NETHERLANDS

 

i. Name of country

NETHERLANDS

ii. Region

Western Europe, bordering the North Sea, between Belgium and Germany

iii. Population

17,337,403 (July 2021 est.)

iv. General Introduction

The Netherlands is a small but influential Western European country. It is a founding member of the EU and the Schengen area, with an excellent geographical location and travel connections for international business. The country's favorable tax regime also lends itself well to international tax planning. The Dutch residency-by-investment program is aimed at ultra-high net-worth investors, and it offers fast-track residency with a variety of benefits, including unrestricted right to work in the Netherlands, access to a variety of social services such as maternity benefit and medical treatment, and visa-free travel within the Schengen zone.

The political landscape in The Netherlands is stable and it is unlikely that there will be significant material political changes affecting doing business in The Netherlands in the near future. However, it is likely that developments in the US and global economy, the upcoming US elections, and Brexit will impact on The Netherlands and its economy.

Several noteworthy bills are pending before parliament (some of which may still be subject to amendment):

Ultimate Beneficial Owner (UBO) register. Under EU rules, Dutch companies will be required to register their owners or persons who have control in a UBO register, starting in the spring of 2020 (the exact date is unknown). Some of the UBO's data will be publicly disclosed, including:

  • name;
  • date of birth;
  • nationality;
  • state of residence; and
  • nature and extent of the UBO's economic interest.

The Child Labour Due Diligence Law. This law will:

  • require all companies selling goods and services to end-users in The Netherlands to establish an action plan to the mitigate the risk of child labour in their supply chain or activities; and
    impose a duty of care on companies to implement proper due diligence measures.
  • Fines can be imposed to a maximum of 10% of annual turnover.

Telecommunications Act

The House of Representatives is debating a bill that would lay down a rule in Dutch law that takeovers in the telecoms sector will be prohibited or reversed when national security or public order is at risk (that is, the service could become unreliable or there is a risk that facilities will fail).

Commercial Register Act 2007

Under a bill passed by the senate mid-2019, the Dutch Chamber of Commerce has been given the power to dissolve a company where that company is no longer reachable at the address registered in the trade register and no statement to change the registration has been made.
Women's quota. In December 2019, the House of Representatives passed a bill that requires listed companies to have at least 30% women in their supervisory boards.

The Netherlands has an open economy and engages in a considerable amount of trade with other countries. In 2019 alone, 397 foreign companies invested in The Netherlands, which resulted in a contribution of EUR4.3 billion to the Dutch economy.

Research has shown that The Netherlands is attractive for foreign investors due to its:

  • Strategic location (ranked No 1 on DHL's Global Connectedness Index).
  • International business climate.
  • Good infrastructure.
  • Competitive fiscal climate.
  • Highly educated and multilingual workforce.
  • Creative and innovative environment.
  • Thriving sectors.
  • Good quality of life.

The Netherlands is a stable nation with an effective government (according to the World Bank). This makes it easier for foreign investors to make long-term decisions regarding investing in The Netherlands.

v. Wifi Speed

Dutch internet speeds are among the fastest in Europe. Nearly 98% of all Dutch households have a broadband connection at home. The average speed of internet connections in the Netherlands is around 80 Mbps.

vi. Electrical outlet

The Netherlands uses the Type F electrical plug. This plug has two round pins, spaced about 2 cm apart, and is the same as those used in many countries in Continental Europe. The standard voltage is 230-volts, but some hotels have special plugs for 110 or 120-volt shavers.

vii. Per Capita GDP

Real GDP per capita
$54,200 note: data are in 2017 dollars (2020 est.)
$56,600 note: data are in 2017 dollars (2019 est.)
$56,100 note: data are in 2017 dollars (2018 est.)

note: data are in 2010 dollars

viii. Climate

temperate; marine; cool summers and mild winters

ix. Residence-by-Investment

In 2013, the Netherlands launched the Golden Visa program with the goal of attracting venture capital funding for small business start-ups. Because the program's popularity was low in the early years, the Dutch government made a few pragmatic changes to the investment requirements in 2018.

Investment

The main requirement for any High Net Worth applicant is a €1.250,000 investment directly into a Dutch startup company or alternatively into a Dutch Venture Capital Fund, which will invest the fund's money in multiple Dutch startups.

Processing Time

Processing time is with in 3 months

Key Benefits

The Netherlands has long had a stellar reputation for attracting foreign investors and entrepreneurs to its shores. The Netherlands is the epitome of innovation, with a thriving startup scene. Investors who make an investment in the country are not only rewarded with such opportunities, but they also gain the right to live, work, or study in one of Europe's most economically successful countries.

Investors can feel truly at ease and at home in the Netherlands, thanks to excellent healthcare, high living standards, and low crime rates.

