The Netherlands is a favorable jurisdiction for holding company incorporation and management because of its favorable legal framework for these types of companies. Holding companies in the Netherlands are regulated by the Dutch Company Act and can be registered as:
•limited liability companies,
Each type of company has its own tax benefits and can be an excellent tax planning solution. The main activities Dutch holding companies engage in are the collection of dividends and interests from different subsidiaries, however, these companies can engage in a number of other activities and they can also perform activities specific to Financial Services Companies.
Below, our Dutch company formation agents explain how to register a holding company here. You can rely on for professional services in relation to setting up a Dutch holding company.
You can read about the Dutch holding company in the infographic below:
The Dutch Company Law and holding companies
TheCompany Act in the Netherlands does not provide for the holding company as a business form itself, but it provides for the legal entities under which it can be established. A holding company can be registered as private limited liability company (BV) or as a cooperative. Both legal forms provide extensive benefits to the shareholders of the Dutch holding company.
When registered as a BV, the holding company is one of the most appealing business forms in the Netherlands, thanks to the flexible incorporation requirements, but also from a taxation point of view. When registered as a BV, the Dutch holding company can pay the dividends at the end of the year or during the year. For the second option to be possible, the company’s Articles of Association must contain specific provisions in this sense, but the company must also have a sufficient reserve of capital in order to pay interim dividends.
Another important aspect which can generate advantages for the holding company registered as a Dutch BV is the equity the shareholders can contribute with to the company and which can take the form of payment on shares or premiums without the issuance of shares. A combination of the two options is also available.
It is also useful to know that there are no limitations or special requirements with respect to the foreign participation of shareholders or appointment of foreign directors in a Dutch BV company.
One of the advantages of setting up a holding company in the Netherlands is that it is not required to have employees. In most cases, the administration of this company falls onto a trust company.
If you plan on setting up a holding company under the form of BV, our company registration specialists in the Netherlands can draw up the paperwork and handle the incorporation procedure on behalf of foreign investors.
Activities to be undertaken by a Dutch holding company
Compared to other European countries, the holding company in the Netherlandscan complete various activities through subsidiary companies. However, the holding itself can own shares in other domestic or foreign companies, can manage and control its subsidiaries and to collect dividends, interests and royalties and distribute them to the shareholders.
Most of the times, the Dutch holding company will act as a partnership in which the shareholders will share the same entity in terms of taxes while undertaking different activities.
Additionally, Holland provides an excellent legal framework for holding companies. Also, Dutch cooperatives are considered zero tax holding companies as they are eligible for the participation exemption. Cooperatives may qualify under the Parent-Subsidiary Directive which will automatically trigger the exemption from taxation of dividends. Holding companies are not subject to foreign currency exchange regulations and they may obtain an advance tax ruling. Companies can deduct certain expenses and losses that qualify and they benefit from low or zero tax burden for profit repatriation.
•no audit requirement for contributions in kind or acquisition of assets,
•no more financial assistance regulations.
The Dutch regime for holding companies remains the most favorable in Europe. The country has a comprehensive regime that includes a complete dividend withholding tax exemption for the Dutch cooperative: a company that has a flexible legal form and no minimum capital requirements.
The participation exemption in the Netherlands is another example of a beneficial tax exemption that can be available when holding shares in subsidiaries that qualify for this purpose. In order for this exemption to apply, the Dutch company must own at least 5% of the nominal share capital of the subsidiary and the activities of the latter must qualify as passive investment activities. Special circumstances are also taken into consideration and foreign companies can qualify as portfolio investment companies.
The cooperative as a holding company in the Netherlands
One of the easiest ways of starting a holding company in the Netherlands is by registering a cooperative. One of the main advantages of using this legal structure for a Dutch holding is that it is treated just like any other corporation and benefits from a 0% tax rate. The cooperative can also help a holding company to qualify for the Parent-Subsidiary Directive, or better said, the Participation Exemption Regime.
The regime implies for the Dutch cooperative to receive dividends from its subsidiaries in other EU countries without paying any withholding tax in the country of residence of the subsidiary.
The cooperative can also help the shareholders in the Dutch holding to obtain withholding tax exemptions in the Netherlands.
it must appoint at least two members who enter an association (the so-called Dutch vereniging);
there are no share capital requirements for a cooperative, however, opening a bank account is mandatory;
choosing the name of the cooperative is also mandatory and for a limited liability, the abbreviation U.A. is required;
the registration of the cooperative must be completed with the Companies Register in the Netherlands and implies drafting the Articles of Association;
the cooperative must also appoint a board of directors (just like in the case of the Dutch BV);
once registered, the cooperative will be subject to various accounting and reporting requirements.
The establishment of a Dutch holding company by using the cooperative will imply the same steps as when setting up a private limited liability company, however, this legal entity can provide for various benefits.
You can also watch the video below for more information on Dutch holding companies and starting a business in the Netherlands:
The Dutch holding company under the participation exemption
Without a doubt, one of the main reasons for setting up a holding company in the Netherlands is benefitting from the participation exemption regime which is applicable in this country just like in other European jurisdictions. The advantage of this regime is that the company will not be taxed on certain holdings.
