However, at a certain point this activity may create a tax presence.
A tax presence means that the local tax authorities consider your business as local enough to tax you — even if you have no legal entity, branch, or registration. In tax treaties this is called a permanent estabishment, but the concept is broader.
If your activities create a tax presence, this can trigger obligations such as:
corporate income tax on locally attributable profits
local bookkeeping and reporting requirements
registration with tax authorities
penalties or retroactive tax assessments if risks are missed
The difficulty is that tax presence is not always obvious.
Many companies assume that “no company” automatically means “no tax”, which is not always correct.
Tax presence risks often arise when a company:
has employees or directors working from another country
uses local sales agents or representatives
carries out long-term projects or on-site activities
operates warehouses or fixed facilities
manages local operations from a home office
Whether these activities create a tax presence depends on how authorities apply these tax rules in practice.
Tax presence (permanent establishment) questions in the Netherlands are handled within a well-developed legal and administrative framework, with a strong role for case law.
Audits, assessments and treaty interpretation are carried out by the Dutch Tax and Customs Administration (Belastingdienst)(link).
Disputes are resolved by the Dutch courts, with final authority resting with the Supreme Court of the Netherlands (Hoge Raad) (link).
In practice, Dutch permanent establishment analysis is highly fact-driven and focuses on economic reality rather than formal labels.
Under Dutch tax law and tax treaties, a permanent establishment is generally defined as a fixed place of business through which the business of a foreign enterprise is wholly or partly carried on.
The Belastingdienst provides practical guidance on when a foreign enterprise is considered to have a permanent establishment in the Netherlands, including consequences for corporate tax and payroll obligations (link).
Dutch courts interpret treaty concepts in line with the OECD Model and Commentary, but always test the outcome against the concrete facts of the case.
A recurring theme in Dutch jurisprudence is whether the foreign enterprise has a sufficiently durable and stable connection with a place in the Netherlands.
Dutch case law shows that ownership or rental of premises is not decisive. What matters is whether the enterprise has the place at its disposal and uses it to carry on its business activities.
Publicly available Dutch court decisions on fixed place permanent establishments can be found via Rechtspraak.nl searches, which show how courts assess durability, disposal and functional use in practice (link).
Home office situations are assessed carefully in the Netherlands. Dutch courts consistently examine whether the employer requires the home office and whether the enterprise effectively has the home office at its disposal.
In multiple appellate court decisions, Dutch courts have ruled that an employee’s home office does not constitute a permanent establishment where the home office is used for the employee’s convenience and the employer does not exercise control over the location.
Published case law on home office and permanent establishment can be reviewed through Rechtspraak.nl searches, which show that the analysis turns on business necessity and functional reliance (link).
The Netherlands has a substantial body of jurisprudence on dependent agent permanent establishments.
Dutch courts focus on whether a Netherlands-based person habitually acts on behalf of the foreign enterprise and plays a decisive role in the conclusion of contracts, even if formal signature takes place abroad.
Economic reality prevails over contractual form. Where Dutch-based representatives effectively bind the foreign enterprise in commercial terms, dependent agent permanent establishment risk increases significantly.
Relevant Dutch case law on agents and contract authority is publicly accessible through Rechtspraak.nl (link).
Several Dutch tax treaties include a service permanent establishment clause. Under these treaties, a permanent establishment may arise where services are performed in the Netherlands for more than a specified period.
Dutch courts apply these clauses strictly, examining both the duration and the nature of the services performed. Repeated short-term assignments may be aggregated depending on treaty wording and factual continuity.
Case law and treaty interpretation on service permanent establishments can be reviewed via Rechtspraak.nl searches (link).
Scrutiny by the Dutch tax authorities typically increases where employees or representatives are permanently based in the Netherlands, where Dutch-based roles are commercially decisive, where home offices are used structurally as operating bases, or where sales or service activities are closely linked to revenue generation.
Dutch audits tend to rely heavily on factual evidence such as emails, mandates, internal decision-making processes and actual conduct.
If a permanent establishment is identified, the Netherlands may tax profits attributable to Dutch activities. This is usually accompanied by profit attribution analysis, bookkeeping obligations and potential payroll tax exposure.
Retroactive assessments are possible, particularly where activities have existed for multiple years without reassessment of the tax position.
In the Netherlands, incorporation often becomes the cleaner option once Dutch-based activity is intended to be permanent, when local personnel perform commercially decisive functions, or when ongoing uncertainty around permanent establishment risk becomes operationally inefficient. At that stage, incorporation typically provides clearer boundaries, greater certainty and more predictable tax and operational compliance.
Across tax systems, the assessment of tax presence typically follows a consistent set of underlying principles:
Substance over legal form
Actual business activities and economic reality carry more weight than contractual labels or formal structures.
People and decision-making
Where key individuals work, negotiate, manage operations or make decisions is often decisive.
Continuity and regularity
Ongoing or recurring activities are treated differently from occasional or incidental involvement.
Economic value creation
Where value is created, managed or controlled is a central factor in tax attribution.
These principles explain why the absence of a legal entity does not automatically eliminate tax exposure.
Tax presence risk is most commonly associated with the following types of activities:
Employees or directors working structurally from another jurisdiction
Sales personnel or agents with decision-making authority
Long-term or recurring on-site projects
Fixed places of business such as offices, warehouses or workshops
Home offices used as a regular base for business operations
The decisive factor is rarely a single activity, but rather the combination, duration and functional role of these activities.
Certain activities are widely regarded as preparatory or auxiliary and typically do not, on their own, create tax presence:
Occasional business travel
Pure marketing or promotional activities
Independent agents acting in the ordinary course of their business
Short-term presence without operational continuity
Supporting functions without decision-making authority
Risk may still arise when these activities evolve or are combined with more substantive functions.