The Dutch Holding Company

We have advised numerous clients on the use of a Dutch Holding Company, helped to set them up, and manage their tax compliance from year to year.  

Below you will find a summary of relevant legal and tax information about the Dutch Holding Company.   

The Dutch holding company

The Netherlands is a preferred location for the setup of a Headquarter Company or Regional Hub for the EMEIA Region, and hence the Dutch B.V. is still one of the most popular entities to be used as a holding company in international structures.

The main reasons for using the Netherlands as the location for a holding company are:

• Stable and open economy,
• Availability of a highly educated workforce,
• Flexible legal and corporate law regime,
• Easy access to financial markets,
• The favorable tax regime for holding activities and international business.

From a tax perspective, the Dutch holding company offers an efficient route for upstreaming profits from subsidiaries to (ultimate) shareholders/ investors. Whether the subsidiary is directly owned or through a corporate structure, the repatriation of profits may trigger taxation in the country where the subsidiary is located. On top of that, the direct shareholder may get taxed in its own country for the income that it would receive directly from a subsidiary. Through the application of tax treaties, the Dutch holding company can significantly reduce the tax at source, and the Dutch participation exemption regime offers a legitimate and safe method for deferral of taxation in the home state of the ultimate shareholder.

The benefits of the Dutch holding company

The main benefits of the Dutch holding company are:

• Full corporate tax exemption of dividends and capital gains on shares in qualifying subsidiaries (participation exemption)The tax exemption may under certain conditions extend to construed share investments, return on profit participating loans, earn-out payments, income from diluted share interests, and hedging results.
• Exemption of Dutch dividend withholding tax on dividend distributions to qualifying corporate shareholders in the EU tax treaty country
• Minimum corporate tax rate of 15% for ordinary income (2021)
• Special tax regimes for amongst others R & D activities (including software development) and international shipping 
• An expatriate incentive for employees assigned to the Netherlands,
• Corporate tax deduction for interest expenses and other expenses allocable to the holding activity
• Tax deduction of liquidation losses
• Favorable tax treaties with the main non-EU economies, including the United States of America, China, Hong Kong, and India.   
• Access to the benefits of the Dutch treaties like the reduction of foreign withholding taxes on dividends, interest, and royalties and protection for the taxation of capital gains on shares in the source state No withholding tax on interest and royalties for shareholders, unless they are located in a blacklisted country (with only a low or no corporate tax). 
• Access to EU tax benefits, specifically the 0% withholding tax rate on dividends and interest and royalties received from qualifying subsidiaries located in other EU member states and EER states, unless anti-abuse provisions apply (like the main benefit test). The possibility to obtain Advance Tax Rulings, for instance regarding the application of the participation exemption in a given situation, and Advance Pricing Agreements, providing certainty about the compliance of internal prices to the Dutch, transfer pricing rules.   
• Flexible corporate law regime
• The possibility to file the corporate tax return in a foreign currency (the functional currency)
• Relatively low incorporation and maintenance costs of legal entities like BV’s, NV’s, and Cooperatives.

The activities of the Dutch holding company

Dutch holding companies do not have a separate status under Dutch tax law. The commonly available tax benefits, also apply to any type of corporation holding shares in Dutch or foreign subsidiaries.

There are virtually no limitations to the activities of the Dutch holding company.

The Dutch (intermediate) holding company can function as regional headquarters combining various activities, such as collecting dividends and receiving interests and royalties from subsidiaries, but also the provision of services or the import/export and distribution of goods. 

A Dutch (intermediate) holding company can also operate as a Financial Services Company (offering the possibility for a tax-efficient setup for fundraising in the marketplace (for instance through the issuance of bonds), and internal financing with cash pools, group financing facilities, etc.

The centralization of activities in a Dutch holding company will make the structure more robust and resistant to the international tendency to deny tax advantages to purely tax-driven vehicles that have little or only little local substance, and which do not perform any real realistic economic activity.

The Dutch holding company is also often used as a joint venture vehicle between non-related parties. The Netherlands is generally perceived by contracting parties from different countries as a neutral ground within a stable and safe political, social and economic environment. This added to the primary advantages of the Dutch Holding Company as described above, making the Netherlands a preferred location for a cross-border joint venture. 

The legal form of a Dutch Holding Company

There are a variety of legal forms available that can be used for a Dutch Holding Company. It will depend on the circumstances which legal form is most suitable in a given case.

The following legal forms can be distinguished: 

Private Limited Liability Company (BV)

The most commonly used legal form is the private Limited Liability Company, referred to in the Netherlands as “Besloten Vennootschap met beperkte aansprakelijkheid”, or “BV”.  Most holding companies are set up as BV.

Public Limited Liability Company (NV)

In particular, if the listing is required, the legal form of Public Limited Liability Company, referred to in the Netherlands as “Naamloze Vennootschap”, or “NV”, is obligatory.

