The Netherlands as a gateway to Europe

MARK

Hello and welcome to TLT's International Tax Video Series: Five Essential Questions, where we explore key tax issues for businesses operating across borders. I'm Mark Brody, partner at TLT and head of our corporate tax and real estate tax practice.

I'm delighted to be joined today by Peter Van Velthoven, Senior Associate at Holla, specialising in international tax structuring and real estate taxation. In this episode, Peter is going to share practical insights into why the Netherlands remains a key jurisdiction for international groups and inbound investment.

Together, we're going to explore the current landscape, the key features of the Dutch tax system, and what businesses need to consider when operating in the Netherlands today.

Welcome, Peter.

PETER

Thank you, Mark.

MARK

So, my first question is: why the Netherlands? Why do international groups continue to choose the Netherlands as a hub or entry point into Europe?

PETER

Yes, thank you Mark. That's a good first question. In my view, the Netherlands is still very attractive as an entry point into Europe. First of all, because it is a very practical jurisdiction. The Netherlands has a strong legal system, a stable tax administration, a highly educated workforce, and excellent logistics and digital infrastructure. For UK and international businesses, it is also geographically very well located.

Historically, the Netherlands has also been very used to international business. Many Dutch tax professionals, legal advisers, banks, service providers, and the tax authorities themselves are internationally oriented and very comfortable working in English. This, of course, makes implementation easier.

Lastly, and this is what we're here for today, the Dutch tax system has traditionally been designed to facilitate international business and cross-border investment.

That does not mean the Netherlands is a low-tax jurisdiction in the old sense. In fact, substance and transparency are very important nowadays. But for businesses or investment platforms with real operations, the Netherlands can still be an effective and predictable jurisdiction.

MARK

Thanks, Peter. That leads us quite nicely onto my next question, which is just around some of the key features of the Dutch tax corporate system. What should foreign investors understand about the Dutch tax regime?

PETER

Like in any country, foreign investors or businesses with a presence in the Netherlands will be subject to corporate income tax. The Netherlands has a corporate income tax rate of 19% on the first €200,000 and 25.8% above that.

There are two key features I want to point out. The first is the participation exemption. This has broad application in the Netherlands and applies to shareholdings of 5% or more. Under the participation exemption, dividends and capital gains from subsidiaries can be exempt from Dutch corporate income tax.

This is very important for holding structures, M&A and international group structures because it helps prevent double taxation.

Another feature that is very important is the Dutch tax treaty network. The Netherlands has an extensive bilateral tax treaty network focused on stimulating cross-border activity. Under those treaties, withholding taxes can, for example, be reduced significantly.

At the same time, I want to mention that, for a long time, the Netherlands was seen as a tax-efficient holding jurisdiction, and I think it still is. However, the tax system has changed and is no longer about Dutch shelf companies or holding companies on paper. Topics such as substance, governance and transfer pricing all need to be considered.

But if you build a real presence here and genuinely use the Netherlands as a hub or entry point into Europe, it can still be a very attractive and efficient jurisdiction with a stable corporate income tax system.

MARK

That's really interesting. Thanks, Peter. I'm also wondering about tax compliance and reporting. What compliance and reporting obligations apply when investing in the Netherlands?

PETER

First of all, a Dutch company will have to file corporate income tax returns in the Netherlands. Deadlines are five months after year-end, but if you engage a tax adviser, extensions of up to 16 months after year-end can be obtained.

If you have employees in the Netherlands, you will also need to carry out wage tax administration, including registering as a withholding agent and filing monthly wage and payroll tax returns.

VAT is also an important point. Depending on your activities in the Netherlands, you may need to register as a Dutch VAT entrepreneur and complete periodic VAT filings.

What is important to note is that these compliance obligations do not only apply to Dutch legal entities. They could also apply if you have a factual presence in the Netherlands, for instance through a branch or permanent representative.

The last thing I want to mention, which is perhaps quite unique, is that the Dutch tax authorities are very accessible and are known for their pragmatic and cooperative approach. For example, it is possible to have advance consultations with the Dutch tax authorities and obtain upfront certainty on the tax treatment of specific structures or transactions through tax rulings.

MARK

That's great. One of the things that keeps tax so interesting is that it's always changing, particularly in the UK. What are the current hot topics or policy developments in tax in the Netherlands at the moment?

PETER

One of the hot topics at the moment is employee participation, especially for startups and scaleups. The Dutch government wants to make it more attractive for employees to participate in the growth of their company through incentive or equity plans. The government is looking to introduce measures and legislation to help startups and scaleups attract and retain talent, including international talent, in a tax-efficient way.

A second hot topic, which has been relevant for many years, is innovation and R&D. The Netherlands is very focused on supporting innovation and, for instance, has an innovation box regime under which qualifying profits from innovative activities can be taxed at an effective rate of 9%.

Another key area is sustainability and green innovation. Areas such as energy transition, grid infrastructure and green business models are hot topics across many business sectors. From a tax perspective, you also see developments in areas such as investment allowances, depreciation, subsidies, and tax measures around energy and infrastructure projects.

Finally, while perhaps not a hot topic, as you may know, we have had a new government in place for the past few months, and the Dutch business climate is very much on its agenda. The current direction is that the government wants to preserve the international business climate, including by maintaining significant tax features such as the participation exemption, the treaty network, the innovation box regime and the expat regime.

MARK

One final question for you today, Peter, before we wrap up. If you had one key takeaway or practical tip for UK or international businesses looking at the Netherlands as a place to invest, what would that be?

PETER

I think the most important point is not to look at the Netherlands as the old-fashioned holding jurisdiction with shelf companies, but really as an international operational platform and an entry point into Europe. If you look at the Netherlands in that way, the tax system can be very attractive and predictable.

However, if your structure is mainly tax driven and lacks substance, it can become vulnerable.

My key takeaway would therefore be to involve a Dutch legal or tax adviser at an early stage in order to make the best use of the Dutch legal and tax framework.

MARK

Many thanks for joining us today, Peter. For further insight and to watch upcoming episodes, please visit the TLT website. You can also connect with myself or Peter on LinkedIn.  

Thanks a lot for joining us today.