Once you have started your company, or registered a branch office in the Netherlands, it's essential to have a good understanding of the tax components of maintaining a successful venture. Particularly in the Netherlands, where corporate tax laws hold significance, and non-resident shareholders can benefit from variable options to keep their accounting requirements at a minimum. Whether you've recently established a Dutch company or are contemplating one in the Netherlands, this guide will walk you through the critical aspects of Dutch corporate tax requirements post-company formation.
Understanding Dutch Corporate Tax Laws
Dutch corporate tax laws are designed to govern the taxation of companies registered in the Netherlands. Corporations are subject to paying taxes on their profits, with rates that can vary based on the amount of profit earned.
Post-Formation schedule once you have registered a Dutch business
A Dutch business is generlly speaking tax liable for corporate taxes by default.
This means that a Dutch TIN (tax number) will be issued automatically, once the company has been registered at the Chamber of Commerce. This also applies for a branch office registration, which is effiectively treated the same, since the same tax rules apply.
The Dutch Foundation is not taxed by default. It can be registred at the Chamber of Commerce with a non-commercial status. This is an easy process, and bears no extra expenses. The main advantage of this tax-free status of the Dutch Foundation, is that the TIN number is not issued automatically, thus no tax filing requests will be issued, AND, the Foundation is NOT required to prepare or FILE any financial report.
Therefore, the Dutch Foundation is a very interesting legal form, which is used as holding company (typically owning one, or more, Dutch BV's), for the purpose of estate planning, asset protection, and even tax optimalisation.
Circling back to the Dutch BV (and NV, as public company variant) and the branch office;
The issuance of the Dutch tax number means, that once your company's financial year has ended, you will have to submit a corporte tax return. This can be 19 months after the registration, or much shorter. It depends on your financial book year, which is typically decided in the Formation Deed/Articles of Association of the Dutch business.
For example; When you register a Dutch BV on the 18th of August 2024, and you decide a typical financial year end of 31th of december, you have a very short financial year. However, to avoid such an unneccesary tax burden, it's possible to EXTEND your first book year, which means your first book year will be extended to 31-12-2025. Does that make sense?
Because in this case, the next book year starts at the 1st of Jan, which is according to your Formation Deed. By the way, the first book year can also be extended, if your current financial year is for example 31st of July. However, in case you registered a branch office, it's typically not advisable to extend your financial year, it that would create an indescrepancy with your principal legal entity's year ending. Because a branch office is a legal extension of your principal entity, the results of the branch should also be reflected in our principals entity's financial report. In order to do so, it makes sense to have the year ending dates aligned.
So what does this tax filing requirement ask from you? Taxable Profits and Applicability
After forming a company in the Netherlands, one of the primary considerations is the determination of taxable profits, which include revenues, deductions, exemptions, and credits. Understanding what constitutes taxable income is crucial for accurate reporting and compliance with Dutch tax laws.
Let's say you have not registered a company in the Netherlands yet. And you like to understand, what kind of fiscal mess you will end up in, once you pull the trigger. Well, that's actually not so bad.
Say you expect to do 20 transactions, which mainly take place outside the Netherlands( VAT plays no part)
You can easily create a simple profit & loss statements, and balance sheet, based on your expenses and income. If you don't know how to do this, House of Companies is happy to provide you a template, a playbook, and personal assistance to prepare this (upto 20 transactions, we offer this for free!)..
Now, you have an understanding of your profit.
If you have not invested in any machinery, cars, or stock, and all services/products have been delivered in the same fianncial year, in which you invoiced them (and received payment), then What You See, is What You Need to File.
For 90% of our members, this is the case in the first year. It means, you don't need an accountant. You take your overview, login to the tax portal of the Tax office (Belastingdienst.nl), and you submit your corporate tax return. By doing so, the tax software will generate a nice pdf report, including a balance sheet and P&L, and you can download it for your records. Easy peazy. No need for any financial reporting tools, or expensive lawyers, to submit your corporate tax return, thanks to House of Companies ;)
Limitation of Tax Deductions
By identifying eligible deductions and credits, companies can minimize their tax liabilities and ensure adherence to Dutch tax regulations.