Co-operative Society (CV)

A special variety of the legal form of a Dutch holding company is the Co-operative Society, or in Dutch de “Vereniging op Coöperatieve Grondslag” or “CV”.  From its origin, the CV was designed for joint activities in the agricultural sector, and other sectors where the principles of cooperation between parties were leading. However, because profit distributions by a CV were not subject to Dutch dividend withholding tax, the CV was also used as a tax-driven holding company within the regular marketplace. This changed in 2018 when the Dutch government introduced a condition withholding tax obligation for CV for non-qualifying shareholders.       

As of January 1, 2018, the CV is required to withhold dividend withholding tax if the following conditions are met:

• One or more members are entitled to at least 5% of the profit and/or liquidation proceeds
• A cooperative is considered a holding cooperative when at least 70% of the activities comprise of holding of participations or direct or indirect financing of affiliated entities

The aforementioned results in holding cooperatives being treated the same as BV/NV holding companies or Dutch dividend withholding tax purposes.

European Societies (SE, SCE, and SPE)

For holding companies that will operate through the European continent, the law offers the possibility of Public European Society (Societas Europaea, or “SE”), the Private European Society (Societas Privata Europaea, or “SPE”), or the European Cooperative Society (Societas Cooperativa Europaea or “SCE”).  These legal forms are based on European law and have their typical characteristics concerning nature and the number of shareholders and minimum capital. It will depend on the facts and circumstances of each case, which one is most suitable in a given situation.

The main benefits of the European societies are the unlimited possibility of cross-border merges within the EU and EER, and the possibility to transfer statutory seats within the EU and EER. The general disadvantage is the relatively high cost of incorporation, the minimum capital and shareholder’s requirements, and the relative unfamiliarity in the legal sector and in the market place which makes them relatively difficult to operate.    

Foreign legal entities

The tax regime for holding companies is in essence also available to legal entities incorporated under foreign law, provided that they have their (tax) residence in the Netherlands. Tax residence is generally defined, as the place where effective management is exercised. 

Dutch tax residence of a foreign corporation will trigger Dutch tax liability, quite similar to the tax liability for Dutch corporations, so including the liability to Dutch corporate tax, VAT, and dividend and interest withholding tax. The same interalis applies to the application of tax treaties when the tax treaty provides for the tie breaker of “place of effective manager management” due to dual residence issues of corporations. Most Dutch tax treaties, but not all of them, such as the tax treaty with the USA.     

Under certain conditions, a foreign legal form may also have to be registered in the trade register as a “formal foreign legal entity”, in particular, if it has Dutch residence and effectively no ties lift with its country of incorporation.     

Protection shareholders – the Dutch Foundation (STAK)

A Dutch Foundation (or “Stichting”) can be used in different ways in a corporate setup of a Dutch corporation, for instance, to protect the company against unfriendly takeovers, to ensure the continuity of the company in case of succession or replacements of shareholders, or to protect the assets of shareholders.

The Stichting has a legal personality, as a consequence of which the assets owned by the Stichting are in legal terms separated from the equity of third parties, like the beneficiaries to these assets (if any), directors, and incorporators.

 The Stichting has its Board and is not required to have any shareholders. The statutes of the Stichting, possibly in combination with two-party agreements, regulate the way the Stichting operates, the authorities of its bodies and officials, and how and to whom the revenues of the Stichting (if any) are to be distributed. 

 In a corporate setting, the Stichting can be used for “Orphaned structures”, whereby the Stichting obtains legal ownership of certain pre-determined purposes, or it can hold ownership of assets (typically shares in subsidiaries) on behalf of third parties. The latter variety is generally referred to as “Stichting Administratiekantoor”, or ”STAK”. 

 For listed companies, the STAK is a sophisticated instrument to protect themselves against unfriendly takeovers. In the private sector, the STAK is primarily used for asset protection purposes.    

 The essence of a STAK is that the Stichting holds legal ownership of shares, on behalf of designated third parties, usually the original shareholders, its successors, or the company itself. These third parties are referred to as “certificate holders”, albeit their rights and entitlements are primarily regulated by two-party agreements (‘terms of administration administration”), and there are no physical certificates. When the STAK holds shares in subsidiaries, the board of the Stichting can exercise the voting rights, and it will depend on the terms of administration agreed upon to what extent the holders of the certificates can influence the way the voting rights are exercised by the STAK. Under normal circumstances, the certificate holders are entitled to the economic benefits derived from the shares held by the STAK, but ultimately this will also depend on the terms of administration agreed upon.              

In effect the interposing of the STAK in corporate ownership structure separates the ownership of the shares, from the equity of the shareholders, as a consequence of which the ownership of the shares, and indirectly the existence of the company, does not need to be affected by developments at the shareholder level, for instance, entry-exit of minority shareholders, succession by death or otherwise, or the bankruptcy of shareholders.   

