Tax Treaty Case Law around the Globe 2012

Netherlands: Interest Income and the Impact of an Exchange Loss on the Calculation of the Tax Credit

25.1. Introduction

It is generally recognized that there is a case for the Netherlands, as a relatively small country with an open economy, to promote foreign investment. From this perspective, it can be explained why the Netherlands has an active policy in avoiding international double taxation of income from capital and labour. The Netherlands currently not only has a large network of tax treaties with other countries, but also unilaterally grants, under certain conditions, relief from double taxation for its residents that receive income from nontax treaty countries under the unilateral Decree for the Avoidance of Double Taxation 2001 (2001 Unilateral Decree).

In the context of the avoidance of double taxation, Dutch tax treaty policy seeks to apply the exemption method for active income (e.g. business and labour income) and to apply the credit method for passive income (e.g. dividends, interest and royalties), although some exceptions to this main rule exist. This policy is broadly reflected in both the Dutch tax treaty network and the 2001 Unilateral Decree. It is emphasized, howe...