TAX to 58% of the investment if it exceeds

TAX ENVIRONMENT

Corporation
tax rate

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The corporation tax rate in the Netherlands depends on the taxable amount.
The taxable amount is the taxable profit less deductible losses.

The tax rate is 20% if the taxable amount is less than €200,000.

The tax rate is 25% if the taxable amount is equal to €200,000 or higher. (government.nl, 2018)

Fiscal unity

A parent company can form a tax group, a so-called fiscal unity, with one
or more of its subsidiaries, which allows the group to deduct a loss incurred
by one company from the profits generated by another.
The establishment of a tax group is only possible under certain conditions. The
main condition is that the parent company holds at least 95% of the shares in
the subsidiary.

Aside from this, all potential group members must have the same financial
year, apply the same accounting policies and be established in the Netherlands.
(idem)

 

 

Asset Investment Tax
Relief

Investments in certain types of assets can qualify for
a special deduction in calculating taxable profits. This relief is in addition
to the usual depreciation and is computed as a percentage of the qualifying
expenditure.

The available deductions fall into the three
categories below:

 

Small-scale investment deduction

This deduction applies to investments in business
assets of 2,300€ up to
11,242€ per
calendar year. The deduction amounts to 28% for investments from 2,300€ up to 56,024€. The maximum possible deduction is 15,687€ for investments of 56,024€ up to 103,748€. The relief gradually decreases to zero when
the investment reaches 311,242€

 

Energy investment allowance (EIA)

This deduction applies to investments in qualifying
new energy-saving assets. The maximum investment qualifying for relief is 120
million Euros. The relief amounts to 58% of the investment if it exceeds 2,500€ per calendar year.

 

Environmental investment allowance (MIA)

This deduction applies to investments in qualifying
new assets contributing to environment protection. The relief provided is 36%,
27%, or 13.5%, depending on the type of asset and whether the investment
exceeds 2,500€ per
calendar year. (Investinholland.com, 2018)

 

Research and Development
Act (WBSO)

Certain R&D activities (development of technically new physical products,
production processes, or software) qualify
for a payroll tax reduction (WBSO).

The reduction amounts to 32% (40 percent for
start-ups) of the relevant payroll costs relating to R&D (R&D payroll
costs, but also other R&D costs and R&D investment expenditures), up to
a maximum of 350,000€, and 16% for any excess. (English.rvo.nl, 2018)

 

The Innovation Box

So as to stimulate R&D activity in the
Netherlands, a special elective regime, the so-called “Innovation Box” can be chosen
to be applied to income from self-produced qualifying intangible assets.

Qualifying income falling in this innovation box will be
subject to an effective tax rate of 5%.

Generally, intangible assets qualify for the innovation
box in case they are patented or generated from R&D activities that fall under
the WBSO.

Under certain conditions, this favourable tax rate also
applies to certain software, production methods, product development or
improvement. It can, on the other hand, not be applied to marketing intangibles
such as trademarks and logos.

The 5% tax rate covers all income derived from the
qualifying assets, including capital gains.

In the case of patents, the regime does not only apply
to the actual licensing income generated, but also to the income generated from
the sale of goods and services that arose from the innovations. All income derived
from the elected assets are pooled.

The income that can be covered by the innovation box is
essentially without a cap, but it usually only covers income exceeding the associated
development costs in the pool.

Losses incurred by assets falling in the innovation
box are also deductible against corporate income at the standard tax rate. (Investinholland.com, 2018)

 

 

 

 

 

Deductible and
Non-Deductible Expenses

In general, all expenses incurred for the purposes of
carrying on a business are deductible when calculating taxable profits.

Non-deductible expenses include:

• Dutch corporate income tax and, if a double taxation
relief provision applies or the income is exempt from Dutch tax, foreign taxes
on income or profits

• boats used for business entertainment, such as
customer receptions

• certain fines and penalties imposed under Dutch or
European law (including tax penalties and traffic fines).

Also non-deductible is 0.4 percent of the total wage
bill, with a minimum amount of 4,500€. Alternatively, 26.5% of certain expenses
are non-deductible:

• food and drink

• business entertainment

• conferences, staff excursions, and similar
activities.

Corporate income tax deductions for equity-settled
awards such as shares, stock options, warrants, restricted shares, and
restricted share units generally are not applicable in the Netherlands.

The costs related to cash settled awards can be
deducted upon payment unless the employee is obligated to convert the cash
payment into company shares.

Stock appreciation rights are only deductible if given
to employees with an annual salary below 556,000€.

The development costs for in-house developed
intangible assets may be deductible provided it is done so in the year costs
are incurred.

A number of other provisions specifically restrict the
deduction of certain expenses, including interest. (Investinholland.com, 2018)

 

 

 

Tax Treatment upon
Cessation of Business

 

Liquidation

Should a business go into liquidation, there is no
longer a corporate income tax liability. The company is obligated to prepare a
final balance sheet for tax purposes at the time of liquidation, in which assets
and liabilities are presented at their fair market value. This ensures that all
benefits not yet reported for tax purposes are included in the profit for the
final financial year. Any distribution above and beyond average paid-in capital
is regarded as a dividend subject to 15% withholding tax. Exemptions or
applicable double tax treaties may reduce this withholding tax.

 

Bankruptcy

It is unlikely that bankruptcy leads to a corporate
income tax charge. However, one has to consider specific case law regarding
liabilities the company’s directors have to adhere to special reporting
requirements to circumvent personal liability, particularly concerning VAT and
wage tax.

 

Emigration and cross-border asset transfers

Should the company relocate abroad, an exit tax might
be due unless assets of the company are kept with a Dutch permanent
establishment. In the same vein, an exit tax will arise in case of a transfer
of assets to a foreign head office or closure of a permanent establishment.

In both cases, the exit tax is computed by taking the
gain of the assets transferred, including any untaxed gains and reserves and
provisions. However, exit tax is not usually payable when assets are
transferred from a Dutch head office to a foreign permanent establishment.

Businesses established in and resident of an EU Member
State or a European Economic Area Member State might not be obligated to pay
the entire exit tax burden in one go.

The exit tax rules allow taxpayers to choose between
immediate taxation, a deferral until subsequent realization and payment in ten
annual instalments.

Should the taxpayer choose for a deferral, it will
entail interest payments on the deferred tax plus a collateral, which will
usually be a bank guarantee of solvency. (Investinholland.com, 2018)