 As long as the foundation does not conduct an enterprise it is not subject to Dutch corporate tax. As long as the setup of the STAK complies with certain conditions, the STAK will not become independently subject to Dutch corporate tax or dividend withholding tax. For the certificate holders, in most cases, the STAK will be treated as a tax transparent entity for Dutch tax purposes. It will depend on the applicable tax rules in the country of the certificate holders and how they will be taxed there, but in most cases, they will apply the same transparency approach as the Netherlands. It is noted that mismatches in qualification which can be heavily sanctioned in the Netherlands and abroad, will generally make the structure non-effective and risk the involved parties from getting exposed to anti-money laundering and anti-abuse rules.     

 Because the STAK is a legal entity, the shifting of equity to and/ or from the STAK to third parties may constitute taxable gifts/ inheritances in the Netherlands, and/or abroad.  

Tax residence of the Dutch Holding Company

A Dutch Holding Company (usually BV or NV) is by its nature considered to be a tax resident of the Netherlands because it is incorporated under Dutch law (incorporation principle). The same, inter alia, applies to foreign corporations that (based on facts and circumstances) have their place of effective management in the Netherlands.  

The primary parameter for determining the tax residence of a Dutch Holding Company is always the Dutch-registered address and the official registration as a tax resident.

However, when the tax authorities of a third country can make a case that the “place of effective management” of the Dutch Holding Company is situated in that country, they may try to tax the Dutch Holding Company as if it were a tax resident of that country as well. This is a generally accepted principle of international taxation, which is also the leading principle under Dutch tax treaties.

The Dutch tax treaties in most cases provide that in case both treaty states claim tax residency of a Dutch corporation, it will for the application of the tax treaty be deemed a resident of the country where its effective management is situated.

The term “effective management” is a technical term, and refers to the place from where the key management decisions of the corporation are taken. This does not necessarily have to be the place where the business is run and managed, and it does not necessarily be the same place where the day-to-day (routine) management decisions of the corporation are taken.

An important factor for determining where the place of effective management of a corporation is located is the place of residence of the decision-making director, and in the case of more than one director, the place of residence of the majority of the directors. This is an important parameter although not the most important one: the place of effective management is the place where the actual management is exercised, which does not necessarily have to coincide with the place of residence of the director(s).

For every company that operates internationally, senior management can reside everywhere and travel to any location. Therefore, it is quite inevitable that management decisions will have to be taken remotely, by e-mail, telephone, etc. The Covid-19 Pandemic strongly increased this phenomenon. However, to avoid dual tax residency issues referred to above, the center of all this activity concerning the affairs of the BV must be located in the Netherlands.

In the startup phase, with limited or no activities of the company, the required involvement of the director and thus the necessity for the foreign director to be present in the Netherlands, will in most cases be limited. Once the business starts to grow and more transactions take place, the required management involvement will increase automatically and the presence of the director(s) - and employees - in the Netherlands will become more important, until the point that at a certain moment, the (almost) continuous local presence of the director in the Netherlands is required, and one would expect that no later than at that moment either a foreign director’s physically moves to the Netherlands, or that a local director is hired.

Substance requirements for a Dutch Holding Company

From a Dutch perspective, the only substance requirement for a Dutch Holding Company is it conducts an enterprise in the Netherlands, and it has a registered office in the Netherlands.   

For newly incorporated Dutch corporations to be included in the Trade Register of the Chamber of Commerce, and to be accepted as Dutch corporations for Dutch tax purposes it is required that the corporation has access to Dutch office facilities from where the enterprise of the corporation can be conducted. A pure virtual office without any other substantial business presence in the Netherlands will generally not be enough.

Dutch tax law does provide for concrete substance requirements for foreign holding companies to become eligible for Dutch treaty benefits and tax exemptions. These substance requirements officially do not apply to Dutch-based holding companies, but the Dutch tax authorities tend to apply these substance requirements for Dutch-based holding companies as well when it comes to the acknowledgment of the entitlement to benefits under Dutch tax treaties or the EU Directives.

For preferential facilities in Dutch tax law to apply (for example Dutch dividend withholding tax exemption, treaty application, benefits EU Directives for dividends, interest, and royalties) the company has to meet certain substance requirements. These substance requirements are generally met if: 

• At least 50% of the board members are residents of the country where the company is residing;
• The board members should have the relevant knowledge to perform their duties;
• The company should have qualified staff to manage all transactions;
• Board decisions are taken in the country of residence of the company;
• The main bank account(s) of the company are held in the country of residence of the company;
• The bookkeeping of the company is done in the country of residence of the company;
• The company has wage costs of at least EUR 100,000 (or an adjusted amount on the basic bathe sis of COL index);  
• The company should have its own office for at least 24 months with such facilities that the activities of the company be explicitly executed in this office.  

The foregoing can still be dismissed by the tax office if they can prove that the Dutch Holding Company holds shares in subsidiaries for the main purpose or one of the main purposes of avoiding the levy of income tax on another person and that there is no valid business reason(s) that reflect economic reality for the existence of the Dutch Holding Company. 

