Netherlands: Country and Foreign Investment
Taxation of Foreign Branches
Dutch laws regarding the taxation of branches are extremely attractive:
- Profits of a Foreign Branch: For profits of a foreign branch to be exempt from corporate income tax if they were taxed at a minimum rate of 10% in the country in which they originated. Prior to 2012, all profits, capital gains and income of the foreign branch of a Dutch registered parent company (whether those profits are repatriated or not) were exempt from corporate income tax in Holland (unless those profits had not been taxed in the foreign jurisdiction in which the branch operates).
- Losses of a Foreign Branch: The losses of a foreign branch of a Dutch registered company are not deductible unless they are incurred when a branch ceases its activities. Prior to 2012, the losses of the foreign branch of a Dutch registered company were tax deductible from the taxable profits of the Dutch registered company. Thus where a project was likely to initially run at a loss it was advisable for the Dutch company to set up a foreign branch since the tax losses of the foreign branch were tax deductible in Holland (whereas the tax losses of the foreign subsidiary of a Dutch parent company are not).