Requirements

To be eligible for the Dutch investor visa, you must invest at minimum € 1.25 million in any of the following categories:

  • An innovative company in the Netherlands
  • A contractual joint venture where the applicant invests in one or more innovative companies (startups)
  • A venture fund recognised by the Dutch Minister of the Economic Affairs
  • A venture capital participation fund affiliated to the Nederlandse Vereniging van Participatiemaatschappijen (NVP).
  • The investment is assessed by the Netherlands Enterprise Agency who use a points system.

Two out of three criteria must be met in order for the investment to be accepted for the golden visa:

  • Within five years, at least ten full time jobs must be created
  • The contribution must enhance the innovativeness of a Dutch company (e.g. by introducing a patent, investing in both technological and non-technological innovation, or investing in a Dutch company classified in the top sector)

Non-financial added value, such as providing specific knowledge, networks or clients, with the investor demonstrating active involvement with the company.

Procedures and Time Frame

The process begins with obtaining an MVV, or provisional residency permit. Applicants from Western countries, such as the United States, and certain Asian countries, such as Japan or South Korea, are exempt from the requirement for an MVV. The investor residency permit and the MVV are applied for concurrently. Applications are forwarded to the Dutch embassy.

Decisions are made in 90 days or less. If the application is approved, the applicant will travel to the Netherlands. Once in the country, you must have health insurance and take a tuberculosis test. The residency permit is valid for a period of three years.

The application fee is approximately 2,100 euros. It must be submitted in one of the following languages: Dutch, English, French, or German.

xi. Natural Resources

natural gas, petroleum, peat, limestone, salt, sand and gravel, arable land

xii. Ethnic Groups

Dutch 76.9%, EU 6.4%, Turkish 2.4%, Moroccan 2.3%, Indonesian 2.1%, German 2.1%, Surinamese 2%, Polish 1%, other 4.8% (2018 est.)

xiii. Languages

Dutch (official); note - Frisian is an official language in Fryslan province; Frisian, Low Saxon, Limburgish, Romani, and Yiddish have protected status under the European Charter for Regional or Minority Languages; Dutch is the official language of the three special municipalities of the Caribbean Netherlands; English is a recognized regional language on Sint Eustatius and Saba; Papiamento is a recognized regional language on Bonaire

xiv. Religion

Roman Catholic 23.6%, Protestant 14.9% (includes Dutch Reformed 6.4%, Protestant Church of The Netherlands 5.6%, Calvinist 2.9%), Muslim 5.1%, other 5.6% (includes Hindu, Buddhist, Jewish), none 50.7% (2017 est.)

xv. Median Age

total: 42.8 years
male: 41.6 years
female: 44 years (2020 est.)

xvi. Urbanization

urban population: 92.6% of total population (2021)
rate of urbanization: 0.59% annual rate of change (2020-25 est.)

xvii. Physician density

3.61 physicians/1,000 population (2017)

xviii. Government type

parliamentary constitutional monarchy; part of the Kingdom of the Netherlands

xix. Unemployment Rate

3.41% (2019 est.)
3.84% (2018 est.)

x. Taxes

Headline Personal Income Tax Rate (highest marginal tax rate)

  • 49.50% + reduction of deductions (arbeidskorting and general korting)

Dutch income tax (inkomstenbelasting) is levied on resident individuals' worldwide income. Dutch income tax is also levied on non-residents, to the extent that they have income from sources in The Netherlands, including employment income, provided that that income is not exempt from Dutch income tax under an applicable tax treaty. If certain conditions are met, non-resident taxpayers residing in an EU member state can be considered resident taxpayers. Some resident taxpayers can opt to be taxed as non-resident taxpayers.

Since there is no definition of "resident" in Dutch tax law, the tax residency of an individual depends on the applicable facts and circumstances and is usually determined in accordance with the individual's centre of economic and social interest. In that context the most relevant facts and circumstances are:

  • The individual's place of permanent home.
  • The place where the individual's spouse and children live.
  • The place of the individual's personal and economic relations.

If residents of The Netherlands leave without becoming a resident of another state and return within one year, they are deemed to have been resident for the entire period.

Employment income is subject to Dutch income tax and includes wages and salaries, as well as sickness benefits and certain social security payments. However, in most cases, employment income will have already been taxed through a withholding tax (loonbelasting), which is a prepayment by the employer of the employee's income tax.

Tax resident employees

Residents of The Netherlands are taxed on their worldwide income. Income derived by Dutch residents is divided into three categories (boxes) of income, each of which is subject to its own tax rate. Employment salaries and benefits (including sickness benefits and certain social security contributions) are subject to income tax in Box 1 at a progressive tax rate of 37.35% or 49.50%, depending on the amount of income.

