Corporate income tax for Dutch companies: Rules, rates, and CIT return
Corporate taxation is often referred to as one of the most challenging back-office processes for companies. A level of complexity varies from country to country and the Dutch system is not among simple ones. In the Netherlands, corporate taxation changes constantly and contains a lot of specificities.
In this article, we review corporate income tax (CIT or vennootschapsbelasting, VPB, in Dutch) — the main tax for companies in the Netherlands. We update its rate to 2022, explore tax exemptions and figure out how to calculate the next CIT return properly.
What is Corporate Income Tax
CIT is a tax that a government applies to the company’s taxable profits on a yearly basis. Each legal entity in the Netherlands must close its financial year in time, i.e. to calculate total taxable profits and pay corporate taxes on these earnings. It must be done within 5 months after the end of the financial year by submitting CIT return online via the Tax and Customs Administration.
A financial year is basically the same as a calendar year. But in some cases, your financial year can be ‘broken’ or ‘shortened’ so the exact return filing deadline can vary. Note that the exact timeframes of the company’s standard financial year must be indicated in the company’s Articles of Association.
How to Calculate CIT Properly
In recent years Dutch authorities stimulate SMEs by lowering taxation. Since 2020 and the coronacrisis Dutch authorities have significantly lowered corporate tax rates and particularly the CIT. Bearing in mind that the Dutch corporate taxes change yearly, an entrepreneur should pay special attention to the constant amendments in taxation.
Let’s consider in detail how CIT works. If a company earns up to €245,000 in 2021, it will pay just 15% CIT. If a company profits more than €245,000, it will pay the same 15% tax on the €245,000 part of earnings (so-called first bracket), and 25% on the part above this amount (second bracket).
For example, LLC Daisy has earned €350,000 by the end of the financial year. Then it will pay €57,750 CIT in total (€36,750 as a 15% tax from €245,000 part of the profit plus €21,000 tax as a 25% from the remaining €105,000 of the profit).
Corporate Income Tax Rate for Dutch Companies in 2022
We’ve got good news! In 2022, the threshold on increased taxation is raised from €245,000 to €395,000. Now if a company earns up to €395,000, it will pay 15% CIT, if more, it will also pay 25,8% corporate tax in excess of €395,000.
Who Must Pay CIT and Who Can Get Tax Relief
Normally, each Dutch legal entity must pay this corporate tax in full. But there are some opportunities to get tax benefits or avoid taxation at all:
For the fiscal investment institutions, the CIT rate is 0% provided the condition for the shareholders and holders of certificates of participation.
Not exceeding a threshold level of profit foundations and associations may be exempt from corporate income tax.
By participating in the governmental innovation box program companies can decrease the CIT rate to 9%. A company should meet research and development conditions and apply for R&D tax credit. Depending on the size of the company you may also need to apply for a patent.
CIT Return Filing Extension
If a company cannot pay corporate income tax in time, an entrepreneur can apply for a tax-filing extension via the Tax Administration website. A special form should be filled out between 1 April and 1 June of the year following the taxable year. An alternative is to download this PDF form, print, fill and sign the document and send it to the Tax Office via post. A company can apply for an extension until 1 November. In the event that five months is not enough, a company can request another prolongation given the significant reason for it.
There are quite heavy fines for late tax payments. If a company submits the CIT return too late, it’ll be fined € 2,757. In the case of the second delay, it’ll be fined € 5,514.
Corporate Taxation For Branches and Subsidiaries
If the non-Dutch parent company has branches or subsidiaries in the Netherlands, it must file a CIT return on the income received by its Dutch subsidiaries. Also, a parent company can establish a fiscal unity with one or more daughter companies located in the Netherlands. In this case, tax authorities will treat the companies as a single taxpayer so they’ll be able to file tax returns as one entity. There are several requirements to set up this fiscal unity.
How Enty Can Let You Forget about CIT Return and Streamline Your Business Processes
For newcomers to the Dutch market, it might be quite challenging to file CIT returns correctly without mistakes that result in heavy fines. With Enty, you will not worry about it anymore. All you need to do is to issue invoices through the Control Panel, then our accountant will file a report to the authorities when needed. All you have to do is make sure that you have your invoices and upload them in time.
Join Enty’s Control Panel and manage all business processes at once — your invoicing and banking data will be reflected in the accounting section. The reports and declarations will be automatically created and sent to the authorities in time.
Besides automated accounting, invoicing, and other features, we also give a 1-hour quarterly consultation with an accountant, so you will be able to make sure that everything is correct and address all questions to the professional.
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