Qualifying group financing and licensing companies must comply with four additional specific substance requirements to avoid the automatic exchange of information with other states. At least half of the total number of statutory board members of the company with decision-making authority resides or is established in the Netherlands, and:

1. The company must comply with all its tax obligations;
2. The company is a resident of the Netherlands. To the best of the company's knowledge, the company is not considered a fiscal resident by another state;
3. The company runs “real risks” for its financing, licensing, or leasing activities.
4. The company has at a minimum “an appropriate equity” that corresponds to its functions performed. 

The bank account of the Dutch Holding Company

A Dutch Holding Company will require a bank account. Although this is technically not a requirement, managing a Holding Company without a bank account is difficult to comprehend.

Unfortunately, obtaining a bank account for foreign-owned and foreign-managed is not easy nowadays.

The Dutch banks are under heavy fire for bad compliance procedures during the last couple of years and have received significant penalties for their bad performance in this respect, and they are fined and their directors are put under accusation of cooperating with money laundering.

The major Dutch banks reacted by creating extensive compliance procedures which in many cases, for foreign-owned and managed BV’s, resulted in rejection to issue a bank account.

Foreign bank account or Dutch bank account?

A Dutch BV can only have a foreign bank account, or no bank account at all, but this will complicate the actual running of the business.

Technically, it is generally not allowed for Dutch parties to refuse money transfers from any IBAN account, regardless of the country of issuance. It is thus very well possible for a BV to have an IBAN account issued by a bank in any other EU or EEA country.

Shortcuts for obtaining a bank account

There are shortcuts for foreign companies that entered the Netherlands through interference from the NFIA (Netherlands Foreign Investment Agency), or through a recognized Facilitator for start-ups, but even then the application period for a Dutch IBAN can be a lengthy procedure and the issuance of a bank account is not guaranteed.

Feasibility of obtaining a Dutch bank account  

Although technically very much disputed, the major Dutch banks tend to refuse to issue a Dutch bank account to newly incorporated foreign-owned BVs that only have foreign-based directors. Such BV’s can still get a Dutch bank account if they can explain their plans for the Netherlands and substantiate their (future) Dutch business activities with a business plan and alike.

Some banks also require the operating subsidiaries to apply for a bank account.  

The alternative FinTech companies:

Some Fin Techs are offering a Dutch bank account service, but charge significant fees for compliance (up to € 1,500 to € 3,500 per year), and typically only provide a payment solution (no credit, etc.)

A couple of Fintech companies active in the Netherlands offer Dutch IBAN with limited payment solutions.

Our support with obtaining a Dutch bank account:

We have a standing relationship with the NFIA and can arrange for an introduction if so required.

The “classic” Dutch banks typically do not allow an intermediary to make the appointment or to apply for the bank account on behalf of their clients. We can, however, advise the procedures to be followed and support the applications to be made.

Our contact with FinTech enables us to arrange introductions. We are allowed to introduce our clients and the Fin Techs also allow our support in the compliance process. Please note that although the banking fees are about the same, the Fin Techs tend to charge relatively high fixed annual fees per bank account (sometimes leading up to € 1,500 to € 3,500 per bank account per year).

If you are interested in our services, please feel free to contact us via e-mail or to call us at our office in Rotterdam on the number +31 (0) 10 2010466 or our office in Amsterdam at  + 31 (0) 20 5709440.

The Dutch participation exemption

The Dutch participation exemption provides for a tax exemption of all "benefits" (dividends and capital gains) arising from shares in qualifying subsidiaries. Under strict conditions, certain categories of profit-participating loans may qualify as well.

For the Dutch participation exemption to apply, the following conditions need to be met:

1. the Dutch corporate taxpayer owns at least 5% of the paid-in nominal share capital of the subsidiary; and
2. if the activities of the subsidiary qualify as "passive investment activities", the subsidiary must be subject to a "normal" profits tax of 10% (see below); and
3. The subsidiary may not be a "fiscal investment fund" ("Fiscale Beleggingsinstelling").

Under special circumstances, a shareholding of less than 5% can also qualify for the participation exemption (e.g. indirect ownership of at least 5% through a related party or a lower than 5% ownership as a consequence of a sale of shares in tranches).

Qualifying foreign "portfolio investment companies" will only qualify for the participation exemption if they are subject to a normal tax rate of at least 10% (statutory rate unless there are significant deviations from the Dutch tax regime).

We like to emphasize that under a special provision, shares in qualifying real estate companies will always qualify for the participation exemption even if the real estate is held as a portfolio investment and/or the subsidiary is not subject to tax or only subject to a very low tax.

In case there is any doubt about the application of the participation exemption it is recommendable to apply for an advance tax ruling. See the item Advance tax ruling for holding activities in The Netherlands.

We have extensive knowledge and expertise of the Dutch participation exemption regime and gladly advise you on this subject.

