Corporate Tax in Netherlands

1- TAXATION

In general, a Dutch resident company is subject to Corporate Income Tax on its worldwide income. However, certain income can be exempted or excluded from the tax base. Non-resident entities only have a limited tax liability with regard to income from Dutch sources.

The standard Corporate Income Tax rate is 25%. There are two taxable income brackets. A lower rate of 20% applies to the first income bracket, for taxable income up to EUR 200,000. A special regime applies with respect to profits, including royalties, derived from a self-developed intangible asset (developed after 31 December 2006). In this so-called innovation box, the taxpayer may opt, under certain conditions, for the application of a lower effective rate on taxable profits derived from these intangible assets. The effective tax rate of the innovation box is 5%. The innovation box is applicable if at least 30% of the profits have been originated by the patent.

There are no provincial or municipal corporate income taxes in the Netherlands. In the Netherlands, corporate residence is determined by each corporation’s facts and circumstances. Management and control are important factors in this respect. Companies incorporated under Dutch law are deemed to be residents of the Netherlands (although not with respect to certain provisions, such as the participation exemption and fiscal unity).

2- Company size

2.1 Criteria

Companies are classified by size using three criteria (articles 395a, 396, 397 and 398 NCC)7:

• Total assets as recorded in the balance sheet;
• Net turnover;
• Average number of employees.

For a parent company, the value of total assets and net turnover for this purpose are its own (stand-alone) figures plus those of its group companies (i.e. on a consolidated basis). The average number of employees includes the employees of group companies. This does not apply if the company applies article 408 NCC, in which case the size criteria are determined on a stand-alone (unconsolidated) basis.

Article 408 NCC is discussed in Chapter 6 ‘Financial statements’, paragraph 6.2. The company’s assets for this purpose must be determined on a historical cost basis.

2.2 Categories

Companies are classified into four categories:

• Large;
• Medium-sized;
• Small; or
• Micro.

2.3 Classification chart

A company is classified in a particular category (micro, small, medium-sized or large) if it meets at least two of the three criteria for that category on two consecutive balance sheet dates. The size of the company calculated at the end of the first financial year is decisive for the classification of the first and second financial year. Please note that the quantitative size criteria may be subject to change (article 398-4 NCC).