Netherlands Has Lowest Tax Rate in Europe

Study Lauds Dutch Tax Incentives for R&D and Innovation

A recent study conducted by KPMG has shown that taxation of foreign companies in the Netherlands is the lowest in Europe, and third lowest in the world.

The Competitive Alternatives 2010 Special Report: Focus on Tax compared tax rates of 95 cities in 10 countries in North America, Japan, Australia and several European states. Researchers included several types of taxes, including those specifically levied on companies, local rates, and labor taxation.

“Our study reveals that there is no standard approach in setting tax policy among the countries examined,” says Greg Wiebe, KPMG Canada’s Managing Partner, Tax. “Although the types of taxes used to raise government revenues are more or less the same, there is a huge range in how these taxes are weighted and applied. A country's tax policy choices can significantly affect the tax cost of doing business in that country.”

KPMG found that companies wanting to initiate “real economic activities,” such as production, services or R&D, find the lowest European taxes in the Netherlands.

The Netherlands’ favorable ranking in the survey is attributed in part to two initiatives. The Dutch fiscal stimulation package compensates for labor costs incurred during research and development. In addition, profits of certified innovations are taxed at lower rates according to “the innovation box,” a new policy that took effect on Jan. 1.

The Netherlands ranked behind only Mexico and Canada on the worldwide list of tax-friendly countries.

Source: RNW and www.competitivealternatives.net, 26 May 2010