If you are interested in our services, please feel free to contact us via e-mail or to call us at our office in Rotterdam on the number +31 (0) 10 2010466 or our office in Amsterdam at  + 31 (0) 20 5709440.

Dutch Interest deduction rules

Generally, interest expenses are tax deductible. However, several limitations can apply, such as:

• Profit-participating loans, which are loans that are subordinated to all ordinary creditors, of which the payment of the consideration is (for a significant part) profit dependent and that does not have a fixed term, but is only repayable in the event of bankruptcy, a moratorium on payments or liquidation or the loan has a term of more than 50 years.
• Hybrid loans can be 1) a sham loan (if a group company grants a loan to a company in a sham transaction which was intended to be equity but was called a loan for tax reasons), or 2) "Bodemloze put" loan (meaning a third party would not have granted a loan because it is clear that the financial position of the debtor will not allow for repayment) or 3) profit-participating loan.
• Loans connected to "tainted" transactions that make interest payments (including costs and foreign exchange results) on a debt from a related party or related individual are not deductible in the case of tax base erosion. A transaction is considered tainted if it is: a distribution or repayment of capital to a related entity, a capital contribution to a related party, or the acquisition or expansion of an interest in a related party.
• Long-term interest-free loans are loans that have no term or with a term of 10 years and no interest has been agreed upon, or the interest agreed upon deviates considerably from an arm's length interest rate.
• Earnings stripping rules limit the deductibility of ‘excess’ net interest expenses as they are only deductible up to 30% of the earnings before interest, taxes, depreciation, and amortization (EBITDA). A threshold of € 1,000,000 applies; ‘excess’ interest expenses up to and including € 1,000,000 are not restricted by this measure. The non-deductible interest due to this measure can be carried forward indefinitely.
• Non-business like loans means it has to be checked whether or not the loan was entered into on a basis of sound business reasons. In answering this question all particulars of the case at hand should be taken into account.

CFC rules

Per 2019 controlled foreign company (CFC) rules apply in case a Dutch corporate taxpayer has a direct or indirect interest of more than 50 percent in a low-taxed foreign subsidiary or has a low-taxed permanent establishment. An entity or permanent establishment is considered as low-taxed if it is tax resident in a country without corporate income tax or with a statutory corporate income tax rate lower than 9 percent, or if the country is on the Dutch list of low-taxed jurisdiction or the EU Blacklist.

In case these requirements are met, undistributed tainted passive income (such as dividends, interest, royalties, benefits from the sale of shares, benefits from financial leasing, and other financial/banking/insurance activities) of the CFC has to be included in the Dutch corporate taxpayer’s taxable income.

The CFC rules do not apply if the CFC performs a substantial economic activity in its country of establishment. The CFC is deemed to perform an economic activity of substance if it carries out and fulfills several substance requirements, which include a wage costs criterion of at least € 100,000 (this amount is multiplied with a multiplier which depends on the country in which the company is established) and having known space available for at least 24 months.

Tax deduction of expenses and losses

If the participation exemption applies, expenses about subsidiaries are in general tax deductible. This includes interest expenses on funding loans and local running costs, but it is noted that other provisions may limit the tax deduction of interest expenses, which we refer to in the paragraph about interest deduction rules.

Losses on subsidiaries are in general not tax deductible, except "true" liquidation losses.

Until 2019, limitations applied for the carry forward or carry back of tax losses by holding/financing companies. In essence, the tax losses which originate from a year in which the main activity of the company is the holding of shares or group financing activities may only be carried back or carried forward to tax years in which the company had or has similar activities. Both the nature of the activities and the volume of the activities (balance sheet ratios) are relevant. This still applies to losses that originated before 2019.

As of January 1st, 2019, the term for carry forward of losses is limited to 6 years. The term for carryback is 1 year. Losses that originated before 2019 can be carried forward for 9 years.

Dutch dividend withholding tax

Dividends paid by a Dutch BV to its shareholder(s) are generally subject to a 15% dividend withholding tax. However, the Netherlands has implemented a domestic dividend withholding tax exemption for EU and EEA shareholders and shareholders located in a tax treaty jurisdiction, provided that the tax treaty contains a dividend provision. If that is the case, the shareholder holds at least 5% of the interest in the company, and cannot be considered an investment company, the exemption in principle applies.

 The exemption does however not apply if the anti-abuse measure is applicable which is the case if the foreign parent company holds the interest in the Dutch entity with the main purpose (or one of the main purposes) of avoiding Dutch dividend withholding tax (“subjective test”) and the structure or transaction is considered artificial (“objective test”). 

 In addition to the domestic dividend withholding tax exemption, the withholding tax rate can however in most cases be reduced by tax treaties or the EU Parent-Subsidiary Directive.

For an overview of the dividend withholding tax rates under the Dutch tax treaties, we refer to our online Dutch Tax Treaty Database. 

