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Tax Substance for Dutch Holding Companies

Date Added: April 12, 2019 06:02:09 AM



The Netherlands accomodates a large number of holding companies. As a Dutch resident, holding entities can benefit from Dutch asset protection on foreign investments and an attractive holding regime. For actual presence, often referred to as tax substance, it is important that the Dutch tax substance requirements shall be met when you plan any Dutch company formation. The Dutch minimum tax substance rules for holdings have been updated in the year 2018 and now read as follows:

> at least 50% of the board members, with a right to make decisions, shall live or factually reside in the Netherlands (in case you do not plan to have local staff a trust company can provide a Dutch nominee director);

> the board members shall be Dutch residents and will have sufficient knowledge to perform their activities in their capacity as a board member of the Dutch company. The entity will have adequate personnel (either of its own or from third parties) for the adequate execution and registration of the transactions;

> the (most important) board decisions shall be prepared and made locally;

> the (main) bank account of  the company shall be controlled from within the Netherlands;

> the bookkeeping and accounting will be executed by a local Dutch bookkeeper or service provider;

> the company shall comply with all Dutch tax compliance rules;

> the company will have its registered address in the Netherlands, while the company shall, according to its best knowledge, not (also) be a resident of another country for tax purposes;

> the parent company will incur minimal wage costs related to any holding activities in an amount of € 100,000 (the country of living index is multiplied by the minimal required wage amount. Thus making the costs for example € 90,000 for Cyprus and € 100,000 for Luxembourg);

> the parent company shall have at its country of residence an equipped office to its disposal which shall also actually used for holding/financing activities.

In case any loans flow through the Dutch company there is an additional criterium:

> the company's minimum equity shall be adequate in relation to the functions performed, taking into account the risks assumed and assets used. It will be required to have an equity of at least 1% of the loan amount with a maximum of € 2,000,000.