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Doing business in the Netherlands

Doing business in the Netherlands

Doing business in the Netherlands

Whether as a foreign company or a private individual you may be thinking of the idea to work in the Netherlands. This guide is specific meant for people who want to work in the Netherlands. We will lead you through the possibilities and consequences, like tax obligations, to work in the Netherlands.

First of all, the Netherlands can only tax non-resident taxpayers for the income from a private enterprise conducted in the Netherlands, if an to the extent these individuals have or can be deemed to have a permanent establishment or a permanent representative in the Netherlands.

1. Private individual

The Netherlands taxes non-residents only on income derived from specific sources in the Netherlands. To avoid double taxation the Netherlands had concluded tax treaties with a considerable number of countries. Based on this tax treaty business income (gained in the Netherlands) are taxable in the Netherlands. This means this profit will be levied with income tax.

Income tax

In the Netherlands we have a progressive tax on profits. This means there are tax brackets, each with its own tax rate. The tax rate depends whether you are social insured in the Netherlands.

Generally you will not be social insured in the Netherlands.

Dutch tax rates income tax 2015

Income

Tax rate including social security contributions

Premium social security

Tax rate

€0 - € 19.822

36,5% 

28.15%

8,35%

€ 19.823 - € 33.589 

42%

28.15%

13,85%

€ 33.590- € 57.585

42%

 

42%

€ 57.586 and more 

52%

 

52%

 

As a self-employed person in the Netherlands you have a different tax situation than an employed person. You will have to file a tax return and pay the income tax due according to an assessment. If the income is classified as business income, you are entitled to self-employment benefits. The possible tax benefits are the self-employed benefit (‘zelfstandigenaftrek), the starting business deduction (startersaftrek) and the small business deduction (MKB winstvrijstelling). In order to be entitled to these tax benefits, you need to spend at least 1.225 hours per year on your business activities. To be eligible for the starting business deduction your income must have been classified as business income in no more than one of the previous five years. The tax benefit for the small business deduction is a 12% reduction of the taxable amount after deduction of the self-employed benefit and starting business deduction.

VAT

As a self-employed are almost always considered entrepreneurs for the purposes of turnover tax, which means that you have to charge and pay VAT on your income. If your level of income is low, you may be eligible for the small business tax scheme (kleineondernemersregeling). VAT is charged on the supply of goods and services in the Netherlands made by a taxable person in the course of furtherance of a business, unless the supplies are zero-rated or exempt. A VAT taxable person is anyone performing business activities in the Netherlands.

The VAT cost is borne by customers such as private individuals. So, in theory, the final burden of the tax should not fall on business activity. This is achieved by an arrangement known as the input VAT deduction system. When the business buys goods or services, it usually pays VAT to the supplier. When the business sells goods or services, whether to another business or to a final consumer, it is usually required to charge VAT. The result is that the end consumers bear the total cost of VAT on the final price of the goods or services they purchase.

There are 3 VAT tariffs in the Netherlands:

  • 0 % tariff: the 0% tariff applies to entrepreneurs who conduct business in foreign countries from the Netherlands. This mainly involves the supply of goods from the Netherlands to another EU country.
  • 6% tariff: the 6% tariff is applied to many common products or services, such as food and drinks, books and daily newspapers.
  • 21% tariff: if there is no reason for an exemption, the reverse-charge mechanism, the 0% tariff of the6% tariff, then you must charge 21% VAT.

2. Foreign company

Based on tax treaties, the Dutch tax authorities consider an entrepreneur from abroad quite easy as being subject to Dutch corporate income tax. When a foreign company is managed from abroad, there is a permanent establishment risk in the Netherlands. If this is the case, the Dutch tax authorities will say there is a taxable presence for Dutch tax purposes. In most tax treaties a permanent establishment is considered as a fixed place of business through which the business is wholly of partly carried on. If so, this results in becoming subject to Dutch corporate income tax.

Corporate (income) tax

The Dutch corporate income tax rate is applied at 20% for the taxable amount up to and including € 200.000,--. For the excess taxable amount the rate is 25%.

Payroll tax

If you employ personnel in the Netherlands you withhold wage tax on the wages. Wage tax is an advance levy of income tax. As you withhold wage tax, the employee will not pay income tax or will pay less income tax.

Payroll taxes consist of the following:

  • wage tax
  • national insurance contributions
  • employed person’s insurance contributions
  • income-dependent contributions pursuant to the Health Care Insurance Act (ZVW)

Please contact Do de Jong for more information. 

Witlox VCS Accountants, Belastingadviseurs en Bedrijfsjuristen

Fellenoordstraat 72, 4811 TJ Breda

Postbus 3341, 4800 DH Breda

T

076 - 522 53 30

M

06 - 48174749

F

076 - 514 98 89

E

bo.dejong@witloxvcs.nl

W

<http://www.witloxvcs.nl>

*Picture by Anton Ivanov


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