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Tax compliance in the Netherlands is essential to the Dutch tax system. In contrast, the reputation for having tax compliance services in the Netherlands is relatively high, meaning that most taxpayers must fulfil their obligations and follow the laws and regulations to avoid penalties. The Dutch tax system is based on income tax, environment tax, value-added tax (VAT), and social security contributions. Different types of income have deductions and allowances that can reduce your tax obligation.
A resident or non-resident of the Netherlands must file an annual tax return in early May for the previous calendar year. Failure to comply with a tax return before the deadline can result in penalties and levied interest charges. The exact penalties depend on the nature and severity of the non-compliance. The Dutch tax authorities have developed an online portal, “My Tax Service”, allowing taxpayers to manage their taxes online. It includes filing tax returns, making payments, and accessing information about their tax position.
Therefore, tax compliance in the Netherlands is an essential factor for taxpayers. It is critical to comply with the regulation in order to avoid penalties and other consequences.
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Businesses in the Netherlands pay and withhold different kinds of tax, including corporation tax on their profits for tax compliance services, Employers withholding salaries tax and social insurance contributions from their employees’ salaries, and dividend tax withheld from profits distributed to shareholders. There are also several environmental taxes. The Netherland Government has signed treaties with different countries to eradicate the problems of double taxation of international companies.
Salaries tax is an advance payment of employees’ income tax to avoid paying a large amount at the end of every financial year; the employers withhold salaries tax in the tax compliance services in the Netherlands. Besides salaries tax, the employer withholds national insurance contributions, and healthcare insurance contributions are deducted from employees’ salaries.
Employers also provide employee insurance contributions to their employees. Such contributions are the unemployment benefit scheme (WW), the Work and income scheme (WIA) and the invalidity insurance scheme (WAO). Employers do not withhold these contributions from their employees’ salaries but require them to pay themselves. The government sets the contribution levels twice yearly, in January and July every year.
2. Corporate income tax
Public and private companies must pay corporate income tax on their profits. Special rules apply to those companies that form a tax group and those that own a 5% share or more of another company.
Every company pays its corporate income tax to the concerned Gov for their tax compliance services. However, if a parent company forms a tax group with one or more subsidiaries, the Tax and Customs Administration of the Dutch Gov. declares it as a single taxpayer company.
The primary benefit of forming a tax group is that a loss incurred by one company can be deducted from the profits earned by other companies in the group. In that case, the primary condition is that the parent company holds 95% of the shares in the subsidiary.
3. Dividend tax
Every company can distribute some of their profits as dividends to its shareholders. Dividends are subject to tax; the dividend tax rate is about 15%.
Withholding and deduction of dividend taxis withheld from the profit distributed to the shareholders.
Dividend tax exemption or refund
Sometimes, a company may be entitled to partial or complete exemption from dividend tax or a dividend tax refund.
4. Environmental taxes
Businesses and households pay various environmental taxes, such as a tax on mains water and an energy tax for tax compliance services in the Netherlands.
The energy taxes pay to the Tax and Customs Administration for the usage of gases may recharge it to their customers. Suppose you use natural gas or electricity to generate electricity. A reduction of tax is granted per electricity connection. The reduction amount is EUR 310.81 in the case of a residential property.
The tax on mains water pays to the Tax and Customs Administration for water usage and may recharge from time to time.
5. Resident taxpayers
All businesses incorporated under Dutch law pay tax on their income in the Netherlands. Overall, the income includes what is earned offshore of the Netherlands.
6. Non-resident taxpayers
Non-resident businesses pay corporate tax in the Netherlands on:
Taxable profit from a business in Curaçao or St Maarten or a permanent establishment in Bonaire, Aruba, St Eustatius and Saba.
Tax treaties between countries
A tax treaty is an agreement between two countries that may levy tax on income. One country will levy taxes, while the other will provide a tax reduction. The Netherlands has signed a tax treaty with other countries’ Tax and Customs Administrations.
In the Netherlands, the Advance Pricing Agreements (APAs) and Advance Tax Rulings (ATRs). APAs and ATRs are binding agreements made with the Tax and Customs Administration on applying tax laws to international groups of companies.
APAs and ATRs assure foreign investors comply with national and international tax rules that will apply to them in the Netherlands. It avoids differences in interpretation later on. The Tax and Customs Administration office deals with requests for APAs and ATRs.
Steps for preventing tax evasion
Tax compliance services in the Netherlands and businesses to comply with Dutch tax laws and regulations. The tax compliance services benefit taxpayers, whether they are resident or non-resident taxpayers, to avoid penalties for non-compliance.
Read our Article: Tax Compliance Services in Bermuda
Minakshi Bindhani has completed LL.M. with a specialization in Criminal Law from Madhusudan Law University, Cuttack, Odisha. She is more inclined toward legal research and writing and have prior experience in Civil and Criminal litigation and content writing.
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