Registration with the tax authorities

Starting up a business in the Netherlands, either using a legal entity (B.V.) or by  establishing a branch requires registration with the Dutch tax authorities. Registration with the tax authorities automatically follows from the registration with the Chamber of Commerce (Trade Register). The tax authorities determine the tax status based on the information provided to the Trade Register, especially about the kind of activities that will be performed, and will issue the related tax registration numbers (e.g. for corporate income tax, VAT and wage tax purposes) accordingly.

Filing corporate tax return

Irrespective of whether activities are performed through a legal entity or a branch, an annual corporate tax return must be filed. Normally, the return should be filed within five months after the preceding financial year is closed (i.e. for a financial year ending on 31 December, the return must be filed before the first of June in the following year).

However, usually extension for filing the tax return can be obtained with a maximum of eleven months (again for a financial year ending on 31 December, the return must be filed before the first of May in the second year).

Assessments

During a tax year in general two provisional tax assessments are raised. The first provisional tax assessment can be expected during the first month of the tax year (for a financial year closed per 31 December, the first tax assessment can be expected in January). This provisional tax assessment is based on the information of the preceding two financial years. If the provisional tax assessment is not in line with the taxpayer’s expectations for that year, it is possible to file an appeal indicating the expected taxable result.

The second provisional assessment can either be based on an estimate of the taxable income that is provided by the taxpayer by filing a preliminary tax return or it is based on the filed tax return in which case it will be issued within six weeks after filing the final tax return.

The tax inspector issues a final tax assessment based on the tax return in which the tax inspector either agrees or deviates from the tax return filed. Any provisional tax assessment issued before filing the tax return are to be set off against the final tax assessment. Tax interest will be due on the outstanding amount of tax payable. Tax interest (so-called ‘heffingsrente’) is calculated on the difference between the amount of the final assessment and the (total) amount paid on preliminary tax assessments. This interest is charged per the first day of the second half of the calendar year (if the book year coincides the calendar year), effective from that date (1^st July) until the date of assessment. The interest rate currently amounts to 8%. This rate is adjusted periodically.

When a tax return is not filed timely, the tax inspector may issue an estimated tax assessmen or (if a certian period has passed) impose a fine. The taxpayer should then prove that the taxable amount estimated by the tax inspector is not correct.

Adjustments

When the tax inspector is of the opinion that any adjustments have to be made to the tax return, he will notify the company in writing. Corresponding assessments may then be issued.

When a final tax assessment has already been issued which afterwards appears to be incorrect as a result of new facts or of fraud, the tax inspector can issue a revised assessment. The right to issue revised assessments in normal circumstances expires after five years after the end of the tax year concerned (this is extended by the period that extension of filing is granted). Special rules can apply if foreign sources of income are involved.

Penalties

Dutch corporate tax law provides for a variety of penalties, which can be imposed in case of amongst others late filing or purposefully filing incorrect tax returns.

Appeal

Any assessment gives the taxpayer the right to file an objection within six weeks after the date of issuance. The appeal can either relate to the tax imposed or penalties levied.

If the taxpayer does not agree with the decision of the tax inspector on his appeal, the taxpayer has the right to file an appeal at the lower Court (in Dutch: rechtbank), and subsequently, on a matter of law only, to the Supreme Court.

The appeal must be filed by the taxpayer (or his authorised representative) within 6 weeks of the date of the decision of the tax inspector on the objection. An appeal can be initiated against all the decisions of the tax authorities to which it is open to file an objection. 

Collection of tax

Taxpayers may choose to pay the tax due on provisional assessments of the current year at once or in monthly installments. A payment can be made in monthly installments if the assessment is levied before the end of the year to which it relates and the full amount has to be paid before the end of the year.

Payments on the final assessment are due within two months after the date of issue unless extension is granted. This can for instance be the case when an appeal is pending. If the tax is not fully paid on the due date, interest will be charged on the outstanding amount from that date till the payment.

Tax audits

Tax audits on companies take place periodically. As a rule of thumb, every five years a tax audit can be expected. Tax audits are usually announced in advance.

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