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Income Tax in Netherland



Tax Compliance
Residents

On entering the Netherlands, the employee must register as a resident in the municipality where he/she will live if the expected stay in the Netherlands exceeds four months. Subsequently, a National Identification Number/”BSN” (Burgerservicenummer) is granted by the municipality.

Income tax returns are based on a 31 December year-end.
Spouses are not taxed jointly; each individual is treated as a separate taxpayer for his/her personal income (such as employment income). In principle, the non-personal income is taxed separately on the spouse who is the beneficial owner of the income. However, spouses are allowed to divide their non-personal income between them as they choose to, as long as all the income is reported. The income will be taxed with the spouse to whom the income has been attributed. Non-personal income of minors is attributed to the parents.
Returns must normally be filed by 1 May following the end of the tax year. Returns prepared by a registered tax professional are generally covered by a tax return lodgment extension program.

If the tax authorities have not issued an individual income tax return form, the employee may have to request one following 31 December of the year in question. This is the case if individual income tax is payable by the employee.
Based on the return, the tax authorities will issue an assessment taking into account any Dutch wage tax withheld during the year. It is possible to file an objection against the final assessment within six weeks from the date of issue of the assessment.
Married couples are tax partners, yet file tax returns as separate individuals. Unmarried couples living together at the same address will, under certain conditions, be treated as tax partners, too. Although tax partners will be taxed separately, certain income components can be taxed more tax efficiently due to the possibility to divide non-personal income between them. The non-working tax partner of a working tax partner can, in principle, claim 40 percent of the general tax credit (maximum EUR 2,254). If the non-working tax partner was born before January 1, 1963, the full general tax credit can, in principle, be claimed.

Non-residents
Non-residents should also obtain a National Identification Number. If the employee has less than four months housing available in the Netherlands he/she will have to obtain a National Identification Number by way of an RNI registration at an RNI Desk. Nineteen Dutch municipalities have an RNI desk: Alkmaar, Almelo, Amsterdam, Breda, Den Haag, Doetinchem, Eindhoven, Goes, Groningen/Eemshaven, Heerlen, Leiden, Leeuwarden, Nijmegen, Rotterdam, Terneuzen, Utrecht, Venlo, Westland and Zwolle. If a non-resident employee has housing available for more than four months the employee must register as a resident in the municipality.

Non-resident spouses are not considered tax partners and are therefore not allowed to divide their non-personal income between them. However, the personal and family situation of non-residents who are residents of an EU or EEA Member State, Switzerland, or one of the BES islands, and who earn 90% or more of their income in the Netherlands, may receive the same tax treatment as that of residents. These qualifying non-residents will only be taxed on their Dutch income, and are, in principle, entitled to the same deductions and tax credits as domestic taxpayers.

The tax year ends on 31st December and the return shall be filled upto 1st May of following year for both resident and non resident.

Tax Rates
Resident

Income tax rate for 2016

Business and employment income and income from the main private residence:

Taxable Income Bracket
Income Tax Rate
Social Security Tax Rate
From EUR
To EUR
Percent
Percent
0
19,982.00
8.90
27.65
19,983.00
33,791.00
13.15
27.65
33,792.00
67,072.00
40.80
0.00
Above 67,072.00
52.00
0.00

Income and Gain from substantial shareholding:

A flat rate of 25% is applicable. Capital gains taxes are not applicable, unless there is a substantial interest in a company

Income from savings and investment:

A flat rate of 30 percent on deemed income from savings and investments. The deemed income depends on the total value of assets and liabilities on 1 January of the tax year and is calculated as follows.

Taxable base income from savings and investments*
Deemed income percentage: 1.63
Deemed income percentage: 5.39%
Until EUR 75,000
67%
33%
EUR 75,000 - EUR 975,000
21%
79%
As from EUR 975,000
0%
100%

* after deduction of the exempted amount of EUR 25,000
Non Resident

Income tax rate for 2016

Business and employment income and income from the main private residence:

Taxable Income Bracket
Income Tax Rate
Social Security Tax Rate
From EUR
To EUR
Percent
Percent
0
19,982.00
8.90
27.65
19,983.00
33,791.00
13.15
27.65
33,792.00
67,072.00
40.80
0.00
Above 67,072.00
52.00
0.00

* if subject to dutch social security

Income and Gain from substantial shareholding:

A flat rate of 25% is applicable. Capital gains taxes are not applicable, unless there is a substantial interest in a company

Income from savings and investment:

A flat rate of 30 percent on deemed income from savings and investments. The deemed income depends on the total value of assets and liabilities on 1 January of the tax year and is calculated as follows.

Taxable base income from savings and investments*
Deemed income percentage: 1.63
Deemed income percentage: 5.39%
Until EUR 75,000
67%
33%
EUR 75,000 - EUR 975,000
21%
79%
As from EUR 975,000
0%
100%

* after deduction of the exempted amount of EUR 25,000



Corporate Tax Rates

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 currently stands at 25%. There are two taxable income brackets. A lower rate of 20% applies to the first income bracket, which consists of taxable income up to 200,000 euros (EUR). The standard rate applies to the excess of the taxable income.
The earlier proposal to increase the first bracket to EUR 250,000 per 2018, to EUR 300,000 per 2020, and to EUR 350,000 as of 2021, is withdrawn. The first bracket will continue to apply to taxable income up to EUR 200,000.
However, the new coalition has expressed its intention to reduce both the lower and standard CIT rate starting from 2019. The rate will be reduced in steps from 25% to 24% in 2019, to 22.5% in 2020, and to 21% in 2021. The lower rate will decrease by the same steps, from 20% to 19% in 2019, to 17.5% in 2020, and to 16% in 2021.

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.

Exempt investment fund regime

The exempt investment fund regime exists next to the fiscal investment fund regime described above. In accordance with the exempt investment fund regime, investment funds as defined in the Dutch Financial Supervision Act (Wet op het financieel toezicht) that meet certain conditions can request an exemption from CIT. Apart from the exempt status for CIT purposes, the exempt investment fund is not obligated to withhold dividend WHT with regard to profit distributions to its shareholders.

Innovation box regime

A special regime applies with respect to profits, including royalties, derived from a self-developed intangible asset (developed after 31 December 2006). 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 5%. Following the 2018 Dutch Tax Package, this will be increased to 7% as of 1 January 2018.

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. This is subject to the condition that these qualified R&D assets became part of the company’s assets after 31 December 2007.
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 outcomes of the OECD/G20’s base erosion and profit shifting (BEPS) project have influenced the Dutch innovation box regime. As of 2017, the Dutch innovation box regime is aligned with the modified nexus approach as described in the OECD report on Action 5. Transitional measures apply to certain assets, especially those created before 1 July 2016 (e.g. the continuing application of the former innovation box regime).

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.

Local income taxes


There are no provincial or municipal corporate income taxes in the Netherlands.

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This blog is Created by CA Anil Kumar Jain.