In order to qualify for this regime, it important to understand that specific conditions need to be satisfied. Here are the conditions:
- the Dutch company must hold at least 5% of the paid-up capital in a subsidiary company;
- the shareholding must be maintained permanently and must have been paid;
- the subsidiary must pay the standard corporate tax rate in its home country (without any deductions or exemption);
- the holding company must be a real owner (not a beneficial owner) in the subsidiary and the investment must not take the form of an investment portfolio.
It is possible for a Dutch holding company to benefit from the participation exemption even if 5% share capital requirement is not accomplished, under the following circumstances:
- the subsidiary has the same activities as the other companies owned by the holding;
- the ownership in the subsidiary is an active one.
There are also exceptions from the participation exemption regime and one of them implies the holding in a subsidiary to be part of a financing structure, case in which the Dutch holding will no longer qualify for this tax advantage.
Our local advisors can explain in detail the conditions to be satisfied in order to benefit from the participation exemption regime.
Holding companies and advance tax rulings in the Netherlands
As mentioned above, there are cases in which the holding company cannot benefit from the participation holding regime or Parent-Subsidiary Directive, case in which advance tax rulings can be obtained with the Dutch tax authorities. Most of the times, agreements are singed in this sense.
Such agreements can help holding companies that do not meet the 5% share capital requirements, those that do not meet the non-portfolio investment requisites, if the foreign subsidiary is a real estate investment company or if the foreign subsidiary benefits from tax breaks in its country of residence.
Withholding tax exemptions for Dutch holding companies
Under the EU Parent-Subsidiary Directive, a holding company in the Netherlands can benefit from an exemption from the dividend tax in the subsidiary’s home state provided that:
- the subsidiary pays the standard corporate tax in its home country and the participation of the holding in it is permanent;
- the subsidiary does not have a second registered seat in another country member of the European Union;
- the Dutch holding company owns at least 20% of the capital in the subsidiary (the paid-up capital) or;
- the holding company in the Netherlands owns at least 20% of the voting rights in the subsidiary for a minimum period of one year.
It should also be noted that many countries, including the Netherlands, have introduced various anti-avoidance regulations in their double tax treaties, as recommended by the OCED.
The Netherlands is a very appealing foreign investment destination, not only because of itsholding company regime. However, the Dutch holding is one of the main reasons the country attracts a great number of investors every year.
Among the advantages of choosing the Netherlands for domiciliating a holding company are the several business forms which can be employed for its establishment, when compared to other EU countries, the favorable taxation regime imposed when using the cooperative or the BV for registration and the many incentives offered by the government.
The holding company can be used for owning shares in innovative companies in the Netherlands, as the government supports research and development activities through programs like the Innovation Box and the Research and Development Deduction scheme.
Taxation of Dutch holding companies
When not meeting the criteria mentioned above and not obtain advance tax ruling benefits, the Dutch holding company will be subject to regular taxation which implies:
- the corporate tax which is levied at rates of 20% or 25% depending on the annual turnover;
- the capital registration tax which is levied at a rate of 0.55%;
- the withholding tax on dividends which is applied a standard rate of 25% in the Netherlands;
- the value added tax which has a standard rate of 21%.
Other tax advantages offered by a Dutch holding company
The Dutch holding offers various benefits when it comes to its taxation. Some of these advantages are shown below:
- the Dutch tax authorities allow for the free repatriation of profits for ;
- a large network of double tax treaties – the Netherlands has more than 80 double tax treaties;
- advanced tax rulings which can be used by all international companies doing business in the Netherlands;
- many tax deductions and exemptions for dividend, royalties and interest payments.
The Dutch holding company regime is one of the most favorable in Europe which is why this country is a preferred destination for foreign investors interested in setting up this type of company here.
How hard is it to open a holding company in the Netherlands?
It is not hard to register a Dutch holding company. As a matter of fact, the registration of such entity is quite fast and easy, provided that all the documents are in order and provided in a timely manner. The Dutch holding company can take the form of a limited liability company, which is very popular among investors because of the minimum company formation requirements it is subject to.
Does the holding company need a minimum share capital?
For the private limited liability company (BV), the minimum share capital is 1 euro, therefore you don’t need a specific amount of money. However, the holding company can also take other forms which are subject to different share capital requirements. Our local advisors can explain these requisites.
The Dutch corporate tax seems high. Is there any possibility to reduce it?
Yes, there are more than one possibility. The following tax deductions are available for Dutch holding companies:
- the participation exemption regime which is available for foreign companies owning shares in a Dutch holding company;
- through the numerous double taxation agreements signed by the Netherlands;
- various tax exemptions are also available for certain investments, for example in innovation;
- dividend tax exemptions or deductions are also granted to foreign shareholders.
For information about the benefits of holding companies you may rely on our company formation agents in the Netherlands. You may also contact us if you need help with the registration procedure or information about how to start a company in the Netherlands.