Intro to Dutch Corporate Income Tax
Corporate income tax exemption
According to the tax authorities, these are the exceptions. If you fall under this, you will receive an exemption from corporation tax. If in doubt, please contact the Tax Authorities.
The promotion of a general social or social interest is in the foreground (for example amateur sport).
The association or foundation uses the income exclusively for the stated purpose.
The association or foundation mainly obtains income through the efforts of volunteers.
The pursuit of profit is of additional significance. Any profit in the year of the event is no more than 15,000 euros, or in that year and the preceding 4 years together no more than 75,000 euros. In this calculation you have to take into account the costs of volunteers and other fictitious costs.
Corporate Income Tax Rates
In The Netherlands the CIT rate is depending on the taxable amount. There are two CIT rates:
The corporate income tax rates for 2020 are:
16.5 percent on the first € 200,000 of the profit;
25 percent on the rest.
For the tax year 2019, the rate for the first € 200,000 was still 19%. This rate has therefore been reduced. There were plans to lower the rate from € 200,000, but the reduction has been postponed to 2021. In 2021, the high rate will go to 21.7% instead of 25%.
This means that there are two tax brackets. On the one hand the lower bracket of 19%, applying to the first € 200.000. On the other hand the standard bracket of 25% which applies to all profits exceeding € 200.000.
How can you calculate the corporate income tax?
Suppose you have a BV and you make a profit of € 100,000 in a year. This means that you have to pay 16,5% tax, which equates to € 16,500 corporate tax. The profit is also called taxable profit . There are a lot of deductions that can save you tax.
Suppose you made € 250,000 profit in a year. What do you have to pay in corporate tax?
The calculation is as follows: You pay 16,5% tax on the first € 200,000, which equates to € 33,000 corporate tax. In addition, you pay a total tax of 25% on the other € 50,000, which amounts to € 12,500 corporate tax. So in total you pay € 33,000 + € 12,500 = € 45,500 .
What if you make a loss? Is loss adjustment possible?
Your Dutch company operates at a loss in a certain year... The question is, can this loss be offset against gains from other years. Fortunately, the answer to this is: Yes. You can settle in 2 different ways . You have the option to settle forwards and backwards.
The participation exemption in corporate tax
You have an operating company and a holding company above it. Of course you don't want the operating company profits to be taxed twice. Fortunately, this is not necessary. By applying the so-called participation exemption , profits are not taxed twice, and you only have to pay tax on the profits once at the operating company.
This means that profits can be moved from the working company to the holding company without being taxed.
When do Dutch companies file the income tax return?
The due date for filing a CIT return is generally five months after the end of the company’s fiscal year. For example, when the fiscal year of company X ends on the 31st of december 2019, the CIT return has to be filed with the Dutch tax authorities before the 1st of june 2020.
The payment of the corporate income tax is due within two months after the date of assessment.
An overview of the corporate income tax rates over the years can be presented as follows:
2016: 20% up to and including € 200,000 AND 25% for the part above € 200,000
2017: 20% to € 200,000 AND 25% for the part above € 200,000
2018: 20% up to and including € 200,000 AND 25% for the part above € 200,000
2019: 19% to € 200,000 AND 25% for the part above € 200,000
2020: 17.5% up to and including € 200,000 AND 22.5% for the part above € 200,000
2021: 16% to € 200,000 AND 21% for the part above € 200,000
The overview above shows that the corporate tax rate will gradually decrease from 2019. This of course provides significant savings for entrepreneurs.
Are there any Dutch withholding taxes on corporate income?
No, in principle there are no withholding taxes related to corporate income (tax). However, based on a preliminary assessment, the corporate income tax can already be claimed by the tax authorities in advance, and can be due on a monthly basis.
Taxable amount and financial year
Corporate income tax is calculated on the taxable amount in a financial year. The taxable amount is the profit minus the deductible losses.