The more complex your transations get, the more suitable it will be to consider the fiscal consequences. Understanding a tax regulation, or obtaining a Tax memo from an expensive lawyer, is typically nothing more, then a legally backed instruction to adjust your spreadsheet formula. With the result that your fiscal profit will be higher, or lower, then your 'economic' result which you calculated based on common sense and logic.
For example; One of your expenses is a hightech TV for in your boardroom, which costs 2.500 EUR.
Well you know what it costs. This is the economic expense. However, the tax man is greedy. Which means his emotions often get in the way of logic.
His aim is to postpone your deductable expenses, for as long as possible. If optional, he would prefer you to go bankrupt, so he is legally first dibs as looter, sacrificing also your suppliers profits.
So you paid 2.500 EUR, but you can NOT claim back 2.500 EUR.
For tax purposes, you can only reduce the value of goodwill by 10% of what you paid for it each year. Also, for other fixed assets like inventory and equipment, you can only reduce their value by 20% of their purchase or production cost each year for tax purposes.
Faster fiscal value reduction in the Netherlands
The law allows faster value reduction for some specific assets. This applies to investments in things that help protect the environment in the Netherlands. These items are on a special list called VAMIL. However, you can only use this faster reduction for up to 75% of the total investment costs.
Faster value reduction is also possible for some other specific assets, like investments made by new business owners.
For ships that mainly operate from the Netherlands, you can reduce the investment costs (minus any leftover value) evenly over five years. Instead of this faster reduction, ship owners can choose to pay taxes right away (see Tonnage tax regime in the Taxes on corporate income section).
Fines and Taxes: What You Can and Can't Deduct
1. Fines and Penalties:
- Most fines (like parking and speeding tickets with your company car! or late filing fees for your overdue tax return) and penalties can't be deducted from your taxes.
This includes fines from:
* Criminal courts
* Administrative bodies
* Disciplinary boards
* European institutions
2. Taxes:
- Some taxes can be deducted, like insurance transaction taxes.
- Property transfer taxes are added to the property's cost and spread out over time through depreciation.
- You can't deduct the Corporate Income Tax (CIT) itself.
In simple terms, if you get fined, you usually can't use it to reduce your taxes. For taxes, some can help lower your tax bill, but others can't. It's important to know which is which!
Net Operating Losses: Simplified Summary
Another way the tax man can be greedy, is to restrict the offset of any losses you made in previous financial years.
Starting from January 1, 2022, businesses in the Netherlands can carry forward their losses indefinitely. However, there are limits on how much they can deduct:
1. Up to €1 million of profit: Losses can be fully deducted.
2. Over €1 million of profit: Only 50% of the amount above €1 million can be deducted, plus the initial €1 million.
This new rule applies to losses from 2013 onwards, including startup losses.
For foreign businesses closing down (liquidation) or stopping operations:
- Losses up to €5 million can be deducted if the closure is completed within 3 years.
- For losses over €5 million, there are stricter rules:
* Only applies to EU/EEA countries
* The company must own more than 50% of the foreign business
These rules aim to balance allowing businesses to use their losses while also ensuring they pay some taxes when profitable.
In Conclusion; your first corporate tax return will not be so bad
Corporate Tax Reporting and Filing
Efficient tax reporting and filing processes are vital to meet Dutch statutory obligations. Companies are required to file annual tax returns and adhere to specific deadlines. Failure to comply can result in fines and legal repercussions.
But. It's not that bad. Or as the Dutch say; you don't have to eat the soup as hot, as it is served.
Even if your transactions are somewhat non-ordinary, the tax rules are quit straight forward, and House of Companies provides detailed explanation on ANY type of tax rule which is relevant for your Tax Return. All via our Playbooks, and AI TaxBot which you can use while you submit your first tax return.
By the way; You will need to apply for access to the tax Portal, by requesting an e-herkenning account. This requires personal identification, but House of Companies can act on your behalf!
We can even submit the corporate tax return for you if you wish. For companies with less then 20 (ordinary) transactions, we do not charge any fees (except license and government fees, which are approx 25 EUR per year for a standard e-herkenning account).
If you start a company today, expecting 20 transactions upto 31-12-2025, your time effort on corporate taxes is about 2 hours, and you probably don't need an accountant.
