Tax residence and fiscal domicilei Corporate residence
Pursuant to Dutch tax law, the place of residence of a corporate entity is determined on the basis of all relevant facts and circumstances, in particular taking into account the place of effective management.
However, the CITA provides an important exception to this principle by applying the 'incorporation fiction'. Pursuant to this fiction, entities such as NVs and BVs are deemed to be tax residents of the Netherlands by virtue of being incorporated under Dutch law. Accordingly, an entity incorporated under Dutch law is in principle fully liable to Dutch CIT regardless of its taxable place of residency, except limited by a bilateral tax treaty.ii Branch or permanent establishment
Taxable profits from a business that is conducted through a PE or a permanent representative (referred to as a 'Dutch business') in the Netherlands are in principle subject to Dutch CIT.
In addition to the generally accepted Dutch PEs (the Netherlands typically follows the PE definition under the OECD Model Convention), the CITA explicitly states that a Dutch business is deemed to include:
- income and gains derived from real estate located in the Netherlands, including direct and indirect rights in Dutch real estate and rights to explore and commercially operate Dutch natural resources;
- profit-sharing rights in, or entitlements to, the net value of a business that is effectively managed in the Netherlands, except insofar as those rights or entitlements are not derived from securities;
- receivables on companies that are residents of the Netherlands, provided that the lender holds a substantial interest in the company concerned; and
- activities performed by a member of the management or supervisory board of an entity that is a resident of the Netherlands, even if the authority is restricted to those parts of the business that are located outside the Netherlands.
In determining the profits attributable to a PE, the Netherlands follows the authorised OECD approach, which has been largely incorporated into the Dutch PE profit allocation decree of 2011.