When determining the profit and the taxable amount, many schemes apply that also apply to entrepreneurs in income tax. Examples of this are:
the investment deduction
some tax reserves
the agricultural exemption, the forestry exemption and the exemption for large-scale road works
the tonnage tax scheme for shipping profits
the exemption for remission profit
In general, the same rules apply to the depreciation of business assets as in income tax.
Some tax schemes are specific to the entrepreneur in income tax, such as the self-employed person's allowance and the employee's allowance. These schemes do not apply within corporate tax.
In addition, there are specific corporate tax arrangements, such as the participation exemption and the fiscal unity.
Financial year
Corporation tax is a tax on profit in a financial year. That financial year is often the same as the calendar year. However, a broken financial year (for example from May to April) is also permitted. The financial year for the corporate income tax return must be the same as the financial year in the company's articles of association.
A financial year is generally a period of 12 months. The first financial year of a newly formed company can be longer or shorter. The last financial year (upon liquidation of the company) may also deviate from a different period. And if a company decides to change the statutory financial year, the 'intermediate year' can also be longer or shorter.
It is not permitted to change a financial year for the sole purpose of obtaining incidental tax benefits.
Profit calculation
You calculate the taxable profit by applying tax rules to your commercial profit and loss account and balance sheet. For example, when valuing balance sheet items and allocating costs to a financial year. The tax valuation may deviate from the valuation in your commercial annual accounts.
With valuation and profit determination, you determine the annual profit according to "normal commercial practise".
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Loan agreement between the company and the shareholders
Loan agreement between the company and the shareholders
Does the BV lend money to the shareholder, for example to pay personal bills or to buy a house or a car? Then the loan agreement must meet certain ‘at arm’s length’ conditions.
These are conditions that the BV would also impose on a third party, which, incidentally, is in comparable circumstances. For example, a comparable income and wealth. We advise you to put the conditions under which the BV gives you the loan in a loan agreement. Then there can be no misunderstanding later.
The “arm’s length-ness” of such a loan is affected by an array of factors such as the level of the loan relative to the company’s shareholders’ equity, the term of the loan, the repayment commitments, the interest rate, the subordination (junior ranking) of the loan to any other debts the company may have, and the security which has been put up by the company. We would point out that the arm’s length principle should likewise prevail in the event of your standing surety for your company’s debts.
It is advisable to draw up a loan agreement and apply an arm’s length interest rate and redemption terms, as this will nip in the bud any arm’s length disputes that might otherwise come up at a later stage. By all means insist on security being put up by your debtor and see to any pre-existing loan agreements with your company in which this has not yet been seen to being amended accordingly.
The difference between a current account and a loan
The current account differs from a loan. Small amounts are booked back and forth via a current account. Amounts that are booked to this account are settled with each other continuously. For example, you have your own account paid by the BV. You will repay this amount to the BV a short time later. Or you pay a bill for the BV and get the money back quickly. These small amounts are only advanced in advance. Therefore, a current account is not a loan with interest.
What are small amounts?
No interest is charged for amounts up to € 17,500. This only applies to amounts that you withdraw from or transfer to the current account. There may never be more than € 17,500 in the current account throughout the year. As soon as the balance on the current account exceeds € 17,500, interest must be charged on the entire amount.
Example
On 1 January, the balance on the current account is € 10,500. In April you buy a private car. The BV advances the purchase price. As a result, the balance increases to € 20,500. You can repay € 5,000 with your holiday allowance in May. The balance on December 31 is therefore € 15,500. Both the opening balance and the closing balance are less than € 17,500. But because the balance rose to € 20,500 in April, the balance was not lower than € 17,500 throughout the year. Therefore, you have to calculate interest all year round.
The exemption for a current account balance under € 17,500 does not apply if there is a loan.
Example
If an amount of € 16,000 is repaid without interest on a current account with a term of 10 years, this is an interest-bearing loan. The loan must meet all business conditions.
Provide details of home loan
Has the shareholder taken out a loan or mortgage for the owner-occupied home with the BV, on which he must pay off in order to receive interest deduction? Then he must pass on the details of this loan to us via the Income Tax return.
