22. The liability of a company to the company tax depends upon its nature and upon whether it is resident or not in N.E.I. The company tax is payable by a resident share company (naamloose vennootschap), or limited partnership with share capital (commanditaire vennootschap op aandeelen), other associations whose capital is entirely or in part divided into shares, co-operative societies and mutual insurance companies on their total income, from all sources. Non-resident companies, limited partnerships with a share capital, and other associations whose capital is wholly or partially divided into shares are taxable only in respect of specified items of income (see paragraph 25). The company tax is also payable by associations, organised in N.E.I. with no share capital and not being partnerships, in respect of income from business activities other than activities conducted for the general welfare.

23. The term “resident” is used in the preceding paragraph to interpret the word “gevestigd”, which is used in the Company-Tax Ordinance. This word is not defined in the Ordinance; but, according to a decision rendered by the Chief Inspector of Taxes,1 it indicates the place where a company has its registered office. If the company’s real centre of management (hoofdleiding) is in another country, then the latter is the deciding factor in determining the extent of tax liability. Thus, if the registered office is in N.E.I., where the company was organised, but if the directors live and meet in another country, and if the annual meeting of shareholders takes place and the central book-keeping is maintained in the other country, the company will be treated as resident in that country.



24. According to the Company-Tax Ordinance, companies resident in N.E.I. are taxable on their total profits obtained in whatever form or name, whether through the carrying on of a business or the investment of capital outside of that business. It is immaterial whether the sources of the income are situated abroad or in N.E.I.

25. Non-resident companies are taxable only on income from the following sources in N.E.I.:

note note

26. According to an official commentary of the Ordinance, tax liability arises in the case of non-resident companies when they have economic relations (economische betrekking) with N.E.I. — for instance, carry on a business or own real property in the country. Such economic relations determine the extent of the tax liability, as only the profit accruing from such relations is taxable. The Ordinance does not specify the circumstances in which a foreign company is considered as carrying on business within N.E.I. In practice, however, liability arises if the foreign company has a permanent establishment there.

27. A foreign enterprise carrying on business through a subsidiary company organised in N.E.I. has not been treated until now as a taxpayer, but the question as to whether or not the subsidiary company should be treated as a branch is still much debated. Except in some parts of Northern Sumatra, where native princes rule, only Dutch subjects or companies incorporated in the Netherlands or in N.E.I. may hold a title of leasehold or concession (Article 11 of the Agrarian Ordinance, 1872, No. 116). Thus a foreign company, wishing to carry on an agricultural or mining enterprise in N.E.I., is compelled to organise a subsidiary company (dummy) in the Netherlands or N.E.I. As the concessions or leasehold are registered in the name of the dummy, this company is taxed for the profits of the enterprise, though it exists only juridically and is totally dependent on the holding company for its financial resources. If, however, the transactions between the subsidiary and the parent company were conducted in such a manner that the true profits of the subsidiary did not appear in its books, certain officials would be inclined to assess the foreign holding company itself through the dummy as its organ.


(a) Computation of Taxable Income and Deductions

28. The tax is assessed on the basis of a return, which is made on a form supplied to the company by the local inspector. The tax-year is the company’s accounting year; otherwise, the calendar year. The basis of assessment is the net income of the preceding accounting or calendar year. The basis embraces all income derived from the carrying on of a business and from investing capital outside the business, including profits made through the disposal of assets not belonging to the company’s stock-in-trade, and, in general, every gain made through sale.

29. Allowable Deductions. — In calculating net profit, the gross amount may be reduced by expenses incurred in the making, collection and maintenance of such profit. Deductions from gross profit include interest on loans, depreciation of assets used in the business, bad debts contracted in conducting the business and written off according to business usage, and the amount necessarily written off on account of the expiration of rights (e.g., leaseholds) which are subject to a limited period. In practice, taxes paid abroad on foreign income are deductible. A loss suffered in one year may be deducted from the profit made during the two succeeding years. Cost of organising, reorganising or increasing the capital of a company is deductible as from January 1st, 1933.

