Dutch

tax 
treaties 

What’s the advantage of Dutch Tax Treaties?

The most important advantage of the Dutch tax treaties is to relieve double taxation. This relief is given in the form of a foreign tax credit or a tax exemption for foreign income or capital located abroad.

 

How can income be taxed by two different countries?

Because both countries apply a different principle on why they feel entitled to claim taxes. For example, one country might claim taxes on a company, simply because the company was incorporated according to its laws. Which is true for the Netherlands. So any legal entity incorporated by Dutch law is considered to be tax liable in The Netherlands. However, another country might claim that that same Dutch entity would be taxed in their country, based on the fact that the sole staff member (director) is a resident in that country. So based on the location of effective management, the other country might also tax the company. 

 

Double taxation is an unwanted situation. To avoid that income is double taxed the Netherlands has concluded tax treaties with a considerable amount of countries. 

 

A tax treaty is an agreement between two countries. This agreement specifies which county can tax which income. Because a tax treaty is an agreement between two countries they will have to negotiate on its contents. This is why the contents of the treaties are not the same for every country. In order to know which country can levy taxes, you will have to read the appropriate tax treaty.

 

A tax treaty between countries overrules the domestic withholding tax laws. A tax treaty can, for example, set rules for incoming and outgoing transactions. The treaty will also contain a tie-breaker rule. This tie-breaker rule will decide which country can levy taxes when, after the rules of the treaty have been applied but still both countries want to tax the income.

On Belastingdienst you will find the complete list of countries the Netherlands has concluded a tax treaty with.

What if no there is no tax treaty?

The Netherlands has not concluded a tax treaty with all countries in the world. When the Netherlands does not have concluded a tax treaty with a certain country, the “Double Taxation (Avoidance) Decree 2001” applies.

 

When you have income from a country, the Netherlands has not concluded a tax treaty with it does not mean that the Netherlands will levy taxes from this income. This is because the Decree applies to this income. The application of the decree will avoid the double taxation of that income. Meaning that you are entitled to double tax relief.

 

For more information please do not hesitate to contact us.

Domestic corporations are required to withhold taxes as follows

 

 

 

 

 

 

 

 

 

 

 

 

Notes

  1. A 0% WHT rate applies to payments to a resident corporation when its shareholding qualifies for the participation exemption and the shares form part of a company whose activities are carried on in the Netherlands. However, dividend WHT may be levied on certain profit-participating loans.

  2. The lower rate applies if the foreign company directly owns at least 25% of the capital of the Dutch company.

  3. The 5% rate is applicable if the foreign company directly owns 10% of the capital of the Dutch company. The 0% rate is applicable if the dividend originates from ordinary taxed profits and the dividend is tax-exempt in the hands of the recipient.

  4. Based upon the treaty concluded with former Yugoslavia.

  5. Negotiations on (revisions of) tax treaties are currently pending with Angola, Aruba Australia, Belgium, Brazil, Chile, Colombia, Costa Rica, France, Indonesia, Kenya, New Zealand, Poland, Singapore, Slovak Republic, and Spain. The revised treaty with the Czech Republic is signed but not yet effective.

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