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Corporation tax rates

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

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If the
taxable amount is less than €200,000, the tax rate is 20%.If the
taxable amount is €200,000 or higher, the tax rate is 25%.

A reduced rate applies to activities covered by the innovation box. The
innovation box provides tax relief to encourage innovative research. All
profits earned from innovative activities are taxed at this special rate.

Tax groups with subsidiary companies

In principle, every company pays its own corporation tax. However, if a
parent company forms a tax group with one or more of its subsidiaries, the Tax
and Customs Administration will on request treat the companies as a single
taxpayer.
The main benefit of a tax group is that a loss incurred by one company can be
deducted from the profits earned by other companies in the group.

The formation of a tax group is subject to certain conditions. The main
condition is that the parent company holds at least 95% of the shares in the
subsidiary. In addition,
the parent company and subsidiary must:

have the
same financial year;apply
the same accounting policies;be
established in the Netherlands.

 

Tax
incentives

The
Netherlands has traditionally provided favourable tax conditions for international
businesses seeking to expand or start up new activities. This is

still
the case today, despite international pressure on countries to refrain from

harmful
tax competition. In response, the Netherlands has introduced a number

of
tax reforms that now provide a modern, stable tax environment in line with

international
norms. An overview of the tax incentives currently in place is

presented
below.

 

Investment
deduction

Investments
in certain types of assets can qualify for a special deduction

in
calculating taxable profits. This deduction is in addition to the normal

depreciation
claimed and is calculated as a percentage of the qualifying

expenditure.
The relief falls broadly into the following three categories:

 

Small-scale
investment deduction

This
deduction is available for investments in business assets of EUR 2,300 up

to
EUR 11,242 per calendar year. The deduction is 28 percent for investments

of
EUR 2,300 up to EUR 56,024. The maximum deduction is EUR 15,687 for

investments
of EUR 56,024 up to EUR 103,748 after which the deduction

gradually
decreases to nil until the invested amount reaches EUR 311,242.

 

Energy
investment allowance (EIA)

This
deduction is available for investments in qualifying new energy-saving

assets.
The total maximum investment qualifying for relief is EUR 120 million.

The
relief amounts to 58 percent of the investment if it exceeds EUR 2,500 per

calendar
year.

Environmental
investment allowance (MIA)

This
deduction is available for investments in qualifying new assets that

contribute
to the protection of the environment. The relief provided is 36

percent,
27 percent, or 13.5 percent, depending upon the type of asset and

whether
the investment exceeds EUR 2,500 per calendar year. This relief is not

available
to the extent that the energy investment allowance has been claimed

for
the same investment.

 

Research
and Development (Promotion) Act (WBSO)

Employers
engaged in certain R&D activities are entitled to a payroll tax

reduction
(WBSO). The reduction amounts to 32 percent (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
EUR 350,000, and 16 percent for any excess. For activities to qualify for the

WBSO,
a certificate (S&O-verklaring) must have been issued by the Netherlands

Enterprise
Agency (Rijksdienst voor Ondernemend Nederland). Applications for

certificates
must be filed before the R&D project commences.

Before
2016, only R&D payroll costs qualified for the WBSO payroll reduction.

As
from 2016, other costs and investment expenditure associated with R&D are

eligible
for the WBSO payroll tax reduction. There are two options for calculating

the
reduction that can be attributed to these other costs and expenditure: (1)

fixed,
or (2) real costs and expenditure.

 

The
fixed reduction is based on a fixed amount of EUR 10 for the first 1,800

R&D
hours, and EUR 4 per hour thereafter. No separate administration is

needed
of the other R&D-costs and expenditure. For the real costs and

expenditure
option all the costs and expenditure per R&D project may be

eligible.
A comprehensive administration per project is needed to subsequently

clarify
the costs and expenditure. The eligible costs and expenditure are added

to
the eligible R&D payroll costs (R&D hours x average R&D wage rate)
to

calculate
the total amount of the WBSO payroll tax reduction.

 

Special
regime for income from patents – the Innovation Box

To
stimulate R&D activity in the Netherlands, a special elective regime known

as
the Innovation Box” (formerly the Patents Box) is available for income

from
self-produced qualifying intangible assets. Under this regime, qualifying

income
is taxed at an effective rate of 5 percent, which is achieved by way of

an
80 percent reduction of the income derived from the qualifying assets.

