Although The Netherlands has a sophisticated tax system with high tax rates, some aspects of its tax system are extremely attractive, and make it the ideal location in which to base international holding, royalty, and trading structures.

Attractive fiscal incentives are enhanced by a complex network of double taxation treaties, and by the existence of a procedure of advance tax rulings, whereby the tax authorities, who are autonomous and approachable, can at short notice specify the fiscal consequences of certain business structures, provided that material financial interests are involved, and the propositions are reasonable.

The Dutch government put forward substantial reductions in corporate taxation. The first two corporate income tax brackets have been broadened: the first bracket (20% rate) to € 40,000.=, the second bracket (23% rate) from € 40,000.= to € 250,000.=, and the headline rate of corporate income tax has been reduced to 25.5%.

A temporary measure is the reduction in 2009 and 2010 from 23% to 20% of the small and medium-sized enterprises rate in the second corporate income tax bracket, making it the same as in the first.

These reductions and measures have brought the corporate income tax rate below the average corporate tax rate in the European Union (EU), which currently stands at 31.4%.

These moves have been made in the light of the ongoing global economic recession and in the knowledge that the average rate in the new member states of the European Union (EU), located mainly in the former “Eastern Block” and the Mediterranean, is 21.5%.

In addition, the Dutch participation exemption rules are relaxed by eliminating the “non-portfolio” and “subject to tax” requirements.

Under the new rules, the Dutch participation exemption applies, provided that the interest in a (domestic or foreign) subsidiary represents at least 5% of the issued capital, and provided that this participation cannot be qualified as “low taxed portfolio”.

The Dutch dividend tax rate is 15%. This rate could be reduced, however, under the application of Dutch tax treaties with other jurisdictions, and the European Union (EU) “Parent-Subsidiary Directive” (typically between 0%-15%).

BK Group can refer to and liaise with various reputable experts in the field of Dutch corporate taxation.