Non-tax resident employees

Non-resident employees that earn Dutch-source employment income are in principle taxed at the same rates as tax resident employees.
30% ruling for expatriates

If certain conditions are met, an inbound expatriate coming to The Netherlands can take advantage of an allowance called the "30% ruling". One of the conditions is that the inbound expatriate must have some sort of "specific expertise" that is scarce in The Netherlands (based on their level of education, level of experience and level of remuneration). Another important condition is that the expatriate must have been residing at least 150 kilometres away from The Netherlands before their assignment to The Netherlands

As a result of the 30% ruling, 30% of all the inbound expatriate's taxable benefits, which in includes allowances for housing and compensation for local costs but not schools fees, which are allowed separately, can be paid tax-free as compensation for "extra-territorial costs" for a maximum period of five years. This was previously eight years but was reduced to five years from 1 January 2019. A transitional regime may apply to 30% rulings that were granted with a term of eight years. Both the employer and the employee must file a request to apply for the 30% ruling. The 30% ruling only applies if the Dutch tax authorities have approved the request.

The 30% allowance is not included in pension calculations, which is an advantage for the employer that can be reallocated by adding the saving to the employee's income, which in turn results in a higher 30% allowance. The allowance is also not included in social security calculations.

Headline Corporate Income Tax Rate (excluding dividend taxes)

25% (on profits over €245,001)
15% (not over €245,000)

Business vehicles are considered to be residents of The Netherlands and are therefore subject to Dutch corporate income tax (vennootschapsbelasting) if they are either:

  • Established under Dutch law.
  • Effectively managed and controlled from The Netherlands.
  • If a business vehicle can also be regarded as a resident of another jurisdiction and there is a tax treaty in place with that jurisdiction, the place of residence of that business vehicle is decided on the basis of the applicable facts and circumstances. This also applies to entities that are not incorporated under Dutch law.

The following business vehicles are subject to Dutch corporate income tax:

  • Public companies with limited liability (such as a Dutch NV), private companies with limited liability (such as a Dutch BV) and open limited partnerships.
  • Co-operatives and other associations established on a co-operative basis.
  • Mutual insurance companies and other associations that act as insurance or credit organisations on a mutual basis.
  • Associations with or without legal personality.
  • Foundations.
  • Entities governed by public law, if and to the extent that they conduct a business.
  • Mutual funds.

Non-tax resident business

Non-resident business vehicles are subject to Dutch corporate income tax on the following sources of Dutch income:

  • Business income derived from a Dutch permanent establishment or permanent representative.
  • Income from immovable property located in The Netherlands.
  • Remuneration derived from a directorship of a resident entity.
  • Income derived from a substantial shareholding (generally an interest of 5% or more in a Dutch company) provided that certain conditions are met, and any income from debt related to such a substantial shareholding.
  • Income and capital gains from rights related to the exploration for or exploitation of natural resources situated in The Netherlands or in The Netherlands' part of the continental shelf.

However, taxable income and profits may be limited or exempt from Dutch corporate income tax under an applicable tax treaty.

Business vehicles that are resident in The Netherlands and non-resident business vehicles that have Dutch-source income are subject to Dutch corporate income tax at a rate of 25% (to be reduced to 21.7% from 1 January 2021). A reduced rate of 16.5% applies to income up to an amount of EUR200,000. As of 1 January 2021, a reduced rate of 15% applies.

The Netherlands has an extensive network of about 127 bilateral tax treaties for the avoidance of double taxation with almost all developed countries in Western and Eastern Europe, North and South America, Africa, Asia and Australia. The Netherlands has also concluded about 100 bilateral investment treaties.

The Netherlands is famous for its vast tax treaty network on income taxes. Tax treaties override domestic law. Under most tax treaties concluded by The Netherlands, double taxation is generally avoided by the exemption with progression method. The exemption is granted in the form of a reduction to the amount of tax by a percentage equal to the proportion of worldwide income formed by foreign-source income.

However, the credit method generally applies to withholding tax on dividends, interest and royalties (that is, the individual is taxed in both states but the state of residence gives credit for tax paid in the other state).

In modern treaties, increasingly the credit method is included also for other sources of income. Currently, the OECD Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Sharing 2017 (MLI) is subject to the approval of the House of Representatives of The Netherlands. Depending this approval, the MLI will be ratified from 1 January 2020. Many of the tax treaties of The Netherlands fall within the scope of the MLI. The implication of the MLI on a specific tax treaty should be checked on a case-by-case basis.
IHT and gift tax

The Netherlands has entered into IHT treaties with Austria, Finland, Israel, Sweden, Switzerland, the UK and the US. The treaties with Austria and the UK also apply for gift tax.

As of 1 December 2015 and 1 March 2016, The Netherlands has tax regulations with Curacao and St Maarten respectively, that contain provisions on inheritance and gift tax. If a Dutch individual emigrates to Curacao or St Maarten and donates an amount, or dies within five years after emigration, that person is deemed to be living in The Netherlands at the time of such donation or decease. The second provision relates to the transition law for Dutch people living on these islands prior to the regulations entering into force: for such people, the term is one year rather than five years. The Dutch Decree for the Prevention of Double Taxation (BvDB) will apply for the prevention of double gift or IHT regarding deceases on or after these mentioned dates.
The Tax Regulation for the Kingdom of The Netherlands (BRK) still applies between Aruba, The Netherlands, Bonaire, St Eustatius and Saba.

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