For more information about the EU tax exemption for dividends, we refer to The EU tax exemption for dividends.

The remaining Dutch withholding tax which is due upon distribution may under certain conditions be reduced by an indirect tax credit based on Dutch domestic law.

The credit amounts to at most 3% (three percent) of the gross amount of the dividend paid by the Dutch holding company. This is a refund of the withholding tax due given the redistribution of qualifying dividend income. Formally the full amount of dividend withholding tax is to be withheld by the Dutch company, but the amount of the credit does not need to be paid to the Dutch tax authorities and thus constitutes a net benefit for the distributing company.

Dutch law does not provide special rules in case of liquidation. If a Dutch BV is liquidated, the fair market value of its remaining assets and liabilities over the amount of paid-in capital, will upon distribution constitute a taxable dividend. See also below: The liquidation of a Dutch holding company.

We have extensive experience with advising clients on the subject the dividend withholding tax and we are gladly prepared to advise you on this subject. If you are interested in our services, please feel free to contact us via e-mail or to call us at our office in Rotterdam on the number +31 (0) 10 2010466 or our office in Amsterdam at  + 31 (0) 20 5709440.

EU withholding tax exemption for dividends

Dividends paid to a Dutch holding company by EU subsidiaries can qualify for a 0% withholding tax rate in the country where the subsidiary is located. The withholding tax exemption is based on the Parent-Subsidiary Directive but may deviate per country depending on the implementation laws.

The conditions which must be met by the Dutch holding for applying the 0% dividend withholding tax rate are:

1. The shareholder is a corporation that qualifies as a tax resident of another EU member state or EER state (except Liechtenstein); 
2. The shareholder would qualify for the Dutch participation exemption or participation credit if it would have been residing in The Netherlands;
3. The shareholder is not a tax-exempt portfolio investment fund comparable to a Dutch portfolio investment fund; 
4. The shareholder has no dual residency status with a country outside the EU or the EER;
5. The shareholder qualifies as a "beneficial owner" of the shares and finally
6. The shareholder is not located in a State with which The Netherlands has concluded a tax treaty that contains an anti-abuse clause based on which the shareholder would not have been entitled to the reduction of the dividend withholding tax rate.     

Most EU member states (including the Netherlands) have incorporated anti-abuse provisions in domestic legislation to prevent abuse of the EU withholding tax exemptions for dividends. In general, these provisions tend to demand:

• True beneficial ownership of the recipient of the income and/or
• At least 50% ultimate EU shareholder control and/or
• The local substance of the recipient of the income in its home country.

Please note however that as a consequence of an EU-Court case in 2006 many EU countries are forced to abolish their anti-abuse rules for foreign shareholders, in particular if no such anti-abuse rules apply to domestic shareholders.

It should be verified country by country what the current status of their anti-abuse rules for foreign shareholders as of today.

The Netherlands has a limited anti-abuse provision. The dividend withholding tax exemption based on the EU Parent-Subsidiary Directive or based on tax treaties may not apply in case of certain dividend stripping scenarios or in case the dividend is paid to a company established in a country with which The Netherlands has concluded a tax treaty which contains an anti-abuse clause which would be applicable in the given situation. An example of a tax treaty that contains an anti-abuse clause is the tax treaty with Malta.

Furthermore, a general exclusion applies to shareholders which do not qualify as the beneficial owner of the income received from the shares in a Dutch company.

Dutch interest and royalty withholding tax

As of 2021 withholding tax applies to interest and royalty payments made to affiliated companies in designated low-tax countries and abusive situations. A company is affiliated when the shareholder has at least 50% of the voting rights, by itself or jointly with third parties. Low-tax countries are countries with a statutory corporate income tax rate of less than 9% and countries that are on the EU list for non-cooperative jurisdictions.

An abusive situation exists when artificial structures are put in place with the main purpose or one of the main purposes to avoid Dutch withholding tax. A structure is considered artificial if it is put in place without business motives that reflect economic reality. If a company meets the substance requirements this is an indicator that the structure is not artificial, however, the tax inspector may still make a plausible statement that the structure is nevertheless artificial. There is no exception for companies with real economic presence.

If interest or royalty payments are made to an affiliated company in a low-taxed country, or an affiliated company with an abusive situation, a Dutch withholding tax is due. The applicable tax rate is equal to the highest corporate income tax rate. This rate can be lowered based on applicable tax treaties. The withholding tax will be levied from the Dutch company making the interest or royalty payment.

Dutch capital tax

The Dutch capital tax is abolished on 1 January 2006.

Tax treaty benefits

The Netherlands has concluded tax treaties with more than 90 countries worldwide.

For an up-to-date overview of the tax treaties concluded by the Netherlands, we refer to our online Dutch Tax Treaty Database. 

