Dividend Withholding Tax in the Netherlands

Companies in the Netherlands are subject to various accounting and taxation requirements. In terms of taxation, Dutch businesses must pay the corporate income tax which is a direct tax imposed on their profits, as well as other taxes, such as withholding taxes imposed on dividends, interests and royalties.

After various discussions started a few years ago, the Dutch government decided to maintain the dividend tax applied to companies operating in the country.

Below, our company formation agents in the Netherlands explain how the withholding tax on dividends applies. We also have an accounting department to help you and your company calculate your taxes and file your tax returns, including those related to the dividend tax.

How is the withholding tax on dividends computed in the Netherlands?

The dividend tax applies to both Dutch private and public companies with profits during a financial year. The part of the profits, after the payment of the corporate tax, which is divided among the shareholders is considered a dividend distribution and taxed in accordance with the law.

Other structures can also be imposed with the withholding tax on dividends in the Netherlands if they complete commercial activities.

The company issuing the dividends is required to withhold the amount of money due as a dividend tax and pay it to the Dutch Tax and Customs Authority.

If you need information on how the dividend tax is computed, our company registration advisors in the Netherlands can help you.

The rate of the Dutch dividend tax

The standard rate of the withholding tax on dividends is 15%, however, there are also cases in which the tax rate can be reduced. Most of the times, reduced rates of the dividend tax apply in the case of Dutch double taxation agreements.

The following aspects need to be taken into account when paying the Dutch dividend tax:

1. foreign shareholders owning shares in Dutch companies can be refunded for the tax they pay in the Netherlands;
2. foreign shareholders can also be exempt from the payment of the dividend tax in the Netherlands under certain circumstances;
3. the dividends received by a shareholder in a Dutch company can be offset against income or corporate tax, depending on whether the shareholder is a private person or legal entity;
4. in case the dividend tax is off set, the shareholder must indicate the amount of money received as a dividend payment;
5. foundations and associations can claim dividend tax refunds if they were not subject to the corporate tax in the previous financial year.

If you need help in calculating the dividend tax you or your company needs to pay, our accountants in the Netherlands can help you.

Our local agents can also help you open a company in the Netherlands.

Dutch dividend tax refunds and exemptions

Dutch and foreign shareholders receiving dividends are entitled to ask for refunds or exemptions from the tax they paid. These refunds or exemptions depend on:

• - whether the refund or exemption refers to intercompany dividend payments, case in which the Dutch company paying the dividends must file the tax return;
• - in the case of portfolio dividends held by foreign shareholders, the refund or exemption from the dividend tax depends on the country in which the shareholders reside;
• - in the case of EU or EEA intercompany dividends, the company receiving the dividends must hold at least 5% of the shares in the company paying them;
• - the dividend tax refund or exemption can be requested online with the Tax and Customs Authority in the Netherlands.

You can also ask for specialized accounting services in order to file tax returns in the Netherlands. Our accountants can assist you in this regard.

The Dutch taxation system

The Netherlands has a very advantageous taxation system, especially when setting up a BV company as a foreign investor. Apart from the corporate tax which is levied at two different rates based on the annual profits of the company, the Netherlands has also signed numerous double taxation agreements under which withholding taxes imposed on dividends, interests and royalties can be partially or totally refunded based on the provisions of the respective conventions.

With respect to the Dutch economy, 2018 was a good year for the country, while in 2019:

• - the Netherlands recorded a 2% increase of the Gross Domestic Product (GDP) in the first quarter;
• - the amount of money entering the Netherlands’ budget in the first quarter of 2019 was 226,399 million USD;
• - the Netherlands ranked 16^th based on quarterly GDP of 50 countries, according to the Country Economy magazine;
• - the Netherlands is expected to register an annual GDP growth of 1.9% in 2019.

For complete information on the withholding tax on dividends, please contact our Dutch company formation experts.