Provisional corporation tax assessment
Most companies that have to pay corporate tax receive a provisional assessment at the beginning of the year. The amount of this assessment is a provisional calculation based on data from previous years. A final calculation always follows later.
Apply for a provisional assessment
Have you not received a provisional assessment from us, but do you expect that you will have to pay tax? Then apply for a provisional assessment.
Change preliminary assessment
Have you received a provisional assessment from us? Then you have to check this assessment yourself and change it if necessary. Do you expect a higher or lower taxable profit than the amount on your assessment? Then request a change in your provisional assessment.
You can report changes to us as long as you have not yet made a declaration. We can process an increase of your provisional assessment over 1 year a maximum of 3 times.
Do you disagree with your preliminary assessment? Then you cannot object. You can, however, update your provisional assessment by submitting a new tax assessment based on your expected profits.
Offsetting losses
A loss from a certain year is settled in 2 ways:
With the taxable profit from the previous year. This is called carry back or backward loss adjustment.
With the profits of up to 6 subsequent years. This is called carry forward or forward loss adjustment. Carry forward means offsetting against future profits.
Settlement by carry back
A loss is first offset against the previous year's profit. Only then do you offset the loss against the profits of the future years.
Settlement by carry forward
Can't make up for a loss against profit from the previous year? Then the loss is deductible in advance. This forward loss adjustment is limited to 6 years.
Transitional rule
For losses from the years prior to 2019, a settlement period of 9 years applies. To avoid adverse consequences, a loss from 2019 (for which a term of only 6 years applies) is settled before losses from 2017 and 2018. A loss from 2020 is settled before a loss from 2018.
When can (previous) losses not be settled against new profits?
In 3 situations, special conditions apply to offsetting losses. You may not be able to offset losses in the following situations:
A change of shareholding occurs in the company.
It concerns passive holding (entity) losses.
Your fiscal investment institution was not classified as an investment institution in an earlier period.
The tax authorities determine the losses with a decision. You can object to this decision.
Provisional loss relief
Do you lose in a year? And do you want to set this loss off against profit from the previous year? Then you do not have to wait until your declaration for the loss year has been completed. If you file the return, you can request for provisional loss relief. We then determine the provisional loss adjustment with a decision. Some conditions that apply:
You submit the declaration for the loss year
The assessment for the year with which the loss is set off must be definitively established
A maximum of 80% of the loss that you declare will be settled
When determining the assessment for the loss year, we take into account the previous provisional loss adjustment.
Fiscal Unity for corporate tax purposes
On request we can designate a parent company together with 1 or more subsidiaries as a fiscal unity for corporate income tax.
You can read more about the fiscal unity on this page.
What are the consequences of a fiscal unity?
In a fiscal entity, the results of the subsidiary (s) are attributed to the parent company. The subsidiary does not cease to exist, not even for tax purposes, but is no longer independently obliged to declare.
An advantage of a fiscal unity is that you can offset the losses of one company against the profits of another company that is included in the same fiscal unity.
What are the conditions for forming a fiscal unity?
In order to form a fiscal unity, the parent company must:
own a minimum of 95% of the shares in the subsidiary
are entitled to at least 95% of the profit and at least 95% of the assets of the subsidiary
have at least 95% voting rights in the subsidiary
be a BV, NV, mutual insurance company, cooperative, foundation, or association that acts as a housing corporation, or has a foreign legal form that is comparable
The subsidiary must:
be a BV or NV, or have a similar foreign legal form
In addition, the parent and subsidiary must:
use the same financial years and profit determination
are actually located in the Netherlands
What if a company is not established in the Netherlands?
A group of companies can consist of companies that are established in the Netherlands and companies that are not. In that case, you may not meet the normal conditions for a tax entity. The members of the group established in the Netherlands can still form a fiscal unity. But only in the following 2 situations:
A parent company established in the Netherlands can form a tax entity together with a subsidiary established in the Netherlands, as long as the shares of the subsidiary are owned by a subsidiary (intermediate company) that is established in another EU Member State. The intermediate company then does not belong to the fiscal unity.
