For entrepreneurs, establishing a company in another country where they trust the potential of their products and services in a more international market outside their own country is always attractive. Setting up a business in another market also entails compliance with that country's tax and business laws. While countries’ tax laws may show parallels, they differ at various points. Additionally, understanding countries’ tax and business laws is important for benefitting from tax incentives in areas such as employment. In this article, as Unusual Companies, a trusted service provider offering Company Establishment Services, Dutch Startup Visa Consultancy and a Business Accelerator Program for Startups, we will provide a general overview of Dutch tax and business law and answer the question “How can companies comply with Dutch tax laws?”
Remember, Dutch tax law for businesses and Dutch labour law for businesses are not limited to those listed in this blog. However, you will find a few important topics in this blog to help you discover how inviting the Dutch tax regime is, especially for foreign entrepreneurs at the Startup stage, and to minimise tax-related business risks. Before we move on to examining Dutch tax laws, let's remember why compliance with tax and labour laws is important.
Why is compliance with tax and labour laws important in the Netherlands?
Regulations and laws outline the general framework of trade operations in a country and protect all stakeholders. Compliance with Dutch tax and labour laws is essential to business in the Netherlands. Companies not complying with tax and labour laws may face significant financial penalties. Therefore, disobeying the law entails business risks and Dutch compliance costs.
Things to know about the Dutch tax system
In the Netherlands, tax processes are carried out by the institution known as Belastingdienst. Everyone with a residence permit in the Netherlands must pay income tax based on their cumulative income. There are also types of taxes that companies established in the Netherlands are obliged to pay. Business owners in the Netherlands are obliged to pay what we can generally call business taxes, including income-related, municipal, and environmental taxes. To operate in the Netherlands, a company must register with the Dutch Chamber of Commerce, the Kamer van Koophandel (KvK), and obtain a trade registry number. When it receives this, information automatically goes to the Tax Administration and Customs Administration, and the company’s existence becomes official. Afterwards, tax identification numbers are assigned to companies by the Tax Administration (Belastingdienst) in line with the eligibility decision. It should not be forgotten that trade registration and tax identification numbers are different. The main types of taxes that concern companies can be summarised as Dutch corporate tax, Dutch payroll tax and Dutch value-added tax.
Dutch Corporate Tax
Generally, a company established in the Netherlands is subject to Dutch standard corporate tax on its global income. The standard minimum corporate tax in the Netherlands is set at 25.8%. While this rate is valid for companies with annual income of € 200,000 and above, companies generating income below this are considered in the 19% tax bracket. In the Netherlands, private limited companies (besloten vennootschap/ B.V) and public limited companies (naamloze vennootschap/ N.V.) are obliged to file a corporate tax return every year.
Payroll Tax
Payroll tax is a type of tax that concerns companies employing in the Netherlands. This tax includes breakdowns such as payroll tax, national insurance contributions, employee insurance contributions and income-related contributions according to the Health Insurance Act (Zvw). Employers are obliged to bear all costs, including contributions under employee insurance schemes, for example, the Sickness Benefits Act (ZW), the Disability Insurance Act (WAO) and the Unemployment Insurance Act (WW). Employers can initiate employment of workers in the Netherlands by completing the registration process with the Tax and Customs Administration.
Value-added Tax
In the Netherlands, value-added tax is also among the tax types that concern employers. The rates set for value-added tax, known in Dutch as “Belasting Toegevoegde Waarde” or BTW for short, are 21%, 9% and 0%.
Tax incentives for Dutch employers
The tax system for companies in the Netherlands is similar to many countries. However, the Netherlands differs in the financial incentives it provides to employers who produce value-added work.
The Netherlands 30% Ruling for Highly Skilled Migrants
One example of the tax incentives in the Netherlands is the 30% Ruling. The 30% Ruling allows eligible expatriate employees to receive 30% of their gross salary tax-free, which is beneficial to employers as it helps attract and retain skilled international talent by providing a competitive financial incentive.
Innovation Box Regime
Companies that generate income from an innovative product or technology for which they have a patent may be subject to the innovation box tax regime. This regime, implemented by the Dutch government to encourage innovation in the country, requires businesses whose 30% of their total profit comes from innovative products or technology to pay a 9% corporate tax for this part of their income.
Entrepreneur Allowance
Business owners in the Netherlands may also be eligible for an entrepreneur allowance. It includes allowances such as entrepreneur allowance deducted from profits, private company ownership allowance, tax deduction for new companies, R&D tax credit.
Simplify tax complexity with Unusual Companies’ Services
As Unusual Companies, we can be your trusted partner for Labour Law Services in the Netherlands! Contact Unusual Companies today to mitigate risks arising from Labour Law and Tax in the Netherlands. One of our experienced Tax Specialists will be in contact with you shortly.
