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Taxation of a Dutch Holding Company

Taxation of a Dutch Holding Company

Updated on Wednesday 01st April 2020

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Taxation-of-a-Dutch-Holding-Company.jpgThe taxation of a Dutch holding company is efficient and flexible, making the Netherlands a preferred location to base this type of company. The corporate tax law in the country and the easy incorporation are two other reasons why the country is a targeted location.
 
A taxation lawyer in the Netherlands from our team can provide complete assistance for investors who are interested in setting up a holding company and need complete and personalized information about the taxation of the legal entity.
 

Dutch holding companies advantages

 
A holding company in the Netherlands is simply a legal entity that is used not for the purpose of engaging in the provision and supply of goods and service, but it is incorporated for the purpose of holding shares in other companies. The main purpose of for the owner to be able to collect dividends through the holding company. This is a vehicle that is flexible, due to the local Dutch legislation, and offers advantages when used by a single investor and even when used by multiple partners (much as a partnership would) even if the said partners engage in different activities (the holding company then becomes a shared tax vehicle).
 
The main reason why this vehicle is a popular one among investors, particularly in this country, is that the taxation of a Dutch holding company is advantageous: the tax regime in the Netherlands is favorable compared to that in other EU countries, and includes but it is not limited to the fact that there is no withholding tax on dividends and no capital gains for the purpose of selling shares.
 
Our team of taxation lawyers in the Netherlands can explain the location advantages in great detail and can help investors set up this legal entity for their particular business purposes and needs.
 

Taxation principles for holding companies in the Netherlands

 
The following features are the ones that define the taxation of a Dutch holding company:
  • - the participation exemption: a holding company can be tax exempt on qualifying holdings (detailed below).
  • - tax reduction: when the participation exemption applies, the expenses related to subsidiaries can generally be deductible.
  • - no substance requirements: a Dutch holding company does not impose substance requirements and the company does not need to have employees.
  • - no withholding tax rate on dividends: the dividend payments made to a Dutch holding company by an EU subsidiary are under the EU Parent-Subsidiary Directive.
  • - no currency exchange restrictions: this company is not subject to restrictions for receiving income in the Netherlands or repatriating funds from the Netherlands; some reporting requirements do apply and one of our taxation lawyers in the Netherlands can give you more details.
 
The participation exemption applies to holding companies in as that although a Dutch company operating as a holding (under the form of a BV, for example) is subject to corporate income tax on its worldwide income, all of the benefits that can arise from a qualifying shareholdings are exempt from the corporate income tax at the shareholder’s level, whereas the shareholder is a Dutch resident company for taxation purposes. The participation exemption is designed to allow for the prevention of double corporate tax on income for a given company. The conditions for a qualifying shareholding are for the parent company to hold a participation of at least 5% and for the company to meet one of the three types of tests: the motive test, the asset test, the subject-to-tax test. One of our taxation lawyers in the Netherlands can give you complete information about these. They can also give you details about the numerous Netherlands double tax treaties; these are agreements between Netherlands and other countries for the avoidance of double taxation.
 
In most cases, the Dutch BV will be the type of company under which the holding company will be incorporated. This business entity type is easy to incorporate and it is the Dutch equivalent of the private limited liability company. It does not require a mandatory minimum share capital but needs to have a registered office in the country and needs to be registered with the Chamber of Commerce and the Tax Office. Another important advantage when setting up this type of company is that the accounting requirements will be the same as those applicable to the BV. Our team of Dutch lawyers can help investors during the registration of the BV.
 
The Dutch holding company can be successfully be used as a manner of extracting the profits of subsidiaries. The Netherlands is a country that offers not only an advantageous tax regime but also a good business environment, credibility and easy access to important surrounding EU markets.
 
Investors who wish to know more about the advantages of setting up a holding company in the Netherlands, as well as receive personalized information about the taxation regime, can contact our Dutch law firm