutch taxpayer for purposes of the anti-hybrid rules, the same 25% threshold applies.
Neutralization of hybrid mismatch benefit. A hybrid mismatch may result in a deductible payment while the corresponding income is not taxed at the level of the affiliated entity (“deduction no inclusion”). In case of deduction no inclusion, the primary anti-hybrid rule is to disallow deduction of the payment, neutralizing the previous benefit of the corresponding income not being taxed. If the primary rule does not tackle the mismatch, the secondary rule is to tax the corresponding income at the level of the (deemed) Dutch recipient, neutralizing the mismatch.
Similar to situations giving rise to a deduction no inclusion, a double deduction outcome is subject to a primary rule or, if the primary rule does not apply because, for example, the state of residence of the investor does not have anti-hybrid rules, a defensive rule applies. Under the primary rule, if the Netherlands is the state of residence of the investor, the Netherlands denies the deduction. If the Netherlands is the state of residence of the partnership and the state of residence of the investor has not denied the deduction, the Netherlands will deny the deduction.
For the avoidance of double taxation, the anti-hybrid rules are applied on a pro rata basis. In case of a deduction no inclusion, if part of the income is included at the level of the recipient, the anti-hybrid rules do not apply to this part of the income. In case of timing differences with respect to income recognition, rules for avoidance of double taxation apply.
In case of deduction no inclusion with respect to a payment by a hybrid entity, a deduction no inclusion with respect to an exemption for permanent establishments or a double deduction, the deduction of the payment at the level of the taxpayer is not disallowed if the deductible expense is set of against income that is
Denmark
(c)(bb)
(b)(g)
(c)(g)
Egypt 0/15 (b)
Estonia 0/5/15 (b)(g)
Ethiopia
(cc)
(b)(g)
(c)(o)
(g)(ii)
(c)
(b)(g)
(q)
(b)(g)
Iceland 0/15 (c)(g)
India 0/5/10/15 (c)(k)
(b)(gg)
(g)(ii)
(b)
(c)(g)(ff)
(c)(v)
(b)(g)
(g)(ii)
(b)(g)
(b)(g)
(b)
(b)(g)
(c)
(b)(r)
(b)
(c)
(c)
(c)(g)
(g)
(h)
(b)(c)(g)
0/5/10 (c)
(b)
(c)(bb)
(b)(g)
(c)(g)
(c)(dd)
(g)(ee)
0/10/15 (b)
Suriname 0/7.5/15 (b)
(b)(g)
(c)(hh)
Thailand 0/5 (b)
Tunisia 0 (c)
Türkiye 0/5 (b)
Uganda
0/5/15 (z)
Ukraine 0/5/15 (d)(nn)
United Arab Emirates 0/5/10 (c)(i)
United Kingdom 0/10/15 (ll)(mm)
(c)(y)
(b)(x)
Venezuela 0/10 (b)(w)
Vietnam 0/5/10/15 (n)
Yugoslavia (j) 0/5/15 (b)
Zambia 0/5 (c)
Zimbabwe 0/10 (b)
Non-treaty jurisdictions 15/25.8 (ss) 0/25.8 (ss) 0/25.8 (ss)
(a) The withholding tax rates in this table are based on the lowest available treaty rates (and are subject to treaty eligibility). Of the tax treaty jurisdictions included in this table, only Bahrain, Barbados and Panama have been listed as a low-tax or non-cooperative jurisdiction for 2024, and the applicable tax treaties can potentially provide relief to mitigate the withholding tax.
(b) The rate is increased to 15% (China Mainland, Czech Republic, Romania, Slovak Republic and Venezuela, 10%) if the recipient is not a corporation owning at least 25% of the distributing company.
(c) The rate is increased to 15% (or other rate as indicated below) if the recipient is not a corporation owning at least 10% of the distributing company or is a pension fund (Zambia).
(d) The treaty withholding rate is increased to 15% if the recipient is not a corporation owning at least 20% of the distributing company.
(e) The treaty withholding rate is increased to 15% if the recipient is not a corporation owning at least 15% of the distributing company and if other conditions are met.
(f) The treaty withholding rate is increased to 15% if the recipient is not a corporation owning at least 5% of the distributing company, unless it is a pension plan meeting certain criteria.
(g) A dividend withholding tax exemption is available to EU/EEA Member State resident investors (who are not treated as a resident outside the EU/EEA under a tax treaty between the EU/EEA state and a third state) holding an interest in a Dutch dividend distributing entity that would qualify for participation exemption benefits. For this purpose, the EEA is limited to the countries of Iceland, Liechtenstein and Norway. The withholding tax exemption does not apply if the foreign shareholder fulfills a similar function as a Netherlands fiscal investment company or tax-exempt investment company. No minimum holding period applies.
(h) The treaty withholding rate is increased to 10% if the beneficial owner is not with capital that is wholly or partially divided into shares and that directly owns at least 7.5% of the distributing company.
(i) The 0% rate applies if the recipient as the beneficial owner is the state itself, a political subdivision, local government, or the central bank thereof, a pension fund, the Abu Dhabi Investment Authority, Abu Dhabi Investment Council or any other institution created by the government, a political subdivision, local authority of that other state that is recognized as an integral part of that government, as shall be agreed by mutual agreement of the competent authorities of the contracting states.
(j) The former Yugoslavia tax treaty continues to apply to Bosnia and Herzegovina, Montenegro and Serbia.
(k) The treaty withholding rate is 15% but contains a most-favorite-nation clause. The 10% rate is based on the treaty withholding rate with Germany. The 5%