Sister companies established in the Netherlands can form a fiscal unity together, as long as the shares of the sister companies are owned by the same company (top company) that is established in another EU Member State. In this case, you designate 1 of the sister companies as the parent company. The top company itself does not belong to the fiscal unity.
Apply for Fiscal Unity (corporate taxes)
If you want us to designate a parent company with 1 or more subsidiaries as a corporate tax entity, please complete the forms below.
Do you want to form a fiscal unity between sister companies that are established in the Netherlands and whose shares are owned by a company (top company) that is established in another EU Member State? In that case, you may in certain cases choose which sister company you designate as a parent company and which sister company as a subsidiary.
You always fill in part A and part B. On part A you fill in the details of the parent company. On part B that of the subsidiary. For each subsidiary you wish to include in the tax entity, please complete a separate copy of Part B.
You only use part C if a subsidiary is already part of an existing fiscal entity as a parent company. On part C, you enter the details of the subsidiaries of that existing fiscal unity.
The Tax & Customs Authorities will decide on your request within 8 weeks.
How to complete & return the fiscal unity application
You can fill out these forms on your computer. You must then print and sign the forms.
Send the completed and signed forms to the tax office where the parent company belongs. You can find this using the tax and customs branch offices tool.
Does the BV lend money to the shareholder, for example to pay personal bills or to buy a house or a car? Then the loan agreement must meet certain ‘at arm’s length’ conditions.
These are conditions that the BV would also impose on a third party, which, incidentally, is in comparable circumstances. For example, a comparable income and wealth. We advise you to put the conditions under which the BV gives you the loan in a loan agreement. Then there can be no misunderstanding later.
The “arm’s length-ness” of such a loan is affected by an array of factors such as the level of the loan relative to the company’s shareholders’ equity, the term of the loan, the repayment commitments, the interest rate, the subordination (junior ranking) of the loan to any other debts the company may have, and the security which has been put up by the company. We would point out that the arm’s length principle should likewise prevail in the event of your standing surety for your company’s debts.
It is advisable to draw up a loan agreement and apply an arm’s length interest rate and redemption terms, as this will nip in the bud any arm’s length disputes that might otherwise come up at a later stage. By all means insist on security being put up by your debtor and see to any pre-existing loan agreements with your company in which this has not yet been seen to being amended accordingly.
The difference between a current account and a loan
The current account differs from a loan. Small amounts are booked back and forth via a current account. Amounts that are booked to this account are settled with each other continuously. For example, you have your own account paid by the BV. You will repay this amount to the BV a short time later. Or you pay a bill for the BV and get the money back quickly. These small amounts are only advanced in advance. Therefore, a current account is not a loan with interest.
What are small amounts?
No interest is charged for amounts up to € 17,500. This only applies to amounts that you withdraw from or transfer to the current account. There may never be more than € 17,500 in the current account throughout the year. As soon as the balance on the current account exceeds € 17,500, interest must be charged on the entire amount.
Example
On 1 January, the balance on the current account is € 10,500. In April you buy a private car. The BV advances the purchase price. As a result, the balance increases to € 20,500. You can repay € 5,000 with your holiday allowance in May. The balance on December 31 is therefore € 15,500. Both the opening balance and the closing balance are less than € 17,500. But because the balance rose to € 20,500 in April, the balance was not lower than € 17,500 throughout the year. Therefore, you have to calculate interest all year round.
The exemption for a current account balance under € 17,500 does not apply if there is a loan.
Example
If an amount of € 16,000 is repaid without interest on a current account with a term of 10 years, this is an interest-bearing loan. The loan must meet all business conditions.
Provide details of home loan
Has the shareholder taken out a loan or mortgage for the owner-occupied home with the BV, on which he must pay off in order to receive interest deduction? Then he must pass on the details of this loan to us via the Income Tax return.
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