TAX advantages of a Dutch LLC
The Netherlands has a rich history of being a center for trade on the European continent, and has subsequently been continental Europe’s maritime link with the Americas, Africa and Asia. To maintain this position the Netherlands has invested the past few years in a business-friendly climate to attract foreign investors. These investments paid off, the Netherlands is the European home of more than 2,100 North American firms, and the list keeps growing. So what makes the Netherlands such an interesting country for businesses? Well, there are multiple reasons, one of those are the tax advantages that the Netherlands has to offer.
Here’s the top ten of tax friendly features the Netherlands has to offer:
- Dutch law provides reduced withholding tax rates on interests, dividends and royalties paid to Dutch companies and mostly excluding the capital gains from taxation arising from the sale of shares in source countries (pact with approximately 100 jurisdictions).
- The Netherlands has one of the biggest investment treaty networks of the world. A Dutch LLC provides access to this network composed of 96 jurisdictions. This network usually protects against expropriation and protects investors in such a way that they receive the same treatment domestic investors or investors from third states would. Using a Dutch company in the corporate structure could safeguard you from foreign governmental intervention by incorporation dispute settlement clauses allowing international arbitration in favour of using the domestic court system.
- Access to EU Directives reducing withholding taxation on payments between related companies.
- Full exemption from taxation for income from qualifying foreign subsidiaries. The participation exemption regime allows no taxation in the Netherlands of eligible dividends and capital gains if a Dutch holding company holds an interest of at least 5% and meets at least one of the rules below:
- The consolidated assets of the subsidiary consist of less than 50% of low-taxed free passive investments.
- The objective for investing in the subsidiary is to obtain a return that is higher than what may be expected from regular asset management.
- The subsidiary is subject to a realistic tax levy according to Dutch standards, which consists of at least 10%. Also, Dutch law provides exemption from taxation for income from foreign permanent establishments of Dutch entities and tax efficient repatriation of profits.
- Innovation box regime, taxing profits from eligible intangible assets at an effective rate of 5%
- Financing (including hybrid debt) and IP arrangements without retention tax on interest, services, and royalty payments even when paid to tax havens.
- Supportive treatment for setting up businesses within the EU for Dutch holdings
- Tax-deferred basis for corporate reorganizations.
- Possibility to form a fiscal unity (subject to certain conditions for directly held subsidiaries of Dutch companies) allowing you to be taxed as a single taxpayer.
- Opportunity to defer taxation of gains realized on the sale or conversion of tangible or intangible business properties that are not held as a passive investment.
If you are looking for exclusive benefits and advantages regarding international tax planning, you will find that Dutch legal entities have a lot to offer. Moreover, the Netherlands is becoming progressively interesting as a jurisdiction for holding company entities. Wondering which opportunities the Netherlands has to you? Or do you already want to set-up a Dutch LLC? Just give us a call or contact us by mail or chat, and our experts will provide you with tailored advice!