Netherlands-USA Double Taxation Avoidance Treaty

The 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.

Our Dutch company formation consultants can offer information on the taxation system applicable here.

Taxes covered by the Netherlands – USA double tax treaties

According to the double taxation convention between the Netherland and the United States of America, the following taxes fall under its incidence:

• - the income tax, the salaries tax, the corporate tax and the dividend tax in the Netherlands;
• - the income and the excise taxes related to insurance premiums imposed to foreign Dutch insurance companies operating in the USA.

Special provisions apply to the taxation of Dutch foundations operating in the USA, which are also governed by the double tax treaty between the two countries. These will be imposed with the excise tax in the USA. Also, the agreement provides for similar taxes which apply in both countries.

The provisions of the Netherlands – USA double tax agreement will apply based on tax residency.

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.

Taxation of companies under the Netherlands – USA double tax convention

With respect to the taxation of Dutch and US companies with activities in the other state, the double taxation agreement provides for the status of permanent establishment which includes:

• - branch offices;
• - other types of office and management places;
• - factories;
• - workshops;
• - mines and other exploitation sites located in the other country.

The facility must have been established in the USA or the Netherlands for at least 12 months in order to be covered by the double tax agreement.

With respect to the avoidance of double taxation, this will be imposed through reductions of the taxes paid in the case of the United States. The Netherlands will grant tax deductions on the taxes paid by US companies in both countries.

Our company registration advisors in the Netherlands can offer more information on the methods of eliminating double taxation under the agreement with the USA.

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.