Anyone who does business in the Netherlands will have to deal with Dutch taxes. This is not just the case if you do business via a Dutch legal form, such as a private limited company (bv) or public limited company (nv). A foreign company that does business in the Netherlands also needs to keep a close eye on the tax implications.
This article examines a number of aspects of corporate income tax that you need to take into account as a non-Dutch business when setting up your Dutch company structure.
Expanding your business to the Dutch market
After conducting a thorough survey of the Dutch market, you need to decide how to shape your company’s expansion. You have the following options:
Set up a Dutch branch
If you start up a Dutch branch or office without a Dutch legal form, you need to consider the implications for corporate income tax even if the branch continues to operate under the existing foreign company. It often involves what is known as a permanent establishment. The profits allocated to the Dutch permanent establishment are subject to taxation in the Netherlands. Transfer pricing rules play an important role in determining these profits.Establish a Dutch legal form
This could be a private limited company (bv), for example. With the exception of a few specific situations, a Dutch legal form is always subject to Dutch corporate income tax.
Acquire an existing Dutch company
An acquired business will generally be subject to Dutch corporate income tax, and you will undoubtedly have a clear view of the position in the course of the acquisition process.
In addition to the tax implications, you will need to consider several other factors when deciding between a permanent establishment and a separate legal form. These include limiting liability and separating the accounting records of individual businesses. In some cases, it may also make sense to make use of an (intermediate) holding company. It is important to have a good understanding of all the considerations in advance, so that you can make the right decision. Altering the structure at a later date often involves significant steps and can be time-consuming.
Non-resident tax liability
If an entity established outside the Netherlands has a permanent establishment in the Netherlands, then the Dutch business profits of the permanent establishment are taxable in the Netherlands. The foreign entity is then considered a non-resident taxpayer. Yet there are various other situations in which a foreign entity may be subject to Dutch corporate income tax. For instance, in certain cases in which the foreign company performs activities as a director of a Dutch company.
Please note: different VAT rules apply to a permanent establishment, the non-resident tax liability and the fiscal unity discussed below.
Fiscal unity for corporate income tax purposes
If you have multiple Dutch entities it may be useful, under certain circumstances, to include the entities in a fiscal unity for corporate income tax purposes. Included companies may offset profits and losses within the fiscal unity. Under certain conditions, a permanent establishment in the Netherlands may also be part of a fiscal unity for corporate income tax purposes.
In order to form a fiscal unity for corporate income tax purposes you need to submit a request to the Dutch Tax Authorities and meet specific terms and conditions. Your advisor can discuss the terms and conditions with you, as well as benefits and points of attention.
Make sure you are thoroughly prepared
The Dutch market offers businesses many opportunities, providing you with access not just to the domestic market but to the entire EU. Thorough preparation is extremely important. Our specialists have all the knowledge and experience needed to assist you right from the start. Whether it involves a new branch, setting up a new company or acquiring another company, at Baker Tilly we have the expertise you need.
Contact
Would you like to know more? Please don’t hesitate to contact us!
The legislation and regulations in this area may be subject to change. We recommend that you discuss the potential impact of this with your Baker Tilly advisor.
