The Netherlands is consulting on broader tax treaty rules that would allow developing countries to levy tax on service payments, including a wider range of services, while introducing safeguards to limit excessive taxation and double taxation.
The Netherlands Ministry of Finance has initiated a public consultation on changes to how the Netherlands will handle taxation of service income in future tax treaties. The consultation runs from 9 September 2026 to 23 October 2026 and invites responses from companies, tax advisors, employers’ organisations, NGOs, and other interested parties.
Current policy and why it’s changing
The Netherlands’ existing tax treaty policy, established in 2020, generally refuses to give source countries the right to tax payments for services. The reasoning behind this stance centres on how source-state withholding taxes work. These taxes apply to total payment amounts without subtracting actual business costs or accounting for losses. This system can produce excessive taxation and result in double taxation, both of which obstruct cross-border commerce.
However, concluding new treaties or amending existing ones with developing countries has proven difficult under these restrictions. The Ministry now recognises the need for greater room to negotiate.
What the proposed changes allow
- The Netherlands would be prepared to agree to a source state levy on service payments in tax treaty negotiations with all developing countries, rather than only the poorest and most vulnerable countries.
- The measure would apply to all types of services, not just technical services.
- The Netherlands would accept the levy only as part of an acceptable overall compromise and would seek to limit its impact by considering expected profit margins for low-risk services when setting the tax rate.
- Taxpayers would preferably have the option to be taxed on a net basis.
- The existing requirement that services must be performed in the developing country would be abolished.
The consultation welcomes input from internationally operating businesses, domestic service providers, tax specialists, academic researchers, and civil society organisations.
Responses must arrive by 23 October 2026.