Next Stop; The VAT, The Sales Tax, The fixed (so-called 'indirect') tax on your sales
How bad is this gonna be? And when is it gonna hit you?
Well, it depends on your market entry profile. I mean on an abitious leval.
If you plan to explore the Dutch market, run some marketing campaigns, and hope to pick some low hanging fruit, then you might want to WAIT with the application of a VAT number.
See, the VAT number is NOT automatically issued for Dutch businesses which are managed (and/or owned) by non-nationals. The idea being; that a Dutch business with non-resident managers, could well be considered NON_RESIDENT, or NON_PERMANENT.
As long as you run a Dutch BV, with basic rep office activities, and non VAT-taxable transactions (meaning, you don't service Dutch clients), then you can just operate without having a Valid VAT number. On your Invoice (format) you can list your TIN, and perhaps mention that VAT is pending.
Any expenses that you make in the meantime, and which include Dutch VAT, you can hold on to, and still submit in your first VAT return, once you decide to apply for the VAT number (upto 5 years).
Submitting your VAT returns is done on a quarterly basis. Actually, it's easier then submitting a corporate tax return. But, the stakes are high. A mistake is much more coslty, since the tax is calculated on the sales price, and this means it can destroy your entire profit margin, if not applied correctly.
But, for ordinary transactions, and without stupid mistakes, it's fine to have the ambition to submit your own VAT return. House of Companies provides a playbook, and video on how to do this.
FINAL TIP: If your whole point of setting up a Dutch company is, to obtain a VAT number, then think again. Your foreign company can also apply for a VAT number!
Employing a Staff Member
When you decide to start a company in the Netherlands, you might be spooked by all the 'social' 'contributions' and the complexities that go along with wellfare state, for dutch workers and company owners. But be rest assured. There is no legal requirement to register as employer, or employ staff, if you have no budget(or intention) yet to do so.
You will not have to file any social premium, or wage tax returns ,or anything like that, untill you decide to become an employer. Easy peazy.
In another article, we will explain how to become an employer in the Netherlands, and what it will cost you. But for now, we will try to keep a simple overview, for a simple market entry.
FINAL TIP: If your whole point of setting up a Dutch company is, to register as Employer, then think again. Your foreign company can also apply for a wage tax number! Use House of Companies to get it done online, and yourself!
Conclusion; What does it cost to start a Dutch company, and do I need an accountant?
Based on a typical (90% of House of Companies' cases) market entry as listed above, with an average newcomer to the Netherlands, that performs 20 transactions or so, the cost will be:
Notary fees for the Dutch BV: 1.000 EUR (advertised with lower fees for residents)
Alternative: Branch Office registration using House of Companies Playbook 0 EUR
Chamber of Commerce Registration: 50 EUR
Corporate Tax Filing: 0 EUR (if you can use a spreadsheet on a basic level)
e-herkenning account to access belastingdienst.nl 25 EUR py
VAT registration: 0 EUR if you register yourself using our Playbook
VAT Filing: 0 EUR, but we advise to use our Corporate Plan (295 EUR), to get insights in the VAT relevancies for your transactions
Register as Employer: 0 EUR, supported by the Playbook of House of Companies
Payrolling Staff: 15 EUR pm, per employee, including issuance of salary slips and tax filing on monthly basis (We do NOT advise you to do this yourself. Its a real hassle. House of Companies does not provide Playbooks on submitting payroll tax return).
Tip: Officially a Dutch legal entity will need a Dutch (virtual) address. However, as subsidiary, or as branch office, you can 'temporarily' use your foreign address, while you are sourcing for a proper location in the Netherlands. This saves you money on a Dutch Business Center, for a virtual services, that only has a virtual value.
Mastering Dutch corporate tax laws post-company formation is a journey that demands attention to detail, adherence to regulations, and continuous learning.
But it does pay off. Research shows that global entrepreneurs that do their own bookkeeping, run their business better!
Once the basics are clear, House of Companies is happy to assist you with bespoke accounting and tax services!
Stay informed, stay compliant, and together with House of Companies we pave the way for success in the thriving Dutch business ecosystem.
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