September 27th, 2023
The Netherlands’ image as a tax haven may no longer be accurate, but it remains an attractive destination for international businesses. Tax conditions like the 30% ruling, and the Dutch American Friendship Treaty (DAFT) are designed to encourage international businesses to move to the Netherlands. Companies from a number of different origin countries can benefit from Dutch diplomacy. These safeguard foreign investors in the Netherlands from double taxation to relieve the tax burden attached to operating internationally.
The participation exemption is a key consideration for entrepreneurs looking to relocate to the Netherlands, as it means the dividends and capital gains that arise from qualifying shareholdings can be made tax exempt under certain conditions. As well as reducing a company’s overall tax burden in the Netherlands, this means it’s worthwhile creating two B.V.s in the Netherlands to reduce legal liability. With this model the operational BV can pay tax-free dividends into the parent company, and then sell the operational BV tax-free under the participation exemption.
The participation exemption simplifies the tax reporting process for companies in the Netherlands. Instead of having to track and report the income received from foreign subsidiaries, Dutch companies can exclude this income from their taxable income, reducing their administrative burden as well as their tax burden.
International businesses looking to lower their tax burden would do well to look to the Netherlands as the place to do it. Compared to other countries, the corporate tax rate in the Netherlands is relatively low; this combined with a stable, predictable economy, excellent infrastructure and a well-qualified workforce make it an attractive choice for companies interested in fiscal freedom and economic stability.