NETHERLANDS Law and Practice Contributed by: Michael Molenaars, Jeroen Smits, Reinout de Boer and Rogier van der Struijk, Stibbe
Stibbe Beethovenplein 10 1077 WM Amsterdam P.O. Box 75640 1070 AP Amsterdam The Netherlands
Tel: +31 20 546 06 06 Fax: +31 20 546 01 23 Email: amsterdam@stibbe.com Web: www.stibbe.com
1. Corporate Structures, Residence and Tax Treatment 1.1 Corporate Forms and Their Tax Treatment Large businesses in the Netherlands typically carry out their activities via a limited liability company ( besloten vennootschap , or BV) or – to a lesser extent, typically in the case of a listed company – via a public limited company ( naamloze vennootschap , or NV) or a no- liability co-operative ( coöperatieve UA ). Each of these legal forms has a legal personality so that the entity can own assets in its own name, and the sharehold - ers (membership right-holders in the case of a co- operative) cannot, at least as a starting point, be held personally liable for corporate obligations. A BV, NV or co-operative is a separate taxpayer for Dutch corporate income tax purposes. Reverse Hybrid Rules A reverse hybrid entity is an entity that for Dutch tax purposes is considered transparent (generally a partnership), whereas the jurisdiction of one or more related participants holding in aggregate (directly or indirectly) at least 50% of the votes, interest or profit entitlements qualifies the entity as non-transparent (ie, it leads to the entity being considered a taxpayer for profit tax purposes). Pursuant to the reverse hybrid rule, entities incorpo - rated or established in the Netherlands that in prin - ciple qualify as tax transparent may nevertheless be considered non-transparent and integrally subject to Dutch corporate income tax. If, and to the extent
that, the income of the reverse hybrid entity is directly allocated to participants in jurisdictions that classify the entity as transparent, the reverse hybrid rules pro - vide for a deduction of the income at the level of the reverse hybrid entity. If a Dutch transparent entity is considered a reverse hybrid entity, distributions by the reverse hybrid entity would in principle become subject to Dutch dividend withholding tax (DWT) to the extent that the recipient of the distribution is a participant that leads to the entity in its jurisdiction being classified as non-transparent. In addition, interest, royalty and dividend payments by a reverse hybrid entity will in principle become sub - ject to a conditional withholding tax provided that the recipient of the payment treats the reverse hybrid enti - ty as non-transparent and provided certain conditions are met. See 4.1 Application of Withholding Taxes . Furthermore, foreign participants could – in (deemed) abusive situations – be subject to Dutch corporate income tax in respect of capital gains and/or dividends derived from their participation in a reverse hybrid entity. See 5.3 Capital Gains of Non-Residents . 1.2 Use and Taxation of Transparent Business Structures In the Netherlands, the tax-transparent entities typi - cally used are a general partnership ( vennootschap onder firma , or VOF), a limited partnership ( com- manditaire vennootschap , or CV) and a fund for joint account ( fonds voor gemene rekening , or FGR). Each of these legal forms lacks legal personality and should be considered as a contractual business arrangement.
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