The Dutch tax authorities have formulated the following basic minimum requirements that a Dutch limited liability company must meet before the Dutch tax authorities are ready to defend itself against the foreign jurisdiction that a Dutch limited liability company is resident for tax purposes in the Netherlands and is entitled to the benefits of a tax treaty. Note that the foreign jurisdiction may require the Dutch limited liability company to fulfill several / different conditions. To avoid discussions with the Dutch tax authorities, a Dutch financial services company can support foreign shareholders by meeting substance requirements in the Netherlands, such as: Global coronavirus measures may make it difficult to organize and attend physical board meetings in the Netherlands (or elsewhere, e.g. if the shareholder has to meet Dutch substance requirements locally). in particular for non-resident members of the Board of Directors travelling from abroad. If you can`t hold physical meetings, it may violate content requirements. In the worst case, this could mean, for example, that the company is no longer considered a Dutch tax resident, that a Dutch withholding tax on dividends may apply and/or that certain information is spontaneously exchanged with foreign tax authorities. The Dutch Association of Tax Advisors (NOB) has sent a letter to the Dutch Ministry of Finance offering the Dutch tax authorities to show leniency in complying with the substantive requirements. Similarly, an interest group of Dutch listed companies has called on the Dutch government to enact emergency legislation to allow electronic general meetings for listed companies. The Government of the Netherlands has not yet responded to these requests and no guidelines have yet been issued. However, if board meetings have been scheduled and a physical board meeting in the Netherlands (or elsewhere if the shareholder has to comply with the Dutch substance requirements) is not currently an option, there may be other ways to continue to meet the substance requirements.
We would be happy to discuss tailor-made pragmatic solutions with you. We are happy to coordinate and support you in setting up your BV and taking care of the associated registration and registration requirements. This usually starts with an inventory of plans for the BV, confirmation of the corresponding legal form, possible tax consequences and ongoing requirements for corporate secretarial, accounting, payroll and (tax) compliance. Once the decision to establish the BV has been made, we can carry out and arrange incorporation on your behalf. Another aspect of the substantive requirements of Dutch legislation is that they are also included in the controlled foreign company (CFC) regulations, which provide for an exception if a CFC carries out genuine economic activities in the foreign country. A sufficient substance in a foreign jurisdiction is a sign of such genuine activity. The substance can be defined as a real or real presence. Thus, if a company lacks substance, the company lacks real or real presence. The Netherlands is one of the few countries with fabric requirements. Substance requirements must be met in certain situations. Here we give you the answers to the following substantive questions: There are no practical legal requirements for a BV to have substance in the Netherlands. The only legal requirement is that the BV has a registered address in the Netherlands.
Therefore, service companies should comply with these additional (and previously introduced) minimum substance requirements in order to prevent spontaneous exchange of information between Dutch tax authorities (DTAs) and foreign tax authorities of the source states. The competent tax authorities, in turn, may take this information into account when determining whether the company concerned is eligible for the relevant tax treaty or the EU Directive. This means that a Dutch limited liability company is subject to Dutch corporate tax on its worldwide profits (unless an exemption applies). However, it may be desirable to have at least one substance in the Netherlands: It is also important to note that the Dutch Ministry of Finance has carried out a study on whether the application of the Dutch participation exemption should be denied to holding companies that do not have substance in the Netherlands. In September 2020, the Dutch Minister of Finance concluded that the Netherlands should probably exchange information on holding companies without sufficient substance with jurisdictions where these companies claim benefits under the Parent-Subsidiary Directive or tax treaties. Compliance with the minimum requirements for the substance listed above is a starting point in this regard. However, the Dutch tax authorities can successfully challenge the structure even if these substantive minimum requirements are met. If the above substantive minimum requirements are met, the Dutch tax authorities (and not the taxpayer) must prove that the beneficiary of the interest and/or royalty income benefits from this income for the main purpose or one of the main objectives of avoiding conditional withholding tax at another level and that the structure is artificial.
In the Netherlands, there are no official minimum requirements for substance for a Dutch limited liability company (BV). In recent years, Dutch banks have become stricter when it comes to the procedure for opening a Dutch bank account. In all cases, it is necessary that the manager(s) personally go to the bank, identify himself and fill out the required forms. In addition, banks are rather critical of BV`s business model, its real presence in the Netherlands and the need for a Dutch bank account. It is likely that as of January 1, 2014, the list of minimum requirements for substances will likely also apply to ATRs. More information will be available in Q3 and Q4 2013. The substantive requirements are essentially similar to the substantive requirements of the Dutch rule for non-resident taxpayers, the Dutch rules for controlled foreign companies (CFCs), the spontaneous exchange of information with home countries in the case of financial services companies and the Dutch exemption from domestic withholding tax on dividends. Thus, since July 2019, even preliminary consultations on the issuance of an international tax ruling can no longer be initiated, unless a taxpayer requesting the ruling has a sufficiently relevant economic link with the Netherlands. In short, economic connection means doing business. Certain additional requirements should also be met. Another option considered but rejected by the Dutch Ministry of Finance was an anti-abuse rule that would allow the DTA to refuse to apply the Dutch participation exemption in abusive situations. Such a regime would create uncertainty for taxpayers, since the absence of substance is not necessarily an indication of tax abuse.
As mentioned above, Dutch holding companies without sufficient substance and, consequently, with the Netherlands would probably not be able to pursue the tax ruling and remove this uncertainty. Also note that the tax substance requirements have no influence on the entitlement to EU tax treaties or parent and subsidiary laws or on the applicability of the Dutch participation exemption. The exchange of information on Dutch holding companies that do not meet all sufficient substance requirements is expected to enter into force in 2022. From a tax point of view, it is highly recommended to comply with the content requirements. The substantive requirements to be examined are as follows: There is currently no draft law transposing these requirements into Dutch national law.
