The Dutch Holding Company is that company that has enough stocks in another company (subsidiary) to manage this company’s actions. Its only purpose is to hold shares in the respective company or companies.
A Dutch holding company may be established as a private limited liability company or as a public limited liability company, depending on the client’s preference. For incorporating a private limited liability holding company a minimum share capital of 18,000 Euros must be deposited in a bank account, unlike the minimum share capital of a public limited holding company: 45,000 Euros.
The main reason the Dutch holding companies are preferred is the applicable fiscal policy. Holland offers an appealing tax regime mainly because of its numerous Double Taxation Avoidance Agreements signed with other countries. If ever in need of legal consultancy or assistance in other European countries, our clients can always rely on our partners lawyers in Cyprus or attorneys in Belgium.
|Legal entities used||
Private limited company (BV) in most cases
|Incorporation method||As per the Dutch company formation rules; registered with the Commercial Register|
|Approximately 1 week|
Easy incorporation in the Netherlands
Various tax addvantages related to the taxation of the holding, when certain criteria are met
|Precautions||Minimum shareholding is needed in the operating company in order for the holding to benefit from certain advantages|
Typically, the holding company (a Dutch BV) will own shares in another legal entity (which can be another Dutch BV)
€0.01 starting capital for the BV
15% on the first EUR 245,000 of taxable profits and 25% afterwards|
A participation exemption applies to income derived from shareholdings of at least 5%, under certain conditions
|Control||The founder of the Dutch BV privately owns shares in the holding|
|Accounting and Reporting||
Annual financial statements. Filing and payment usually takes place five months after the end of the fiscal year.|
Holdings (parent companies) can form a fiscal unity with one or more operating companies (subsidiaries).
|Number of double taxation treaties||> 100|
Usually no withholding tax is applicable on the dividends. The share sale of the holding company in Holland doesn’t provide capital profits in the subsidiary’s country.
The holding company may operate in other foreign currency, there are no constrains regarding this.
The participation exemption is another major reason why Dutch holding companies are created. In case the principles of the participation exemption are applied, than the company may not be subject of any kind of taxation.
The main conditions a holding company must comply are: the subsidiary is taxed in the country of origin, the Dutch holding company must own at least 5% of the paid up share capital of the subsidiary, the subsidiary’s shareholders are standing and actual and the holding company must have an actual owner.
If the first condition of owning at least 5% from the paid up share capital is not respected, the holding company may be tax exempted but only it have the same type of business as the rest of the holdings and if it is a strategic company.
As a result of the participation exemption the costs in relation to the subsidiary are recoverable. Excepting the liquidation losses, the subsidiary’s losses are not recoverable.
Double tax treaties were signed by Netherlands with more than 100 countries so special policy is also applied to the holding companies in Netherlands. Here are some of the benefits: the decrease of the withholding tax on dividends in the subsidiary’s country of residence, the preventing of the dual residency and permanent headquarters, cut of withholding tax rates for other sources of revenue.
The liquidation of a Dutch holding company is no different than the liquidation of a private limited liability company or public limited liability company.
Table of Contents
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.
While the Dutch holding company is not subject to value-added tax as it does not provide goods or services, our team is also able to answer questions about Netherlands VAT registration for other types of companies. This is a mandatory step for all companies that produce and distribute goods, and it has varying rates according to the type of goods or services offered by the company.
Our team of lawyers can help you set up a holding company or any other type of company in Netherlands. Also, company formation in Cyprus is a service we strongly recommend for entrepreneurs willing to invest in this country.