Keywords: Multinational companies; Year-end closing; Result for the year; Tax planning; Corporate income tax; and Dividend tax.
Preface
The end of the year and the transition into a new year are busy period for companies and businesses. For Finance and Accounting perspectives, the year-end closing will deal with several tasks from updating the accounting books and be ready for opening the books for the following year until organizing the annual general meeting of the Management Board to approve the annual accounts.
Especially for companies with operations worldwide or multiple jurisdictions, this is the time when the stakeholders review the business through the annual accounts, not just to understand the business’s financial standing, but also to hope for taking benefit on the tax planning strategy. The hope that the strategy will benefit a company’s worldwide tax burden while furthering the company’s goals, or when distributing earnings to the parent company or to the shareholders for the successful businesses. The tax planning mostly includes re-evaluating existing structures and developing the impact of other options due to the international tax changes from tax reform.
Year-end closing and the corporate income tax
As part of year end-closing, companies in the Netherlands must file a set of accounts with the Dutch Chamber of Commerce, these accounts called Statutory accounts. The accounts include any tax due which also needs to be filed with the Dutch Tax Authority (DTA). The financial year for the corporate income tax return must be the same as the financial year in the company’s articles of association.
In general, companies in the Netherlands are subject to corporate income tax (CITA) on their worldwide income. This generally applies to private and public companies with Dutch residency. The Dutch Corporate tax rate in the 2021 starts with 15%, if the taxable income amount is less than €245,000, For the taxable income amount of €245,000 or higher, companies are liable to pay a corporate tax rate of 25%. In 2022 the threshold becomes € 395,000 where the percentages remain unchanged.
Certain companies can apply for an exemption to access lower corporate tax rates. Also, the taxable income can be reduced if the company has deductible losses. These exemptions only apply to Dutch resident companies, for example a Dutch B.V.’s company (Besloten Vennootschap/private limited liabilities company). Dutch resident companies are subject to the CITA with their entire worldwide income. However, non-resident companies can only be liable for Dutch CITA if they have Dutch income.
Multinational companies can take advantage of international differences in corporate tax system to reduce their tax burden. This depends on the mutual agreement between countries (tax treaties) whether it is on their tax advantage. The Netherlands is a leading stream country for international income flows, which is used by multinational companies because its significant list of countries participated in the Dutch tax treaties.
Result distribution and the tax withheld
If companies make success and are profitable at the year-end of the books, the board may decide to distribute profits to shareholders, as so called a dividend. The company that issues the dividend withholds the dividend tax and pays this to the DTA. The company that pays the dividend must file the return for dividend tax. The return must be filed within one month after the dividend being issued or distributed.
For a shareholder owns shares or profit-sharing certificates in a company in the Netherlands, this company will withhold 15% tax on any dividend received by a shareholder. If this shareholder resides outside of the Netherlands, they may be eligible for full or partial exemption from this dividend tax or may be entitled to a refund. This depends depends on whether the shareholder’s country of residence has concluded a tax treaty with the Netherlands or not.
Foreign shareholders can be eligible for a refund as mentioned above, only if they have paid tax more than if they were a Dutch shareholder, and if they are unable to deduct this tax in their own country. These two conditions can make them to be eligible to request for a refund.
For more information, please contact our Amsterdam Office: nazali_amsterdam@nazali.com
Sources:
Filing your Dutch corporate tax return | Business.gov.nl
Tarieven voor de vennootschapsbelasting (belastingdienst.nl)
Dividend and dividend tax in the Netherlands | Business.gov.nl
Moving your business to the Netherlands | Business.gov.nl
Tax treaties (belastingdienst.nl)
NAZALI TAX & LEGAL