Tax convention between the Netherlands and the United States
In order to encourage foreign investments and create a more favorable taxation regime
for foreign companies operating in their jurisdiction the Netherlands and the United States have signed a Convention for the avoidance of double taxation
. This applies to taxes on income
imposed in both countries and it is also used as an instrument to control and avoid tax evasion.
The double tax treaty signed between the USA and the Dutch is useful for many businesses and individuals who perform activities in both jurisdictions. It is an instrument which guarantees that the income produced in one country is not taxed by both jurisdictions.
The scope of the treaty
The Convention for the avoidance of double taxation applies on all taxes on income and on various types of income. The taxes for which the treaty applies in the Netherlands are:
- the income tax;
- the tax on wages;
The taxes for which the treaty applies in the United States are the federal income taxes imposed by the Internal Revenue Code (except for the social security taxes).
The Convention applies to persons (or corporations) that are residents of one or both Contracting States. For the purpose of the treaty, a tax resident is a company or individual who is liable to tax in the country because he is a resident or because the company is incorporated in the country or has its main management headquarters in the country.
Income covered by the treaty
The type of income covered by the Convention includes both income derived from business activities and income derived from remuneration as per an employment agreement. The following types of income are included:
- income from real property;
- business profits;
- profits derived from a company that operates ships or aircrafts;
- dividends, interest, royalties, capital gains;
- independent and dependent personal services;
- director’s fees;
- income for artists or athletes;
- pensions, alimony and other income.