Entrepreneurial Guide to Tackle Taxes for Your BV in the Netherlands

Despite being among the smallest countries in Europe, the Netherlands presents itself as a diamond location for entrepreneurial activities. Its world-class economy, highly educated workforce, and reliable political structure attract business owners and successful mindsets to establish their business footing.

Besides everything, the gleaming tax climate is among the most interesting features that enlist the Netherlands into the list of most open economies worldwide for local and international corporations. 

Alright, fellas, We’ll explore the realm of taxes in the Netherlands. I know it isn’t the most entertaining topic, but hey, the business world is not exactly ‘entertaining,’ right? 

If you’ve set your mind on registering a company in The Netherlands, understanding the complex game of taxes can be your secret weapon to save yourself from unforeseen trouble. 

Let’s break down all the taxes BVs are usually entitled to pay without making it a headache. Shall we?

Corporate Income Tax

To begin with the list of taxes, Corporate Income tax stands tall among all the others. Calm down; it’s not as scary as it sounds. All you need to do is keep track of your annual earnings and subtract the allowable costs, and there you’ve got your taxable profit. 

You can think of it as the entrance fee to the business world in the Netherlands.

This tax depends upon the annual profit margin of your BV. In the year 2023, the rate of corporate income tax for taxpayers was 25.8%, i.e., 19% for taxable income up to €200,000.

The Dutch Corporate Income Tax Act, in particular, does not provide a specific method for the computation of annual taxable profits. Therefore, the profits are usually determined under sound business practices and in a consistent manner. 

In principle, the taxable income is calculated in Euros. However, the taxpayer may get approval from the tax authorities to determine the profits using another functional currency provided that certain conditions are met. 

CFC Rules

Controlled Foreign Companies or CFCs have particular rules included in the EU ATAD - Anti-tax Avoidance Directive. However, these rules fall under the Corporate Income Tax category, with a few tweaks. 

The passive income of a CFC is entitled to tax in the hands of the Dutch controlling person. 

In certain cases under the CFC rules, the passive income of a CFC will be subject to corporate income tax. Relief from double taxation is allowed for foreign tax incurred when the passive income is distributed to the Dutch company.  

According to ATAD, a foreign legal entity is qualified to be CFC if the Dutch taxpayer directly or indirectly owns more than 50% of the votes or capital of the foreign company. 

VAT (Belasting over de toegevoegde waarde: BTW)

Value Added Tax, or BTW as known in the Netherlands, is another vital aspect of Dutch Taxation. The BV entrepreneurs generally have to comply with the VAT on all their goods and services. 

All businesses, except for some foundations and associations, must add VAT to the price of their goods and services. 

There are three different levels of BTW/VAT. The standard VAT rate is 21%. However, certain services or goods are subject to a reduced rate of 9% or even )%.

Businesses and freelancers must calculate the VAT they have earned and spent through the quarterly sales tax declaration. Then they will pay this amount to the Belastingdienst.

Understanding the VAT rates, compliance requirements, and exemptions is crucial to avoid any penalties or higher taxes. Keeping accurate records and submitting your VAT returns will help you maintain a healthy relationship with the tax authorities.

Payroll Taxes

For BVs with a certain number of employees and workforce, payroll taxes apply that are generally covered as Wage Tax, Employment Insurance, and Specific tax benefit - 30% ruling.

Wage Tax: The employers have to withhold the wage tax from all employee’s gross salary and must remit this amount to the tax authorities. For 2023, the income tax rates for employees are as follows.

Employment insurance: Dutch BV Employers are required to withhold the contributions for state social security and remit the total amount to the tax authorities. The rates of social security are determined on an annual basis. In 2023, the percentage employed for employment insurance was 27.65% levied over a max. Annual income of €37,149. The employed person’s insurance schemes are usually:

• Invalidity Insurance Act
• Sickness Benefits Act
• Unemployment Insurance Act

Special Tax Benefit (30% Ruling): This type of tax is not absolute. However, the tax authorities may grant a special tax benefit to foreign employees upon request. This 30% ruling is granted specifically to highly skilled expatriates with expertise working in the Netherlands (provided that certain conditions are met). However, this tax benefit is subject to a limitation starting from January 1, 2024.

Real Estate Transfer Tax

Another Indirect Tax that needs to be considered beforehand is the real estate transfer tax. If you want to acquire economic or legal ownership of a property in the Netherlands, you are subjected to real estate transfer tax. By the year 2023, the rate scaled at 10.4%. 

A special 2% rate applies to the residential property if occupied by the acquirer, and it will serve as their main residence. The residential property that serves as a second home, for instance, a vacation house, will be subjected to the complete real estate transfer tax of 10.4%. 

This type of tax is generally calculated on the grounds of the fair market value of the property and the purchase price. 

Sum Up

Tackling taxes as a foreign entrepreneur in the Netherlands requires you to thoroughly understand the tax regulations of the country. Taxes might be scary, but drifting between the rules and regulations can help you save a nice percentage and also avoid any penalties. So, keep your BV thriving without worrying about the tax implications.

(Disclaimer: Devdiscourse's journalists were not involved in the production of this article. The facts and opinions appearing in the article do not reflect the views of Devdiscourse and Devdiscourse does not claim any responsibility for the same.)