The Advantages of the Netherlands Tax System for Australian Businesses

If you are an Australian company looking to expand its operations into Europe, it may be worth considering establishing your operations in the Netherlands. Companies including Google Australia, Rio Tinto, BHP, Starbucks, IBM and Yahoo have made the Netherlands their home.

One of the big attractions to basing your operations in the Netherlands is its business friendly tax system. Please find below our summary of the key features:

  1. Netherland has concluded tax treaties with the most of the countries of economic importance including Australia;
  2. The corporate income tax rate is progressive and hence depends on the amount of annual profit. The first EURO 200,000 is taxed at 20%, the additional profit is taxed at 25%. The losses for the taxation purposes, may be carried forward for 9 years and carried back for 1 year;
  3. Thin capitalization rules have been abolished as of 2013;
  4. Absence of withholding tax on royalties and interest;
  5. Participation exemption to avoid double taxation for Dutch parent company and its qualifying subsidiary. The exemption applies to dividends and capital gains derived from active subsidiary company of which the parent company holds an interest of at least 5%. Also provided that the subsidiary:
    • Is subject to a reasonable effective tax rate based on Dutch tax principles; or
    • Less than 50% of the assets of the subsidiary consist of “passive” assets based on the fair market value of the assets.
  6. Transfer pricing – establishing a strategic entity of the Netherlands in the multinational group offers access to a wide range of tax treaties with other countries, also some countries with low tax rates.
  7. Netherlands offers ‘APA’ (Advanced Pricing Agreement) rulings which will give foreign investors certainty upfront by the tax authorities regarding the required margins attributable to the Netherlands.
  8. Tax incentives to recruit expat employees by way of an eight year long partial wage tax holiday, the so called 30%-ruling. The employer is allowed to grant tax free 30% reimbursement to expat employee who have expertise which is scarcely available in the Netherlands. (Subject to other conditions as well)

Netherland’s geographical location, recognised role as the logistics hub of Europe, and the pro business corporate tax system makes the Netherlands an attractive base for Australian companies looking to do business in Europe.

If you are an Australian business interested in expanding to Europe, please reach out to us.

Special thanks to our Lawyers Associated Worldwide (LAW) member firm, Fruytier Lawyers in Business B.V. for its assistance in preparing this summary.