SUBSTANCE REQUIREMENTS IN THE NETHERLANDS
Many companies use the Netherlands as gateway / hub for EMEA markets(Europe / Middle East / Africa) US / Asia markets. They do this by setting up a holding company in the Netherlands. The legal entity which can used does not matter. It can be a BV (like a Ltd.), NV. or a Dutch Cooperative (with members and no shareholders). In order to set up this Dutch company you need to have sufficient substance in the Netherlands. Below we will discuss some important points about substance requirements in the Netherlands.
Setting up a Dutch BV – Steps
If a (foreign) shareholder (individual or business) want to set up a Dutch BV because of the favorable aspects of the various elements of the Dutch tax regime, such as the participation exemption, extensive tax treaty network, or concluding tax rulings with the Dutch tax authorities), the following steps must be taken to set up the company:
- Register the Dutch B.V at a notary;
- Register the Dutch B.V at the Chamber of Commerce;
- Register the company at the Dutch tax authorities receiving fiscal numbers (CIT/VAT/Wage tax).
Foreigner setting up a Dutch BV – Substance requirements in the Netherlands
In order to fulfill the substance requirements in the Netherlands, foreign companies / individuals who want to do the above-mentioned steps must have a Dutch business address where all the correspondence will be send to. This can be arranged by having an office with skilled staff in the Netherlands. As result, this skilled staff can apply for a special tax facility called 30% ruling where employees receive 30% of their income tax free. The 30% ruling is very attractive for employers who need qualified personnel.
Holding companies in the Netherlands
Foreign investors with a holding company in the Netherlands, with no business presence because they have no office / staff can be supported by a Dutch financial service provider / company (trust), so they will be seen as Dutch tax resident.
Dutch financial service company (Trust)
In order to avoid discussions with the Dutch tax authorities, a Dutch financial service company can support foreign shareholders by fulfilling the substance requirements in the Netherlands such as:
- At least half of the management directors of the company should be a tax resident in the Netherlands;
- The board is actually taking the key discussions and is generally doing so in the Netherlands;
- Use of a Dutch bank account
- The regular business address of the Dutch BV is in the Netherlands
- Maintain the financial administration and tax compliance in the Netherlands
In order to avoid discussion with the Dutch tax authorities and to fulfill the substance requirements in the Netherlands, we recommend to implement some of the above-mentioned points (based on the circumstances).
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