The Dutch Holding Company is that company that has enough stocks in another company (subsidiary) to manage this company’s actions. Its only purpose is to hold shares in the respective company or companies.
A Dutch holding company may be established as a private limited liability company or as a public limited liability company, depending on the client's preference. For incorporating a private limited liability holding company a minimum share capital of 18,000 Euros must be deposited in a bank account, unlike the minimum share capital of a public limited holding company: 45,000 Euros.
The main reason the Dutch holding companies are preferred is the applicable fiscal policy. Holland offers an appealing tax regime mainly because of its numerous Double Taxation Avoidance Agreements signed with other countries.
Usually no withholding tax is applicable on the dividends. The share sale of the holding company in Holland doesn’t provide capital profits in the subsidiary’s country.
The holding company may operate in other foreign currency, there are no constrains regarding this.
The participation exemption is another major reason why Dutch holding companies are created. In case the principles of the participation exemption are applied, than the company may not be subject of any kind of taxation.
The main conditions a holding company must comply are: the subsidiary is taxed in the country of origin, the Dutch holding company must own at least 5% of the paid up share capital of the subsidiary, the subsidiary’s shareholders are standing and actual and the holding company must have an actual owner.
If the first condition of owning at least 5% from the paid up share capital is not respected, the holding company may be tax exempted but only it have the same type of business as the rest of the holdings and if it is a strategic company.
As a result of the participation exemption the costs in relation to the subsidiary are recoverable. Excepting the liquidation losses, the subsidiary's losses are not recoverable.
Double tax treaties were signed by Netherlands with more than 100 countries so special policy is also applied to the holding companies in Netherlands. Here are some of the benefits: the decrease of the withholding tax on dividends in the subsidiary’s country of residence, the preventing of the dual residency and permanent headquarters, cut of withholding tax rates for other sources of revenue.
The liquidation of a Dutch holding company is no different than the liquidation of a private limited liability company or public limited liability company.
If ever in need of legal consultancy or assistance in other European countries, our clients can always rely on our partners lawyers in Cyprus or attorneys in Belgium. Also, company formation in Cyprus is a service we strongly recommend for entrepreneurs willing to invest in this country.
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