Which Dutch withholding taxes are relevant for my company in The Netherlands?
Withholding taxes are deducted, in The Netherlands, from interest, royalties and dividends distributed abroad. A withholding tax is an income tax that needs to be paid to the Dutch tax Authorities by the payer of the interest, royalty or dividend. Governments use withholding taxes to fight tax evasion. According to Wikipedia, the definition of withholding tax is:
‘Withholding tax, or a retention tax, is an income tax to be paid to the government by the payer of the income rather than by the recipient of the income. The tax is thus withheld or deducted from the income due to the recipient. In most jurisdictions, withholding tax applies to employment income. Many jurisdictions also require withholding tax on payments of interest or dividends. In most jurisdictions, there are additional withholding tax obligations if the recipient of the income is resident in a different jurisdiction, and in those circumstances withholding tax sometimes applies to royalties, rent or even the sale of real estate. Governments use withholding tax as a means to combat tax evasion, and sometimes impose additional withholding tax requirements if the recipient has been delinquent in filing tax returns, or in industries where tax evasion is perceived to be common.’ - Wikipedia
Mostly the Dutch withholding tax rate is 15%. However, The Netherlands does not levy a tax on royalties and interest income.
When dividends are paid to the mother company within the EU, no tax is due because of the participation exemption and the European freedom of capital movement-principle.
Withholding taxes are due in the situation when a company distributes a dividend to its shareholder(s). In this situation, most of the times, the standard rate of 15% applies.
Dividends paid out to a related company outside of the EU are subject to withholding tax. When there is a tax treaty between the two countries the withholding tax of 15% might be reduced.
A tax treaty is an agreement between two countries stating which of the countries may tax what income. One country levies taxes and the other provides a reduction or exemption.
A list of the countries with which the Netherlands has signed a tax treaty is available on the website of the Dutch tax authorities. https://www.belastingdienst.nl/wps/wcm/connect/bldcontenten/belastingdienst/individuals/tax_arrangements/tax_treaties/overview_of_treaty_countries/
When The Netherlands has a tax treaty with the country that distributes the royalties, interest or dividend, it is possible that the taxes are exempt or have to be refunded. This depends on the agreements made in the tax treaty. When a company is entitled to an exemption or refund they have to request this with the tax authorities of the concerning country.
Apply for a Tax Residence Declaration in The Netherlands
If you request a full or partial exemption or refund via the application of a Tax Treaty, the treaty country may ask for a certificate of residence (woonplaatsverklaring). INCO can help you to apply for the Tax Residence Declaration, and further consult you on any substance requirements.
When no request for a (partial) exemption is submitted, tax is due at the moment of the payout of the dividends. It is possible to request a refund of the too much-withheld taxes.
The procedure for filing a refund request is different in every country. In The Netherlands, for example, a certificate of residence is obliged. This certificate states in which country payroll tax is due. Payroll tax is always due in the country of residence.
INCO can help you with all your questions related to withholding taxes.
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