Netherlands: A Tax Overview

The Netherlands has a long-standing history as an attractive jurisdiction for foreign enterprises and investors due to its stable economic, social and political environment. The Dutch tax system has always been an important element of the Dutch business and investment climate.

In the last decade, the OECD and the EU have developed initiatives to counter tax avoidance and abuse. Following these initiatives, the Netherlands has introduced measures to combat tax avoidance and abuse, both by endorsing and implementing EU directives and by introducing certain unilateral tax measures. However, in recent years, the Dutch government has repeatedly emphasised the importance of a reliable and stable tax climate to remain attractive to (foreign) enterprises and investors. The need to maintain and possibly expand existing tax incentives has been acknowledged, as well as the need for a level playing field within the EU.

In 2025, it was relatively quiet on the legislative front in the Netherlands. Importantly, in December 2025, a government-commissioned report on the future earning capacity of the Netherlands was published, drawing on insights from experts across business, academia  and government. This report is effectively the Dutch equivalent of Mario Draghi’s 2024 EU competitiveness study and is expected to be recognised in the policy agenda of the new Dutch government.

As far as taxation is concerned, the report includes the following recommendations:

• Facilitate investment – avoid levying tax when investments have yet to yield economic returns (due to cumulation of interest deduction, depreciation and loss carry-over limitations).
• Enhance competitiveness – the Dutch tax system needs to be aligned with those of competing EU member states to reduce the effective marginal tax burden on labour and profits.
• Simplify the system – eliminate tax facilities that do not achieve their objectives.
• Boost innovation – maintain the WBSO (tax credit for research and development) and innovation box and expand investment deductions for investments in innovation.
• Attract talent – broaden tax benefits for knowledge workers.

Some of these recommendations align with concurrent developments at EU level, particularly the expected measures in the proposal for the 28th legal regime, also referred to as “EU Inc”. This proposal will contain a new legal framework for innovative companies.

Returning to combatting tax avoidance, the Dutch government has been careful to ensure that any new measures do not have a negative effect on real economic activities, and the Dutch government will in general refrain from unilateral measures where international or European initiatives have not, or have not yet, resulted in measures. Therefore, the government's basic principle in addressing international tax avoidance is to adhere to international agreements. An example is the recast of the EU Directive on Administrative Co-Operation in the field of taxation (DAC7), which is expected at the end of the first half of 2026 and will incorporate elements originally intended under the proposal to prevent the misuse of shell entities.

In addition, the Dutch government holds the view that there are already effective measures in place targeting conduit companies, particularly the conditional withholding tax on interest, royalties and dividends (together: “IRD payments”). The Netherlands levies such conditional withholding tax on IRD payments to affiliated entities in low-tax jurisdictions or in jurisdictions included on the EU blacklist. This tax is also levied on IRD payments to certain hybrid entities, and in the case of abuse.

The Dutch tax system has thus preserved its attractiveness to multinational enterprises engaged in real economic activities in the Netherlands, among other things, because of its competitive tax rates and incentives, the possibility of obtaining tax certainty in advance, its large treaty network and some key elements of the Dutch tax system highlighted below.

Tax Rates

The Dutch corporate income tax features a main corporate income tax rate of 25.8% and a reduced corporate income tax rate of 19% for the initial EUR200,000 of profits. The lower 19% rate applies per taxpayer, meaning that entities consolidated for corporate income tax (CIT) purposes in a so-called fiscal unit can only make use of the lower rate once.

Participation Exemption

The participation exemption aims to prevent economic double taxation of profits that are distributed by a subsidiary to its parent company. Hence, all income derived by a parent company from a qualifying participation is exempt from Dutch CIT.

In general, a shareholding is considered a qualifying participation if the parent company, or a related party thereof, holds at least 5% of the nominal paid-up share capital of the subsidiary and these shares are not held as a (deemed) portfolio investment.

In principle, the participation exemption applies to all income. However, based on an anti-abuse rule, this is not the case for income that gives rise to a tax deduction elsewhere.

As an exception to the general rule that all income from a qualifying participation is exempt, a deductible loss can, under strict conditions, be claimed in the case of liquidation of a qualifying participation. This loss can be claimed in the year that the liquidation is completed.

Consolidation Regime

Dutch tax law provides for a true consolidation regime for group companies, pursuant to which corporate income tax is levied from these companies as if they are one taxpayer (fiscal unit).

One of the conditions for fiscal unity is that the parent company has both the full legal and full economic ownership of at least 95% of the nominal paid-up share capital of each of the subsidiaries, and that this ownership represents at least 95% of the statutory voting rights of the subsidiary and entitles the parent company to at least 95% of the profits and the capital of the subsidiary.

One of the main advantages of fiscal unity is that the losses of one company can be offset against the profits of another company (other than pre-fiscal unity losses, which can only be offset against profits on a standalone basis). Another advantage is that assets can be transferred tax-free within the fiscal unit, except for when an anti-abuse measure applies.

Innovation Box

The Dutch innovation box regime provides for the possibility to be effectively taxed at a reduced rate of 9% (instead of the regular rates of 19–25.8%) with respect to qualifying benefits derived from qualifying self-developed intangible assets. To apply the innovation box regime, several (formal) requirements must be met.

Advance Tax Rulings

The Dutch tax authorities (DTA) offer companies that have a sufficient economic nexus with the Netherlands the opportunity to obtain certainty in advance on the application of Dutch tax law by concluding an advance pricing agreement (APA) or an advance tax ruling (ATR). An APA contains an agreement on at arm’s length remuneration or the method chosen for the determination thereof. An ATR offers certainty in advance on the applicability and scope of a tax clause or on the tax consequences of an intended transaction. The DTA also provide advance certainty on the minimum taxation (Pillar Two) rules applicable as at 31 December 2023.