Companies want to take advantage of the favorable Dutch treaty network. Many measures have been taken against companies with little to no substance in the Netherlands in recent years. Certain companies establish themselves in the Netherlands primarily to avoid taxes. These measures made it more difficult to gain access to the treaty network and enter the market successfully. Being more obedient is rewarded. We can assist you in determining whether you have enough substance to gain access to the treaty network with your Dutch B.V. We go into greater detail about this topic in our free guide.
One of the requirements for Dutch B.V.s is to have a minimum amount of substance, meaning a company has the necessary amount of tangible assets and personnel in the Netherlands. If a company does not meet the substance requirements, it will be denied certain benefits, such as access to the favorable Dutch treaty network.
Substance Requirements in the Netherlands
Most conduit companies (holding companies formed to avoid paying tax on income to two different countries) are affected by substance restrictions. These businesses primarily engaged in (group) financing or licensing to take advantage of The Netherlands’ extensive network of attractive tax agreements. Since the implementation of this regulation, it has been more difficult for conventional businesses as well as conduit corporations to establish themselves.
Example of a conduit company:
Mother company (Country A) → Dutch BV (the Netherlands) → Daughter company (Country B)
Dutch B.V.s are frequently created since mother-to-daughter direct funding will result in withholding tax on interest income. Most of the time, these withholding taxes are avoided because of the favorable Dutch tax treaty network. Businesses having sufficient merit will have access to the treaty network while companies that lack substance won’t.
Minimum Amount of Substance
For Dutch B.V.s registered with the Dutch Chamber of Commerce, the Dutch secretary of state has ensured the minimal amount of substance. This minimum consists of the following:
- At least half of the statutory and decision-making board must reside in The Netherlands or be located there;
- The Dutch board members must possess the necessary professional competence to perform their duties;
- The board must have the ability to decide;
- The Dutch business must employ qualified people;
- The Netherlands must be the location of board decisions;
- The main bank account has to be kept in The Netherlands;
- The administration has to be kept in The Netherlands;
- The company satisfies her obligation to declare taxes;
- The company address has to be in The Netherlands;
- The company must have sufficient equity.
It will be significantly simpler to register bank accounts, obtain licenses, and other things if more requirements are met. You will also gain access to The Netherlands’ treaty network.
We are more than delighted to assist you with all the criteria, ensuring that your business is compliant and receiving all the benefits to which it is entitled.