Specifically, for holding activities tax treaties may provide the following benefits:

• A reduction of the withholding tax rate on dividends in the country where the subsidiary is established. We refer to the Overview of the dividend withholding tax under Dutch tax treaties.
• No capital gain tax in the country where the subsidiary is located when the Dutch shareholder sells its shares.
• No dual residency issues.
• No permanent establishment issues.
• The reduction of withholding taxes in connection with dividend payments by the Dutch holding company to the country where the investor resides. We refer to the Overview of the dividend withholding tax under Dutch tax treaties.
• A reduction of withholding tax rates for other sources of income, like for instance interest income or royalty income. We refer to the Overview of royalty withholding tax under Dutch tax treaties and the Overview of interest withholding tax under Dutch tax treaties.

Tax treaties can be overruled by EU-Directives. Specifically for dividends the Parent-Subsidiary Directive provides for a 0% withholding tax rate for qualifying corporate dividends paid within the EU. For more information, we refer to The EU withholding tax exemption for dividends.

For interest and royalties, a similar Directive applies. For more information, we refer to the page The Dutch Licensing Company or The Dutch Finance Company.

Dutch VAT for Dutch Holding Company

In essence, a Dutch holding company is subject to the normal Dutch VAT regime.

The Dutch VAT rules do however in practice only apply to holding companies that are either actively involved with the management of the subsidiary(ies), or that conduct other activities as well.

The use of virtual offices by foreign-owned BV’s without employees in the Netherlands has grown significantly during the last couple of years. The Dutch tax office now tends to take the stand that as long as there are no actual business activities in the Netherlands, no Dutch VAT number will be issued. The idea is that with business activities outside Holland only, the BV can only register as a non-resident entrepreneur.

In general, a passive holding company will not qualify for VAT registration (regardless of its substance in the Netherlands) which implies that the passive holding company:

• cannot obtain a Dutch VAT registration number
• does not need to file VAT returns
• is not eligible for VAT relief

If the holding company does qualify for VAT registration, it will have to file VAT returns. In these returns, the VAT charged to the holding company can be claimed back, and the VAT which it becomes due given services rendered becomes payable.

A limitation for the VAT refund can apply to the extent the Dutch holding company provides VAT-exempt services (like providing loans to EU parties).

We have extensive experience with advising clients on the subject of VAT issues of holding companies and we are gladly prepared to advise you on this subject. If you are interested in our services, please feel free to contact us via e-mail or to call us at our office in Rotterdam on the number +31 (0) 10 2010466 or our office in Amsterdam at  + 31 (0) 20 5709440.

Tax compliance for Dutch holding companies

A Dutch holding company needs to comply with Dutch tax filing and registration requirements.

In essence, they are the same as for a normal BV, but as a consequence of its specific activities, tax compliance does require specific expertise. For the Coop special rules apply.

There is increased scrutiny from the Dutch tax authorities about holding companies (and other tax planning vehicles). For a Dutch holding company in particular the following is relevant:

• for a Coop - proper set up as a corporation
• registration for tax purposes
• annual corporate income tax return
• obtaining tax residency statements (if required)
• VAT returns (if required)
• dividend withholding tax returns (if required)

We have extensive expertise in the area of holding companies and provide tax compliance services on a professional basis.

We are providing tax compliance services to many foreign-based clients. If you are interested in our services, please feel free to contact us via e-mail or to call us at our office in Rotterdam on the number +31 (0) 10 2010466 or our office in Amsterdam at  + 31 (0) 20 5709440.

Advance tax ruling for a Dutch holding company

The Netherlands has a well-developed tax ruling practice.

It is generally possible to agree with the Dutch tax authorities, based on which 100% certainty can be obtained (in advance) on the Dutch tax treatment of a particular structure or transaction. This applies to holding activities, but also to a wide range of other activities, like for instance group financing or royalty activities.

For more information about the Dutch ruling practice, we refer to the page The Dutch tax ruling practice. In practice the tax ruling for holding activities relates to one or more of the following subjects (which are in practice the most common areas of doubt for the application of the participation exemption):

• The percentage of ownership in a subsidiary is less than 5%
• Venture capital or private equity investments (non-portfolio investment test for subsidiaries)
• Participation exemption for other rights than the legal ownership of shares such as full economical ownership, derivatives, or profit-participating loans
• The foreign subsidiary owns (substantial) portfolio investments or it is a group financing company
• The foreign subsidiary is a real estate company
• Certainty about the obtaining of a tax residency statement which gives access to treaty benefits
• Application of the limitation for tax loss carry back or carry forward
• Application of the Dutch dividend withholding tax exemption

There are no costs attached to the ruling procedure itself, apart from the costs of professional representation.

We have extensive experience with negotiating advance tax rulings on behalf of our clients and we are gladly prepared to advise you on this subject or to represent you in the ruling negotiations. If you are interested in our services, please feel free to contact us via e-mail or to call us at our office in Rotterdam on the number +31 (0) 10 2010466 or our office in Amsterdam at  + 31 (0) 20 5709440.

