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Doing business in the Netherlands 30Tax declarationThe income tax declaration for any given tax yearmust be submitted to the tax authority in principlebefore 1 April of the next year. If a firm of accountantsproduces the return an extension schemeapplies. This means that the return may also be submittedlater in the year.6.3 Dividend withholding taxCompanies often pay out profits to the shareholdersin the form of dividends. The following are furtherexamples of dividend situations:• Partial repayment of the moneys paid-up onshares by shareholders;• Liquidation payments above the average paid-upequity capital;• Bonus shares from profits;• Constructive dividend. This concerns paymentsmade by a corporation primarily for the benefitof a shareholder as opposed to the businessinterests of the corporation;• Interest payments on qualifying hybrid debt assuch debt is treated as informal equity of theborrowing company.ExemptionNo tax is withheld, among others, in the followingsituations:• Where, in inland relationships, benefits areenjoyed from the shares, profit-sharing certificatesand cash loans of participations to whichthe participation exemption applies;• If a Dutch company pays out dividends to a companyestablished in a member state of theEuropean Union and the company holds at leasta 5% share of the Dutch company.Tax rateThe tax rate for dividends is 15%. The tax is withheldby the company that pays out the dividendsand pays it to the tax authorities. The dividend taxwithheld serves as an advance tax payment onincome and corporate income tax.The Netherlands has signed tax treaties with variousother countries, as a result of which a lower tax ratewill apply in many instances.6.4 Prevention of double taxationResidents of the Netherlands and companies that areregistered in the Netherlands must pay tax on all revenuegenerated worldwide. This could result in any givenincome component being taxed both in the Netherlandsand abroad. To prevent this kind of double taxation, theNetherlands has signed tax treaties with many othercountries. The treaties are largely modelled on theOESO Model Treaty for the prevention of double taxation.If an income tax component is nevertheless double-taxedas income or corporate income tax, thetaxed amount is reduced based on the exemptionmethod. The method entails a reduction of the Dutchtax related to the foreign income. The exemption onthe income tax is calculated per box.Double taxation of dividend payments and interestpayments and royalties is prevented with the use ofthe settlement method. The use of this methodmeans that the Dutch tax is reduced by the amountof tax charged abroad.In certain situations it is also possible to deduct theforeign tax directly from the profits or as costsrelated to income.6.5 Wage taxAs explained earlier in this section wage withholdingtax is an advance tax payment on income tax. Anyonederiving an income from employment in theNetherlands is liable to pay income tax on theincome. In addition, employees in the Netherlands aregenerally covered by social security. The employerwithholds the social security premium and wage taxdue from the wages as a single amount and subsequentlypays this to the tax authorities. The combinedamount is referred to as wage tax. The wage tax is subsequentlysettled against the amount of income taxdue.Dutch tax legislation allows numerous options forrewarding personnel in fiscally friendly ways. Wagetax is calculated on the full value of the remunerationsreceived by the employee based on theemployment contract. The remuneration may takethe form of cash, such as a salary, holiday allow-