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Netherlands-USA Double Taxation Avoidance

Updated on Thursday 14th April 2016

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Netherlands-USA-Double-Taxation-AvoidanceThe Netherlands has an extended network of double taxation agreements in order to provide an advantageous taxation system to foreign investors setting up companies in the country. Among the agreements for the avoidance of double taxation the Netherlands signed, is also the convention with the United States of America. The first double taxation agreement between the Netherlands and the United States was concluded in 1992 and was first amended in 1993.

The taxation of individuals according to the Netherlands-US double tax treaty

Dutch residents are subject to the income tax, while companies are subject to the corporate tax in the country. In order to avoid double taxation, all Dutch double taxation agreements contain provisions with respect to the income and the corporate taxes.

Foreign investors setting up companies in the Netherlands may choose tax residency and thus establish in the country they will be held liable for paying their taxes. Non-resident taxpayers may choose for paying their taxes based on the provisions of the double taxation agreement with the United States or may choose the Unilateral Decree on the Avoidance of Double Taxation the Netherlands enabled in 2001. According to the double taxation agreement with the United States, US residents earning incomes in the Netherlands will benefit from the credit method, when it comes to the taxation of dividends, interests and royalties.

Amendments to the Netherlands-US double taxation agreement

The Netherlands and the United States have amended their double taxation agreement in 2004, when new provisions with respect to the taxation of dividends, branches, pensions and alimony have been introduced. According to the new provisions, dividends paid by an US company to a Dutch resident may be taxed in the Netherlands. The tax rates for the dividends are:

  • - 5% of the gross amount of the dividends, if the recipient owns at least 10% of the voting power in the company paying the dividends,
  • - 15% in other cases.

US and Dutch branch offices will be taxed in the country where the permanent establishment is registered. With respect to pensions, annuities and alimony, individuals receiving such incomes will pay the income tax in their resident country only.

For complete information about all the amendments of the double taxation treaty with the United States, please contact our company formation agents in the Netherlands.

 

 

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