Expert advice: Make sure your tax bill isn't double Dutch
Helen Cowley, senior tax manager at Cassons, offers some savvy advice for companies looking to set up in the Netherlands.There is often the risk when doing business overseas that profits of an entity could be taxed twice.
A company incorporated and managed in the UK, for example, will pay UK corporation tax on its worldwide profits. However, if it carries out business in another country through a permanent establishment then it will generally pay foreign tax on those profits too. This may result in a double tax charge, which may or may not be relieved in full.The Netherlands has concluded tax treaties with more than 80 countries to provide clarity on taxing rights and to avoid double tax. The parties to a tax treaty agree which jurisdiction has the rights over certain income so that one country will tax that income and the other will grant relief.
As the Netherlands has a small domestic market, there is a clear focus on international trade and its government aims to attract inward investment from foreign markets by ensuring equality between Dutch investors and foreign investors. Broadly speaking, the treaty policy is to charge tax where the business activities take place.With attractive corporation tax rates (the first €200,000 of profits will be taxed at 20 per cent with the excess being taxed at 25 per cent), the Netherlands offers a competitive tax climate for you to do business on the continent.