Tax implications of trading through the Netherlands

At DB Tax & Legal we can help you map out various the taxes that apply to your company. We will be happy to advise you on optimising your tax situation.

  • Learn more about corporate income tax
  • Learn more about Dutch VAT legislation
  • Learn more about income tax
  • Learn more about employment tax and the 30% facility

Corporate income tax

The corporation tax in the Netherlands is similar to the Italian IRES (Corporate Income Tax) and is levied on the company profits of a BV (private limited company, similar to Italian S.r.l.) and NV (public limited company, similar to Italian S.p.A.).

Currently, corporation tax on profits up to €200,000 is 16.5% and above this amount the tax rate is 25%.

A loss in a given year can be offset in two ways:

  • with the taxable profit in the previous year (carry back or carry back of the loss compensation)
    or
  • with the gains relating to up to nine subsequent years (carry forward or carry forward of previous losses).

Italian S.r.l. or S.p.A. companies with an established company in the Netherlands are also required to pay corporation tax for their Dutch companies on the profit attributable to that permanently established company. Profits received by a Dutch BV or NV from a holding/subsidiary are generally exempt from corporation tax. The same applies to the capital gain on the sale of equity investments.

Dutch VAT legislation

Dutch VAT legislation is, like Italy’s, based on the European VAT Directive. As a result, there are many similarities between the Dutch and Italian VAT systems.

The standard rate in the Netherlands is 21%. A reduced rate of 9% applies to certain categories of goods and services.

VAT registration

It is also easy for foreign companies to apply for a Dutch VAT number. This number is automatically and immediately registered as an EU VAT number. You can apply for a Dutch VAT number even if you do not have a branch or address in the Netherlands.

Imports in the Netherlands must be registered

Many Italian companies that import goods from countries outside the European Union do so through the Netherlands. These imports in the Netherlands must be registered and included in the periodic Dutch VAT return. It is not necessary to appoint a tax representative to complete the VAT administration.

The reverse charge mechanism and VAT deduction

The Dutch customs authorities are known for their efficiency and versatility. To open a branch in the Netherlands, you can use the so-called reverse charge mechanism. When importing goods from non-EU countries, VAT is normally due to the customs authorities.

If your organisation is eligible for VAT deduction, VAT will need to be deducted as input tax in your VAT return. The reverse charge mechanism requires that the import VAT is not paid to the customs authorities but that it is transferred to the VAT return. If your organisation is eligible for VAT deduction, VAT can be deducted via the VAT return and you will not need to pay anything in the balance. VAT returns are generally submitted quarterly. A VAT refund is generally granted within 4 weeks of filing the VAT return.

Income tax

When do you have to pay income tax?

Companies in the form of a legal person, such as a BV or NV are required to pay corporation tax. Other company forms, such as a sole proprietorship or general partnership (VOF), are required to pay income tax.

Generally speaking, the smaller companies are mainly sole proprietorships or partnerships while the larger companies are in the form of a BV or NV. For new small businesses in particular, it can be beneficial to be subject to income tax rather than corporation tax, because the income tax facilitates new businesses with a series of measures that reduce the effective tax burden; such measures do not apply to corporate tax.

It is generally easy to convert a sole proprietorship or general partnership (VOF) into a BV or NV. Employees also pay income tax. Employees also pay the various types of national insurance contributions in the country where they work.

Income tax and national insurance deductions for employees

For employees, income tax and national insurance deductions at source are as follows:

  • Income tax & social security contributions
  • Insurance premiums for employees
  • Other contributions staggered by income brackets:
    • Healthcare Insurance Act (Zvw contribution)
    • National insurance
    • Employee insurance

If an employee of an Italian company is temporarily posted to the Netherlands, or vice versa, the social security / social insurance of the country of origin may remain in force.

If an employee works in two or more EU countries, they are insured in the country where they live. For example, if:

  • they work in the country of residence for 25% or more of their time
    and/or
  • the employer has its registered office in the country where the employee lives, or
  • the employee works alternately or simultaneously for two employers in different member states.

These can be the country of residence and another member state or two member states other than the country of residence. This principle is called the ‘country of residence principle’. In other cases, the employee is insured in the country where the employer has its registered office.

Employment tax: the 30% facility explained in brief

What is the 30% facility?

If an employee comes to work in the Netherlands from abroad, under certain circumstances, the so-called 30% facility can be applied. Under the 30% facility the employer may compensate the additional ‘extraterritorial costs’ incurred tax free.

A limited liability company (BV) founded in the Netherlands by a foreign worker, which then employs the worker, can be considered an employer. In this way, the 30% facility is also open to self-employed persons.

What are the conditions for applying the 30% facility?

Employees can apply for this facility if they come to work in the Netherlands from abroad and have a specific competence which is scarce in the Netherlands. Eligibility depends on earnings, age and education.

  • specific expertise and earning more than €38,961 in 2021, not including the tax-free allowance
  • under 30 with a master’s degree, obtained in the Netherlands or another country, earning more than €29.616 in 2021
  • conducting research (PhD) or a doctor training to be a specialist, no salary restrictions.

The tax authorities will assess each individual case whether the specific competence is scarce in the Dutch labour market. In order to apply the 30% facility, the employer and the employee must submit a request to the Dutch Tax Authorities. Those who have lived near the Dutch border (within a radius of 150 km) for more than 16 of the 24 months prior to starting employment in the Netherlands cannot make use of the 30% facility.

How long does the 30% facility last?

The 30% facility is valid for a maximum of 5 years. This period is shortened if the person has previously lived or worked in the Netherlands. Any period of residence or employment in the Netherlands in the previous 25 years, and also an earlier period of residence or employment in the Netherlands that began more than 25 years ago but ended less than 25 years ago, shortens the duration of the 30% facility. If the request for the 30% facility is made within four months of the first business day worked, the 30% facility can be applied retroactively from the first business day. If the request is made later, the 30% facility comes into effect from the following month.

What if the employee changes employer?

If an employee changes employer during the period their 30% facility applies, on request, the 30% facility may remain applicable for the remaining period, provided that no more than three months have passed since employment ended at the old employer and an employment contract commences with the new employer. The new employer must also demonstrate that the employee can be considered a newly acquired employee.

Other advantages of the 30% facility

When an employee is granted the 30% facility, one extra they can opt for is a partial foreign tax regime. In this case, the employee is considered a taxable foreigner only for part of the income tax which does not include some components, such as assets owned, which would normally fall under Dutch income tax. In practice, this results in lower taxation than the normal Dutch income tax. In addition, the employer can pay some tuition fees tax free for the employee.

What happens if the 30% facility is not granted?

If the Dutch Tax Authorities do not approve the 30% facility application, certain costs related to employment in the Netherlands can still be compensated by the employer tax free. For example, double housing costs. A significant difference with the 30% facility is that evidence of double costs must be provided, which is not necessary under the 30% facility.