30. Non-allowable Deductions. — No deduction is allowed for capital expenditure, for the creation or increase of a reserve fund, for interest on capital invested in the business, or for any tax (i.e., the N.E.I. company tax or a foreign tax) on profits derived in N.E.I. The Ordinance allows no deduction whatever for payments out of profits, or surplus, with the exception of payments to the Government otherwise than as shareholder, and of payments (bonuses) granted for services rendered to persons other than managing directors, directors, managers or managing partners. When a company borrows from its shareholders amounts far in excess of what could be obtained from disinterested sources, no deduction is allowed for any interest on the part of the loan which exceeds that which could be borrowed from such disinterested sources. As the borrowing company is assessed, no tax is levied on the creditor company in respect of the interest in question.

31. Double Taxation Relief. — If a resident company pays tax to the Government of the Netherlands, Surinam or Curaçao or a foreign country, on profits derived from business conducted or property (including rights therein) situated within those countries, N.E.I. exempts two-thirds of the profit acquired in the Netherlands, Surinam or Curaçao, and half of the profit acquired in foreign countries. The same exemption is granted to resident companies holding 90 per cent of the registered stock of non-resident companies which are taxed by the above-mentioned Governments. The Governor-General has special powers to effect relief by ordinance (see paragraph 18). Non-resident companies are not taxable on profits derived from shipping between ports in N.E.I. and abroad (Company-Tax Ordinance, 1932, effective January 1st, 1933).

32. To prevent double liability to the N.E.I. tax, no tax is levied on dividends received by an N.E.I. or foreign company from an N.E.I. company or a foreign company deriving at least 90 per cent of its income from sources in N.E.I., provided the shares held in the distributing company are registered in the name of the shareholder.

33. Assessment of Non-resident Insurance Companies. — Special rules are given for the computation of the taxable income of foreign insurance companies. This taxable income is fixed for life insurance companies at 5 per cent, and for all others at 10 per cent, of the amount received in premiums or capital from insurees living or incorporated within N.E.I., or for risks within this country. No deductions are allowed for brokerage or other commissions, rebates, reinsurance or other expenses. As an exception to the preceding regime, the taxpayer may request to be taxed on an amount representing the same proportion of the whole net profit of the insurance business as the above-mentioned amount received in premiums and capital in N.E.I. bears to the total amount received in the same year in premiums and capital from insurees.

(b) Computation of Tax and Abatements

34. The tax is computed on the total net taxable income of the company at a proportional rate plus a surcharge (also proportional) on the preceding rate (see Annex).

35. No abatements are allowed against the tax. For double taxation relief, see paragraph 31.


36. Tax is never withheld at source under N.E.I. law, but is always levied by direct assessment against the taxpayer or his representative in N.E.I. The inspector of finance or his substitute notes the assessment in a register and notifies it to the management of the company. The company tax must be paid as a rule within one month from the date of the assessment notice, but the inspector of finance can allow a postponement, in which case interest will be due on the amount for which postponement is granted at a rate of ½ per cent for every month. The Treasury has, to a certain extent, a preferential claim for the tax on all property of the company, etc.


37. In general, the district inspector of finance sends the company a return form, which is filled in and returned to the inspector after the books are closed. The taxpayer must comply with all requests for verbal or written information necessary to verify the return. Usually, copies of the annual balance-sheets and profit-and-loss statements are requested. Upon request, the taxpayer must open his books and pertinent documents to the examination of the inspector of finance, of any persons named by the head inspector, or of experts appointed for that purpose.

38. After having secured the necessary information, the inspector computes the assessment, enters it in a register, and serves a notice of assessment on the taxpayer. The taxpayer may lodge an appeal in three months to the head inspector and thence to the Court of Tax Appeals, which is the final authority.

39. Penalties. — If, after receiving a return form and a written reminder, the taxpayer makes no declaration, or if he refuses to give access to the books and to related documents when requested, the assessment will be increased by 100 per cent. Provisional assessment may be imposed on the basis of the amount declared, or on the basis of an estimated amount if accounts have not yet been closed. If it appears through later information that the assessment was too low, an additional tax may be assessed, and increased 100 per cent, provided five years have not elapsed since the end of the year for which the tax is levied.