If you expand your business to the Netherlands as a foreign entrepreneur or shareholder, you want to know what your own tax position is. You need to consider aspects such as:
Do you receive Dutch income as a foreign shareholder or director?
When is a foreign legal form transparent for tax purposes?
How are dividend distributions taxed?
What restrictions or withholding taxes do you need to take into account?
In this article, our experts explain a number of tax-related points of attention.
Foreign entity as shareholder and/or director
If a foreign entity is the shareholder and/or director of a Dutch company, you need to be aware of any Dutch tax implications for that foreign entity. If the shareholder receives Dutch income, such as taxable income from a Dutch business or income from a substantial interest in a company established in the Netherlands, this can lead to Dutch corporate income tax being levied in cases of tax abuse. In some situations, remuneration for activities as a director of an entity established in the Netherlands may also be classified as Dutch income. If this is the case, the foreign shareholder or director will need to submit a tax return in the Netherlands.
Foreign legal forms: transparent or non-transparent
If you do business in the Netherlands via a Dutch legal entity (e.g. a private or public limited company), then that legal entity is subject to Dutch corporate income tax. If you do business in the Netherlands via a foreign legal form, you will need to establish the tax position under Dutch rules. A foreign legal entity may be subject to corporate income tax in the Netherlands; in this case, it qualifies as non-transparent. However, if the legal form qualifies as transparent, it is not itself subject to Dutch corporate income tax. Instead, the underlying participants are taxed.
Whether a foreign shareholder qualifies as fiscally transparent/non-transparent is especially relevant for transactions within international structures, for instance in the case of distributions by a Dutch company to a foreign shareholder. The qualification may have implications for the withholding exemption for dividend tax, among other things, and the application of tax treaties. It is therefore important that you have a clear picture of the fiscal qualification of the relevant group companies. Your advisor can provide more insights into this matter.
Dividend distributions
In principle, when dividends are distributed to a foreign parent company, 15% Dutch dividend tax is withheld. If certain criteria are met, a withholding exemption may apply to distributions, except in cases of tax abuse.
In some situations a conditional withholding tax on dividend distributions may also be withheld in the Netherlands. This is the case for (re)distributions to an entity based in a low-tax country or in the event of tax abuse. A similar conditional source tax also may apply to interest and royalty payments by a Dutch entity to a group entity.
If dividends are distributed to a private individual, dividend tax is also due. There is no exemption for this situation under Dutch law. Depending on the person’s country of residence and the size of the shareholding, dividends or sale proceeds received by the individual can lead to additional taxation in Dutch personal income tax.
Tax treaties and other international agreements
In addition to the topics mentioned above, it is important to consider the possible application of tax treaties. Less (or even no) withholding tax may be due as a result of the application of tax treaties.
At an international level, a growing number of rules need to be taken into account in cross-border business. Examples include substance requirements, Pillar 2, transfer pricing obligations and the ATAD anti-tax avoidance rules. Your advisor would be happy to discuss which developments are relevant to your situation.
Make sure you obtain sound advice before starting out
When you start to do business in the Netherlands from abroad, make sure you have a clear picture of all the relevant aspects. The Dutch business plan and your business choices are important, but don’t forget to consider your Dutch tax position as a shareholder. Make sure you obtain sound advice before you start.
Contact
If you would like to know more about this topic, please don’t hesitate to contact us. Our international experts would gladly discuss your growth plans with you!
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.
