KNOWLEDGE BASE Taxation Triggers
Taxation Triggers In the Netherlands
When doing business in the Netherlands, you need to consider whether your activities will trigger tax obligations, even if you are not a Netherlands based business and have no physical presence in the Netherlands. There are several ways in which you could trigger tax obligations by doing business in the Netherlands or with Dutch residents.
Because income tax is far too complicated and company specific, this tax information will pertain only to the other indirect taxes you might be responsible for when doing business in the Netherlands. In general, if your business is based in the Netherlands or the executive board is based in the Netherlands, you will be liable for taxes on all globally generated income. On the other hand, if neither your business nor the board is based in the Netherlands, you will be liable for only tax on income generated in the Netherlands, i.e., from a permanent establishment or representative, dividends, or licenses.
Because taxes are one of the most complex areas of law and are completely business specific, you should speak with a tax attorney and/or accountant to learn about and understand your tax obligations in the Netherlands.
Value Added Tax
Along with corporate tax, Value Added Tax (VAT) is the tax you will deal with the most when you conduct business in the Netherlands. Below you will learn the basics of VAT, including rates, registration, filing and payment.
What is VAT?
Value Added Tax (VAT) is a broad-based consumption tax levied on the sale of all supplies of goods and services in the Netherlands. VAT is paid every time a customer buys a taxable good or service from a VAT-registered business. Suppliers essentially act as VAT collection agents.
Because the calculation and collection of VAT differs from a typical sales tax, this is one of the hardest concepts for Americans to understand. Whereas in America, sales tax is added on top of the retail price at the time of purchase, VAT is built into the retail price that a consumer sees online or at the store. Since VAT is built into the price that your customers see, and since VAT rates and the price that the market will bear vary from country to country and region to region, be sure that you incorporate these variables into your pricing model and understand your margins.
To whom does VAT apply?
VAT applies to you if you, as a business entity or individually, carry out any economic activity in the Netherlands. That is, if you sell a product of service to an individual or company in the Netherlands, you are liable for VAT. The registration requirement threshold in the Netherlands is only €1,345, meaning, it is likely you must register for VAT shortly after you begin conducting business in the Netherlands. VAT applies to distance selling, so just because you aren’t located in the Netherlands, it doesn’t mean you aren’t required to collect and pay VAT. VAT applies to distance sales if you sell over the minimum threshold of €100,000 per calendar year.
How do companies comply with VAT?
If you are required to collect and pay VAT, you must register for VAT with the Netherlands Tax and Customs Administration. You can register online.
VAT is charged on most goods and services purchased in the Netherlands. There are a few exemptions to the VAT requirement. VAT is also charged on the import of goods into the Netherlands from outside the EU. In this situation, the importing company will pay VAT on top of import duty and excise duty.
Current VAT Rates:
There are two VAT rates in the Netherlands, a standard and a reduced rate.
Standard Rate: 21% applies to all taxable goods and services that are not reduced rate
Reduced Rate: 6% applies to many common products and services, including medicine, food (restaurants), clothing, books and newspapers, etc.
Learn more about calculating your VAT liability.
VAT on Digital Services:
Digital services are taxed in the country in which the customer lives or is established. The Mini One Stop Shop (MOSS) was established to prevent companies from having to register in each EU country in which they provide digital services.
For distance selling, VAT is generally levied in the destination country. For example: A Dutch company buying goods from another European country will pay VAT on those goods in the Netherlands at the Dutch VAT rate. VAT applies to distance sales if you sell over the minimum threshold of €100,000 per calendar year.
You are required to keep records of the VAT you charge. Furthermore, there are specific requirements for invoices. Learn more about VAT records here.
What are the consequences of noncompliance?
If you fail to file your taxes on time, you will receive a tax assessment and may have to pay a fine.
Businesses and individuals pay a number of environmental taxes, including energy tax and tax on water.
If you want to move your company from the Netherlands or dissolve a company, you will be subject to an exit tax on realised and unrealised profits. The taxable amount is calculated upon migration or dissolution and formalised in an official assessment. If you are moving your company to a new location within an EU or EEA state, this tax may be deferred under specific circumstances.
Companies are permitted to distribute some of their profits to shareholders, these dividends are subject to tax at a general rate of 15%. This dividends tax is withheld from the profits distributed to shareholders. If a company that receives dividends on shares it owns in another company, it can deduct the dividend tax from the balance of its corporate payable tax.
Companies that are required to collect and pay VAT should register as quickly as possible to ensure they are compliant as soon as they incur VAT obligations. There are a number of other business taxes that companies may be liable for. A Dutch tax expert can help with the VAT registration, filing, and record keeping processes.
KNOWLEDGE BASE Taxation Triggers