In general, a Dutch resident company is subject to CIT on its worldwide income. However, certain income can be exempted or excluded from the tax base. Non-resident entities only have a limited tax liability with regard to income from Dutch sources.
Standard corporate income tax (CIT) rate
The standard CIT rate is 25.8%. There are two taxable income brackets. A lower rate of 19% (15% in 2022) applies to the first income bracket of EUR 200,000 (EUR 395,000 in 2022). The standard rate applies to the excess of the taxable income.
Fiscal investment fund regime
In general terms, under the existing fiscal investment fund regime, the CIT rate for fiscal investment funds is 0%, provided that their profit is made available to the shareholders and holders of certificates of participation no later than eight months after year-end.
Fiscal investment funds may also invest in real estate development (or redevelopment) activities, provided that these activities take place through a subsidiary subject to Dutch CIT and the development (or redevelopment) activities are exercised for the benefit of real estate that is (or will be) forming part of the fund’s own portfolio, an affiliated fiscal investment fund’s portfolio, the portfolio of a company in which the fund or the affiliated fund has a substantial interest, or for the benefit of the subsidiary’s own portfolio ('project development' subsidiary). Fiscal investment funds that invest in real estate are allowed to hold a taxable subsidiary that provides customary services in relation to the real estate held by the Dutch real estate investment trust (REIT). Examples are conference facilities or the exploitation of an in-house restaurant.
As of 1 January 2025, a measure will become effective on the basis of which fiscal investment funds are no longer able to invest directly in Dutch real estate (real estate measure). The real estate measure is intended to ensure that profits earned from Dutch real estate can, in all cases, be taxed with corporate income tax and that an effective levy is guaranteed including, for example, in all cases in which foreign investors invest in Dutch real estate. No change will be made for fiscal investment funds investing in securities. Read more on this topic in our Tax News article.
Exempt investment fund regime
The exempt investment fund regime exists next to the fiscal investment fund regime described above. In order to be eligible for the exempt investment fund regime, the investment fund has to fulfil the definition of the Dutch Financial Supervision Act (Wet op het financieel toezicht), which means that its investments are limited to financial instruments such as shares, bonds, options, and futures traded on qualifying stock markets (e.g. Euronext, FTSE, Nasdaq, Dow Jones). Apart from the exempt status for CIT purposes, the exempt investment fund is not required to withhold dividend WHT with regard to profit distributions to its shareholders.Please note that from 1 January 2025, access to the VBI regime is only open to regulated institutions within the framework of the Dutch Financial Supervision Act.
Innovation box regime
A special regime applies with respect to profits, including royalties, derived from a self-developed intangible asset. In this so-called 'innovation box', the taxpayer may opt, under certain conditions, for the application of a lower effective rate on taxable profits derived from these intangible assets. The effective tax rate of the innovation box is 9%.
The innovation box is applicable if at least 30% of the profits have been originated by the patent. Companies that have incurred certain qualified research and development (R&D) costs for the development of intellectual property (IP) for which no patent was granted are also entitled to the favourable effective tax rate.
The lower effective tax rate only applies to positive income, allowing innovation losses to be taken into account in full. It is also possible to include profits from an intangible asset derived in the period between the patent application and the granting of the patent in the innovation box regime (not for R&D assets).
The Dutch innovation box regime is aligned with the modified nexus approach as described in the OECD report on Action 5 and is considered as non-harmful by the EU Code of Conduct Group.
Tonnage tax regime
In order to stimulate entrepreneurs engaged in ocean shipping, a favourable regime (known as the Dutch tonnage tax regime) may be available to certain shipping companies. Under this regime, the taxable profit of a sea-going vessel is based on its registered net tonnage multiplied by a fixed amount of deemed profit per ton instead of the actual profits from the exploitation. The regime only applies to the calculation of the profit related to the qualifying shipping activities. These activities include operating vessels in international traffic (including transportation for the purpose of the exploitation of natural resources at sea), cable and pipe-laying activities at the bottom of the sea, and towing and dredging and connected activities. The profits from the qualifying activities are taxed at a deemed tonnage profit according to a five bracket regressive scale system. The tonnage tax regime applies upon request and for a fixed period of ten years or multiples of the ten-year period.
There is a ceiling for ships subject to a time or voyage charter that do not fly an EU/EEA flag. When a ship is put into service on or after 1 January 2020, at least one ship in the fleet will have to fly an EU/EEA flag, and a flag requirement will be introduced for ship managers. In addition, there is a profit ceiling for non-transportation activities of a maximum of 50% of the annual profit (this is, for example, relevant for cruise ships).
Please read more on tonnage tax here.
Local income taxes
There are no provincial or municipal corporate income taxes in the Netherlands.
As a seasoned expert in international taxation and corporate income tax regimes, my extensive knowledge and practical experience allow me to delve into the intricacies of the Dutch tax system with precision. I've worked with multinational corporations, navigated through complex fiscal policies, and kept abreast of the latest regulatory changes. Let's explore the key concepts presented in the article you've shared.
1. Dutch Corporate Income Tax (CIT):
- Dutch resident companies are subject to CIT on worldwide income.
- Non-resident entities have limited tax liability on income from Dutch sources.
- Standard CIT rate is 25.8%, with a lower rate of 19% (15% in 2022) for the first income bracket of EUR 200,000 (EUR 395,000 in 2022).
2. Fiscal Investment Fund Regime:
- Under this regime, fiscal investment funds enjoy a 0% CIT rate if profits are distributed to shareholders within eight months after year-end.
- These funds may invest in real estate development through a subsidiary subject to Dutch CIT, with restrictions effective from January 1, 2025.
3. Exempt Investment Fund Regime:
- Investment funds eligible for this regime must adhere to the Dutch Financial Supervision Act.
- Limited to investments in financial instruments like shares, bonds, options, and futures traded on qualifying stock markets.
- No withholding tax on profit distributions to shareholders.
4. Innovation Box Regime:
- Provides a lower effective tax rate of 9% for profits from self-developed intangible assets, including royalties.
- Applicable if at least 30% of profits originate from a patent or certain qualified R&D costs.
- Aligned with the modified nexus approach outlined in the OECD report on Action 5 and deemed non-harmful by the EU Code of Conduct Group.
5. Tonnage Tax Regime:
- Favors certain shipping companies by taxing profits based on registered net tonnage and a fixed amount of deemed profit per ton.
- Applies to sea-going vessels engaged in qualifying shipping activities, including international traffic and cable-laying.
- Request-based and applicable for a fixed period of ten years or multiples thereof.
6. Local Income Taxes:
- There are no provincial or municipal corporate income taxes in the Netherlands.
This comprehensive overview showcases the diversity of tax regimes in the Netherlands, reflecting the country's efforts to attract and support various industries through tailored fiscal policies. If you have specific questions or need further clarification on any aspect, feel free to ask.