Direct investment, typically used by multinationals to acquire substantial interests in foreign entities, plays a key role in shaping global corporate structures. The Netherlands maintains an exceptionally high position in both inward and outward direct investment. At year-end 2024, these positions amounted to 436% and 508% of gross domestic product (GDP), respectively – equivalent to €4,946 billion inbound and €5,759 billion outbound.

The scale of these flows underscores the Netherlands’ attractiveness to multinationals for establishing business units, often for legal and tax optimisation purposes rather than for operational activities. These entities are commonly referred to as "letterbox companies."

New measures to combat tax avoidance

One of the key reasons why many multinational corporations structure their operations through the Netherlands is the country’s extensive network of tax treaties. In fact, until recent years, Dutch legislation allowed companies to avoid paying tax on dividends and royalty income – such as those from trademark rights – if such income was already taxed in another treaty country. 

This provision made the Netherlands an attractive conduit for channelling profits to jurisdictions with minimal tax obligations, including Bermuda, the Cayman Islands, and Trinidad and Tobago. These destinations are commonly referred to as low-tax jurisdictions (LTJs).

In recent years, both national and international measures have been introduced to curb tax avoidance through LTJs. The Netherlands implemented a withholding tax on interest and royalties in 2021, followed by a withholding tax on dividends in 2024. Additionally, a global minimum corporate tax rate of 15% came into effect last year.

Income flows to tax havens structurally lower

Recent legislation appears to have had a measurable impact on income flows to and from the Netherlands. Since 2020, there has been a marked decline in direct investment and royalty income routed from the Netherlands to LTJs.

In 2019, these flows totalled €37 billion, but fell sharply to €5 billion in 2020. Since then, they have remained structurally lower, with minor fluctuations, reaching over €6 billion in 2024.

The most significant reduction has been observed in royalty-related profits, which averaged €24 billion annually between 2015 and 2019, but dropped to less than €1 billion in 2024. The remaining flows to LTJs now consist primarily of dividend distributions.

More information 

• Table 12.12: Net external assets
• Table 12.21: Geographical distribution income from foreign direct investment