NETHERLANDS Law and Practice Contributed by: Folko de Vries, Ilse van Gasteren, Robert Smits and Stern Flik, Clifford Chance
Hybridity Risks Dutch investors have historically been a source of hybrid mismatch issues (where one jurisdic - tion considers a vehicle as tax transparent but another as opaque) created for fund-type vehi - cles in the form of partnerships and contractual funds. Dutch entity classification rules have changed since 1 January 2025, but especially for certain fund vehicles these hybridity issues have not disappeared. Mitigating such issues should be considered in the fund formation phase, for example by requiring Dutch investors to invest through a feeder vehicle. Equity Interests As set out at the end of 4.1 Withholding Tax , in situations where an instrument has equity fea - tures or the private credit provider or an affiliate also has an equity interest, consideration must be given to the withholding tax position and corporate tax deductibility of expenses at bor - rower level. Furthermore, private credit providers should consider whether there is a possibility of any individuals having a (direct or indirect) 5% or more interest in the private credit provider and the relevant borrower as that would possibly, even absent Dutch residency or a Dutch per - manent establishment, bring the private credit provider in scope of Dutch corporate taxation with respect to income derived from such bor - rowers. 4.4 Tax Incentives There are no tax incentives available for foreign private credit providers lending into the Neth - erlands. 4.5 Non-Bank Status There are no additional tax considerations appli - cable specifically for non-bank lenders.
of debt by private credit providers to a Dutch tax resident borrower or foreign resident borrower lending through a Dutch establishment (or debt secured by Dutch real estate) should be a supply of exempt financial services for Dutch VAT pur - poses (provided that the place of supply is the Netherlands). However, the applicability of VAT is assessed on a case-by-case basis (depend - ing on the relevant supply). For example, fees for debt collection services supplied by a per - son other than the originator may be subject to Dutch VAT (if the place of supply is the Nether - lands). 4.3 Tax Concerns for Foreign Lenders Certain Dutch Tax Concerns for Foreign Private Credit Providers The way in which private credit providers are often structured and operate may create certain Dutch tax risks. Three are especially notewor - thy: (i) permanent establishment risks associated with activities (such as loan origination) by per - sons or teams operating from the Netherlands, (ii) hybridity risks associated with having Dutch investors and (iii) the presence of equity interests generally. Permanent Establishment Risk To the extent that the private credit provider or any manager or investment adviser appointed by it carries on part of its activities in the Nether - lands, especially where such activities constitute loan origination or more broadly speaking where such activities exceed those of a preparatory and ancillary nature (including where persons in the Netherlands have the authority to contract), it should be determined whether there is a risk for the private credit provider of a permanent establishment (or even residency) in the Nether - lands to which (part of) the income from credit provided is allocable and subject to Dutch cor - porate taxation.
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