Dutch corporate law 

In most cases, a Dutch holding company is set up as a BV, a limited liability company comparable with an LTD, GmbH, or SARL.

The BV is regulated by Dutch corporate law, which in comparison to the corporate laws of other countries is quite flexible. For more information about the BV and the incorporation procedure, we refer to the page The incorporation of a Dutch BV.

In particular, relevant for a holding company is that:

1. Dividends can be paid at the end of the year or, if the proper provisions are included in the articles of incorporation of the BV, during the year as an interim dividend. The general limitation for paying a dividend is that the company has sufficient "free reserves".
2. Equity can be contributed to the company as a payment on shares or as a share premium without the issuance of shares or as a combination of these two. The contribution of share premium and the repayment of share premium can be achieved through a shareholder’s decision which allows an easy and quick transit of funds.
3. There are no special limitations for foreign shareholders or directors.

For more information about setting up or acquiring a BV, we refer to our publications How to incorporate a Dutch BV and The acquisition of a Dutch shelf company.

Dutch accounting rules for holding companies

A Dutch holding company is subject to the normal accounting, reporting, and registration requirements that apply to BVs. For more information, we refer to the page Dutch accounting and audit requirements.

Functional currency

A Dutch company is under certain circumstances allowed to keep its books and to calculate its taxable profits in another currency than the EURO. An election should be made before the foreign currency can be applied as functional currency for corporate tax purposes.

The cost of a Dutch holding company

The set-up of a Dutch BV as a holding company is a relatively easy and quick procedure. The costs of incorporation (including notary fees) start at approximately € 1,500, but will in most cases be higher when the BV is tailored to the specific needs of the shareholders. The set-up costs of a Coop start at about € 3,000 (with the same reservation).

It is noted that the articles of incorporation are only drafted in the Dutch language. However, in most cases, the public notary can provide English translations.

Most of the services which are required for maintaining a Dutch holding company can be provided by so-called "trust companies". This includes domiciliation (registered address plus local director), and legal and accounting services. Note however that substance is an important aspect of Dutch tax law for holding companies. For more information, we refer to the page Trust and management services in The Netherlands.

The prices of trust companies can vary significantly. Total annual fees (address, director, accounting) start at an amount of approximately € 5,000 per annum. On top of that the holding company will be incurring the normal corporate costs, such as the annual registration fee for the Chamber of Commerce, which are normally rather insignificant amounts.

We have set up many holding companies for our clients and have extensive experience with this process. We can execute the set-up of your holding company and the engagement of a suitable trust company. If you are interested in our services, please feel free to contact us via e-mail or to call us at our office in Rotterdam on the number +31 (0) 10 2010466 or our office in Amsterdam at  + 31 (0) 20 5709440.

The liquidation of a Dutch holding company

The liquidation procedure of a Dutch holding company is in essence the same as one for an ordinary Dutch company, BV, or Cooperative.   

For a description of the general legal and tax procedure of the liquidation of a Dutch BV or Cooperative, we refer to our publication The liquidation of a Dutch BV.  

The liquidation of a holding company has the following typical tax implications:

1. for Dutch tax purposes, a liquidation is treated like a deemed sale: assets/liabilities must be evaluated at fair market value and a subsequent gain or loss must be included in taxable profits; 
2. to the extent the participation exemption applies a gain or loss on the shares in qualifying subsidiaries is tax-exempt;
3. the liquidation distribution (after revaluation) over paid-in capital qualifies as a dividend and may as such be subject to Dutch dividend withholding tax; 
4. to the extent paid-in capital originates from a share for share acquisition, the repayment of capital may be subject to Dutch dividend withholding tax;
5. accumulated tax losses or tax credits will usually vaporize upon liquidation;  
6. the revaluation of loans and receivables may result in taxable currency exchange profits (even if non-realized); 
7. transfer of shares in subsidiaries may trigger taxation in the country of the subsidiary.   

Following the above, a straightforward liquidation of a Dutch holding company can have significant Dutch or foreign tax consequences. Depending on the specific situation one of the following alternatives may give a better outcome: 

• cross-border legal merger instead of liquidation (with possible deferral of taxation of hidden capital gains); 
• sale as a shelf company (no Dutch dividend withholding tax levy over positive reserves);
• transfer tax residence to another treaty state (no Dutch dividend withholding tax levy over positive reserves); 
• convert into another legal form (like a tax-exempt portfolio investment company);
• conversion into a corporation of another state (transfer corporate seat).   

We have advised many clients on possible scenarios for the liquidation of a holding company and/or assisted them with the actual liquidation. If you are interested in our services, please feel free to contact us via e-mail or to call us at our office in Rotterdam on the number +31 (0) 10 2010466 or our office in Amsterdam at  + 31 (0) 20 5709440.

What we can do for you:

If you are interested in our services, please feel free to contact us via e-mail or to call us at our office in Rotterdam on the number +31 (0) 10 2010466 or our office in Amsterdam at  + 31 (0) 20 5709440.