Broadly
speaking, intangible assets will qualify for the regime if they are

patented
or derived from R&D activities that benefit from the R&D incentive

regime
referred to as WBSO (see above). The Innovation Box may also apply to

certain
software, production methods, product development or improvement,

for
example. It does not apply to marketing intangibles such as trademarks

and
logos. Subject to certain conditions, assets that are partially derived from

outsourced
R&D may also qualify.

The
Innovation Box regime covers all income attributable to qualifying assets,

including
capital gains. In the case of patents, the regime covers not only

licensing
income but also income derived from the sale of products or services

based
upon the innovations. The election is made per asset, but, once elected,

all
assets and related income are pooled.

As
of 2013, it is also possible to fix the income attributable to qualifying
assets

at
25 percent of profits, up to an annual maximum of EUR 25,000, although this

is
subject to certain conditions. The Innovation Box also applies to profits
derived

from
the use of an intangible asset from the year the patent is requested to the

year
in which the patent is granted. The election does not have to be made until

the
tax return is filed. Once made, an election cannot be revoked.

 

There
is no cap to the income that can benefit from this regime, but it generally

only
covers income in excess of related development costs in the pool.

Losses
in respect of assets covered by the innovation box are also effectively

deductible
against corporate income at the regular tax rate. As a result of new

European
Union rules and policies, the Dutch rules for access to the Innovation

Box
and for the computation of the in scope profits are likely to be changed

and
the new rules will take effect no later than 1 January 2017. In all likelihood,

taxpayers
using the Innovation Box as at 30 June 2016 for certain assets will be

allowed
to benefit from the existing Innovation Box regime until 30 June 2021

at
the latest with respect to those assets. The existing Innovation Box regime is

likely to remain open to new entrants
until 30 June 2016.

 

Expenses

The
main rule is that 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
EUR 4,500. Alternatively, 26.5 percent 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 associated with cash settled

awards
can be deducted at the moment of payment, provided the employee

is
not obliged to convert the cash payment into company shares. Stock

appreciation
rights are not deductible when granted to employees with an

annual
salary of EUR 556,000 or more.

The
development costs for in-house developed intangible assets may be

deducted
in the year the development costs are incurred.

A
number of other, primarily anti-avoidance, provisions specifically restrict the

deduction of certain expenses, including
interest.

 

Liquidation

Liquidation
means that the company ceases to exist. Once the liquidation

is
settled, there is no longer a corporate income tax liability. The company

must
prepare a final balance sheet for tax purposes at the time of liquidation,

reporting
its assets and liabilities 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 in excess of the average paid-in capital (i.e. the liquidation

distribution)
is considered a dividend for dividend withholding tax purposes

and
subject to 15 percent withholding tax. Exemptions or applicable double

tax
treaties may reduce this withholding tax.

Bankruptcy

Bankruptcy
is unlikely to result in a corporate income tax charge. Specific case

law
regarding liabilities must be taken into account. The company’s directors

must
fulfil special reporting requirements to avoid personal liability, especially

for
wage tax and VAT.

Emigration
and cross-border asset transfers

Exit
tax may arise if the company relocates abroad.except to the extent that

assets
are retained by a Dutch permanent establishment.

Exit
tax also applies on the transfer of assets to a foreign head office and

on
the closure of a permanent establishment. In both cases the exit tax is

normally
computed by reference to a deemed gain in respect of the assets

transferred,
including any untaxed gains and reserves and provisions. Exit tax

is
not usually payable on the transfer of assets from a Dutch head office to a

foreign
permanent establishment (although the untaxed gains and reserves

will
effectively be taxed in subsequent years due to a lower exemption applying

to
the profits of the permanent establishment).

 

Parties
that are residents of an EU Member State or an European Economic

Area
Member State may not have to pay the full amount of exit tax in one go.

The
exit tax rules allow taxpayers to choose between immediate taxation, a

deferral
until subsequent realisation and payment in ten annual instalments.

Unless
the taxpayer opts for immediate taxation, interest will be payable on

the
deferred tax, and the tax authorities will require collateral. Under Dutch

law,
a bank guarantee will often be the preferred form of collateral. However,

according
to recent case law of the CJEU a requirement to provide a bank

guarantee
for exit tax may only be imposed on the basis of the individual actual

risk
of non-recovery of the tax. If the taxpayer opts for deferral until realisation
it

will
also have to provide an annual balance sheet and income statement drawn

up
in accordance with Dutch tax law so the Dutch tax authorities can determine

whether there has been a realisation.

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