Dutch Corporate Income Tax (CIT)

The Netherlands offers a transparent and reliable corporate tax framework for both domestic and international businesses. If you’re an expat or foreign entrepreneur setting up a Dutch business or expanding operations to the Netherlands, it’s essential to understand how corporate income tax works.

1. Who Is Subject to Dutch Corporate Income Tax?

Corporate income tax (vennootschapsbelasting) is levied on:

• Dutch legal entities such as BVs (private limited liability companies), NVs (public companies), and open CVs (open limited partnerships).
• Foreign legal entities with a Dutch presence (e.g., a permanent establishment or Dutch-based assets).

In the Netherlands, corporate income tax is a national tax only—there are no separate regional or municipal CIT obligations.

Resident vs. Non-Resident Companies

• Resident companies: Entities incorporated under Dutch law (such as a BV or NV) are always tax resident in the Netherlands.
• Foreign companies: May be treated as Dutch tax residents if their place of effective management is in the Netherlands (e.g. Dutch-based directors, board meetings, or operational control).

Tax residency is determined on a case-by-case basis.

2. Taxable Profits: What’s Taxed?

Resident companies are taxed on their worldwide profits. Non-resident companies are taxed only on Dutch-source income, such as:

• Income from Dutch real estate
• Profits from Dutch permanent establishments (branches)

Profit Determination

Profits are calculated annually using the principles of “sound business practice” and based on financial statements. This includes:

• Comparing opening and closing equity
• Recognizing unrealized losses while deferring unrealized gains
• Using Euro as the standard currency (unless an approved functional currency is used)

3. Corporate Income Tax Rates (2024)

Rates are updated annually. Contact us for the most current figures.

4. Tax-Deductible and Non-Deductible Expenses

In principle, expenses incurred for business purposes are deductible. However, some exceptions apply:

Non-Deductible Expenses

• Dutch CIT itself and foreign taxes where double tax relief applies
• Fines and penalties (tax-related or otherwise)
• Certain costs such as:
  • Business entertainment
  • Meals and drinks
  • Excursions and congresses

For a full list of deductible expenses, see our business costs page.

5. Depreciation of Business Assets

• Assets must be capitalized and depreciated over their useful life.
• Max 20% per year (10% for goodwill).
• Real estate may only be depreciated down to the WOZ value (the municipal valuation).

6. Provisions and Reserves

Tax-deductible provisions are allowed for future obligations that are sufficiently certain and relate to the current financial year (e.g., bad debts, environmental cleanup, warranties). Reinvestment reserves are also available under specific conditions.

7. Transfer Pricing and the Arm’s Length Principle

All intra-group transactions must be at arm’s length. If not, the Dutch Tax Authorities may adjust your taxable profits and impose secondary adjustments (e.g. deemed dividends).

To avoid disputes, consider entering into an Advance Pricing Agreement (APA) with the tax authorities. See our APA page for more details.

8. Interest Deduction Limitations

Interest on business loans is generally deductible, but several anti-abuse rules apply:

Hybrid Loans

Interest may be non-deductible if:

• The loan resembles equity in substance (e.g. profit-linked returns, no maturity, or deep subordination).

Anti-Abuse Rules

Interest deduction is restricted if the loan is linked to:

• Profit distributions
• Capital contributions
• Acquisition of participations from related parties

Counterproof is possible if:

• There are valid business reasons for both the transaction and financing
• The interest is taxed at ≥10% in the hands of the lender

9. Thin Capitalization Rules

While traditional thin cap rules have largely been replaced by the earnings stripping rule, historical rules are still relevant for understanding past structures. Under current EU-aligned rules, excessive interest deductions may be disallowed if they exceed 20% of EBITDA, subject to exemptions and thresholds.

10. Innovation Box Regime

Qualifying R&D income can benefit from a reduced effective CIT rate of 9% (2024). To apply:

• The company must have a WBSO R&D certificate
• The innovation must be self-developed intellectual property

We assist with structuring and applying for this incentive.

11. Investment Institutions

Fiscal Investment Institutions (FII)

FIIs benefit from a 0% corporate income tax rate, provided they meet strict conditions regarding shareholder base, leverage, and distribution.

Exempt Investment Institutions (EII)

EIIs are fully exempt from both CIT and dividend withholding tax. Unlike FIIs, there are no minimum distribution or shareholder restrictions, but EIIs do not qualify for treaty benefits and cannot invest directly in Dutch real estate.

12. Participation Exemption

One of the key pillars of the Dutch tax system. A Dutch company is exempt from CIT on dividends and capital gains from qualifying shareholdings if:

• The interest is ≥5%
• The participation is not a passive portfolio investment unless it passes the sufficient tax or asset test
• The interest is part of the company’s business operations

This regime avoids double taxation and enhances cross-border structuring.

13. Fiscal Unity (Group Consolidation)

Companies can form a fiscal unity for CIT purposes if:

• One company holds ≥95% of the shares in another
• All companies are Dutch tax residents (or have a Dutch branch)
• The companies have a similar financial year and accounting method

Benefits include tax-neutral intra-group transactions and consolidated filings.

14. Loss Relief and Carryforwards

As of 2022:

• Losses can be carried forward indefinitely
• Losses may be carried back 1 year
• Use is limited to €1 million + 50% of taxable profit above that threshold

Restrictions apply in cases of ownership changes or fiscal unity restructuring.

Need Support?

At Nexpat, we specialize in advising international entrepreneurs and expats on Dutch corporate taxation—from incorporation and tax filings to fiscal unity, APAs, and participation exemptions.

📩 Contact us to schedule a free consultation and receive expert advice tailored to your structure.