Public companies (NVs) and private companies (BVs) pay corporation tax. Foundations and associations also pay this tax if they carry on a business.
Corporation tax rates
The corporation tax rate depends on the taxable amount. The taxable amount is the taxable profit in a year less deductible losses.
- If the taxable amount is less than €200,000, the tax rate is 20%.
- If the taxable amount is €200,000 or higher, the tax rate is 25%.
If a business incurs a loss, it can deduct it from its taxable profit:
- for the previous year (carry back);
- for up to the next nine years (carry forward)
Exemption on substantial holdings
Subsidiary companies distribute their profits to their parent companies in the form of dividend. The substantial holding exemption means that the parent company does not have to pay tax on this profit. This prevents it being taxed twice within the same group of companies. The substantial holding exemption is available only to shareholders who hold at least a 5% stake in a company.
The exemption applies to substantial holdings in resident and non-resident companies. It is a key feature of the Dutch tax regime. Since profits are not taxed twice, subsidiaries located outside the Netherlands can compete with local companies on an equal tax footing. The substantial holding exemption does not apply to holdings in an investment vehicle that is subject to a low rate of taxation.
Tax groups with subsidiary companies
In principle, every company pays its own corporation tax. However, if a parent company forms a tax group with one or more of its subsidiaries, on request the Tax and Customs Administration will treat the companies as a single taxpayer.
The main benefit of a tax group is that a loss incurred by one company can be deducted from the profits earned by other companies in the same group.
The formation of a tax group is subject to certain conditions. The main condition is that the parent company holds at least 95% of the shares in the subsidiary. In addition, the parent company and subsidiary must:
- have the same financial year;
- apply the same accounting policies;
- be established in the Netherlands.