[ESTABLISHING A BUSINESS ENTITY IN THE NETHERLANDS] 354 354
Companies need to file timely tax returns concerning all taxes, such as for instance wage tax, value added tax (VAT), corporate income tax and dividend tax.
delivery of goods or services) parties should trade at arm’s length in order to meet the requirements of the tax authorities of the countries involved (transfer pricing). When cross border activities are performed, not only Dutch tax law may be relevant. The Netherlands has tax treaties with many countries. Furthermore, EU law and regulations may apply. Noteworthy are the Parent- Subsidiary Directive which prevents double taxation on the income of affiliated companies located in different EU member states and the Merger Directive, which facilitates cross-border mergers, divisions, transfers of assets or exchanges of shares in the EU. A company which holds more than 5% of the shares in a N.V./B.V. – which is not an investment company – can apply for a participation exemption for corporate income tax purposes. Profits, for example dividends and profits on the sale of a participating interest, that have been taxed at a subsidiary will not be taxed again at the parent company if this exemption applies. Thin Capitalisation Due to erosion of the tax base profit the Corporate Income Tax Act holds a number of provisions with regard to the limitation of deductibility of interest payments to affiliates or third parties, instead of the (abolished) thin capitalization rules. For example, excessive interest cost of a parent company with regard to a subsidiary are limited deductible for corporate income tax. Financing schemes within a group of (international) affiliated companies may be confronted with limited deductibility of interest, for different situations. Withholding tax Interest and royalty payments from a legal entity in the Netherlands to foreign companies are not subject to Dutch withholding tax. A law
Partnerships Governance
With respect to governance issues, we refer to what is being written on the specifics of the partnerships above. Maintenance Pursuant to Dutch tax law, partnerships do have an obligation to keep account of their rights and obligations in a proper manner and to keep the books and documents for at least 7 years. There is no obligation to publish annual accounts, since the activities of the non-legal entity in principle are being conducted for the account of the participants. In the event that participants are legal entities (e.g., a N.V. or a B.V.) such legal entities do have to publish their accounts in accordance with what has been stated above. TAX Here a few issues regarding business taxation will be reviewed, namely the participation exemption, thin capitalization and withholding tax. Participation Exemption A legal entity is subject to taxation. The aforementioned businesses which are not a separate legal entity are not subject to taxation, because they will mainly be transparent for tax purposes. Tax will be levied at the level of the (income of) partners of the partnership, not at the entity itself. Foreign companies investing in a legal entity in the Netherlands will also be confronted with Dutch tax law. If transactions between affiliated companies take place (e.g., financing and
ILN Corporate Group – Establishing a Business Entity Series
Made with FlippingBook Ebook Creator