Types of taxes

A global overview on different types of taxes

Different types of taxes

Before diving in the tax regulations we must clarify the status of the tax obligated. Because it depends whether you will pay tax as an individual person or as a company. An individual should report to the Tax Department in person. You can make an appointment in advance for this purpose. After identification by the Tax Department, you are issued the tax number (BSN - Burger Service Number) immediately. The Tax Department will send you an income tax form that serves as a tax bill in due course. Alternatively, you may request your tax bill form at your own initiative. Regarding local taxes, you should register with the Tax Department in the city where you live.

A company on the other hand, will have to register in the Chamber of Commerce’s Trade Register. The Chamber of Commerce passes on the details to the Tax Department, which will register the business for the applicable taxes based on the details received. The Tax Department sends the tax numbers to the registered offices. It is important to have this checked by your tax advisor, as the Tax Department sometimes tends to register you for more taxes than is applicable. The Tax Department automatically sends you the first tax bills and a login code and password to file your tax bill online. Many taxes can be filed electronically.

The main taxes

The government feels that taxes may not form an impediment for a person or company to reside or establish business in the Netherlands. The Dutch tax system therefore provides a number of incentives for internationally operating companies and foreign employees. Additionally, the Netherlands concluded tax treaties with many other countries in order to prevent double taxation.

The main taxes in the Netherlands include:

Corporate income tax
If you own a private or public limited company (BV or NV), you must complete a corporate income tax return (VPB) for your company. Foundations or associations must complete corporation tax returns only in specific circumstances. Depending on the level of profit, you may be exempt.

Wage tax, income tax and social insurance
If you employ staff in the Netherlands, you must deduct payroll tax (loonbelasting) from their wages. Payroll tax consists of wage tax, employee and national insurance contributions and income-based Health Care Insurance Act contributions (employer's contribution).

Value Added Tax (VAT - BTW)
If you run a business in the Netherlands or if you run a foreign company with a Dutch branch, you may have to pay turnover tax (VAT) in the Netherlands. This also applies if your company is established abroad, but does business in the Netherlands. In all cases you need a VAT number (also known as a VAT identification number).

Dividend withholding tax
If you run a business in the Netherlands and you receive interest, royalties or dividend from abroad, withholding tax (bronbelasting) is often deducted on payment of these sources of income. If the Netherlands has a tax treaty in place with the country from which the income originates, you may be entitled to a full or partial exemption or refund of the tax withheld.

Environmental tax
Business owners in the Netherlands may have to pay various environmental taxes. If your business extracts groundwater, you must pay groundwater tax. You also pay tax on any mains water and electricity used.

Inheritance and gift tax
If you own a business in the Netherlands, your heirs must settle your tax affairs after your death. Furthermore, the Netherlands does not apply any source tax on interest and royalty payments. The Netherlands does not apply a branch profit tax.
Non-residents are subject to taxation if they derive a certain income from the Netherlands

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Other taxes

In addition to the national taxes, the Netherlands applies a number of local taxes, including property tax and a levy for public cleaning. The rates of such local taxes are imposed by the municipality of residence or registered offices. If you decide to reside or carry out activities in the Netherlands, you are expected to register as a tax payer in the Netherlands. The Tax Department (Belastingdienst) assigns you a tax number. In principle, residents of the Netherlands are taxed on their worldwide income.

Non-residents are subject to taxation if they derive a certain income from the Netherlands. Each country has its own way to handle their internal affairs on tax matters. The assumption (if you should have one) that officers respond in the same way as in your country would be wrong. Here strict compliance is expected with the rules that are imposed. This also applies to the tax regulations. You must comply with submission and payment dates and the Tax Department will grant postponement only for certain taxes regarding filing the tax bill and payment of tax. If you are late with filling and submitting you can expect a fine. If you have to pay taxes you pay on time. Otherwise you’ll also get a penalty there. In some cases negotiation with the Tax Department in the Netherlands is very normal thing to do.

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