Corporate income tax

Who pays corporatie income tax?

Public and private companies usually have to pay corporate income tax on their profits. In certain circumstances, foundations and associations must also file corporate income tax returns.

Some legal entities, such as fiscal investment institutions, do not pay corporate income tax. Some legal entities that collectively invest, may also be exempt from corporate income tax.

Natural persons (such as the self-employed) pay tax on their profits through their personal income tax returns.

Corporate income tax rates in 2022

The corporate income tax rate depends on the taxable amount. The taxable amount is the taxable profit in a year reduced by deductible losses.

• If the taxable amount is € 395,000 or less, the corporate income tax rate is 15%.
• If the taxable amount is more than € 395,000, the corporate income tax rate is € 59,250 plus 25,8% for the taxable amount exceeding € 395,000.

A reduced rate of 9% applies to activities covered by the innovation box. The innovation box provides tax relief to encourage innovative research. All profits earned from innovative activities are taxed at this special rate.

Tax groups with subsidiary companies

In principle, every company pays its own corporate income tax. However, if a parent company forms a tax group (also referred to as a fiscal unity) with one or more of its subsidiaries, the Tax and Customs Administration will on request 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 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.

Exemption for substantial holdings

Subsidiary companies distribute their profits to their parent companies in the form of dividend. The participation exemption exempts the parent company from paying tax on dividends received from its (qualifying) subsidiaries. This prevents it being taxed twice within the same group of companies. The participation 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 base. The substantial holding exemption does not apply to holdings in an investment vehicle.