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Jean Paul Dresen - IBCPIB™ 2009


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Jean Paul Dresen - IBCPIB™ 2009

  1. 1. Tax efficient structures with the Netherlands<br />International Business Conference<br />16 July 2009<br />J.P.A. Dresen<br />
  2. 2. Contents<br />NL – introduction<br />NL – examples of structures<br />
  3. 3. NL - introduction<br />
  4. 4. NL– Tax rates<br />Corporate income tax (CIT) rate: 25.5%<br />Dividend withholding tax (DWT) rate: 15%<br />No capital tax<br />No withholding tax on interest<br />No withholding tax on royalties & fees<br />Proposal Ministry of Finance: Group Interest Box - effective 5% tax rate on interest from related parties as from 2010<br />
  5. 5. Why NL<br />Use of NL tax treaties* almost all EU and all OECD Member States* many former USSR countries: Russia, Armenia, Azerbaijan, Estonia, Georgia, Kazakhstan, Latvia, Lithuania, Moldavia, Tadzhikistan, Turkmenistan & Ukraine* treaties with many Asian, African, Latin and Arab countries<br />Use of NL Bilateral Investment Treaties (asset protection)<br />
  6. 6. Example: Russian – Dutch tax treaty<br />Withholding taxes:subsidiary dividends 5%portfolio dividends 15%interest 0%royalties 0%<br />Capital gains on shares:taxation only in state of selling shareholder<br />
  7. 7. Why NL<br />Access to EU Directives<br />Dutch participation exemption / finance / royalty structures<br />NL for tax beneficial exit<br />
  8. 8. NL - Common used vehicles<br />Dutch BV (limited liability company):company with capital divided into sharesminimum capital EUR 18,000tax treaty protection/EU Directives<br />Dutch Cooperative (Coop)commercial associationno minimum capitaltax treaty protection/EU Directives<br />Dutch Closed CV (Limited Partnership)partnership – no legal person (yet)tax transparentno tax treaty protection/EU Directives<br />
  9. 9. NL - Participation exemption<br />Full exemption on dividends and capital gains from qualifying subsidiary<br />Participation exemption may also apply (under certain circumstances) on:<br />Profit rights;<br />Hybrid debt<br />Requirements:<br />at least 5% in company with capital divided into shares or membership of Coop; and<br />subsidiary not qualifying as low-taxed passive investment subsidiary (LTPS)<br />
  10. 10. NL - Participation exemption<br />Requirements<br />Ad (2): LTPS: <br />assets (directly and indirectly) >50% of free passive investments on an aggregate basis; and<br />subsidiary tax burden < 10% based on Dutch standards; and<br />subsidiary is not real property subsidiary (the subsidiary owns on a consolidated basis ≥ 90% real estate)<br />proposal Ministry of Finance: new rules that are less strict for the LPTS - effective as of 2010<br />
  11. 11. NL –intragroup interest<br />Currently, interest from related parties could be tax free if hybrid instruments and/or entities are used<br />Proposal from Ministry of Finance: - Group Interest Box- 5% effective tax rate - bill expected after summer holidays, new regime in force per 2010<br />
  12. 12. NL - Taxation non-resident<br />Non-Dutch resident having an interest in BV/Coop subject to Dutch (C)IT on income from/gains realised on sale of BV/Coop if:<br />interest in BV/Coop should be allocated to Dutch permanent establishment; or<br />non-Dutch resident has a substantial interest in BV/Coop:- interest in BV/Coop of at least 5%; and- interest in BV/Coop is not part of the business enterprise of owner<br />In practice this non-resident taxation very seldom applies to companies<br />
  13. 13. NL - Dividend withholding tax<br />Dividend distributions by BV subject to 15% dividend withholding tax (unless treaty or EU Directive)<br />Distributions by Coop not subject to dividend withholding tax<br />Distributions by VBI and transparent entities not subject to dividend withholding tax<br />No withholding tax on interest (save certain profit sharing), royalties and fees<br />
  14. 14. NL – examples of structures<br />
  15. 15. NL - Holding company - general<br />Foreign parent<br />Coop / BV<br />5% - 100%<br />Foreign/NL subs<br />Dutch Participation exemption on dividends and gains from subsidiaries<br />Often Dutch tax treaties protect against taxation on dividends and gains in country of residence of subsidiary<br />Generally no Dutch taxation on dividends and gains for foreign parent<br />
  16. 16. Asset protection structure<br />Beneficiaries (Russia)<br />Dutch Antilles Trust (SPF)<br />Dutch Antilles NV<br />Dutch STAK (optional)<br />Dutch Coop / BV<br />Russian subsidiary<br />
  17. 17. Asset protection structure II<br />Dutch Coop/BVprotected under Dutch-Russian BIT against expropriation in Russia<br />Dutch STAK (STichting AdministratieKantoor) legal control over Dutch Coop / BV without economic ownershipcan be used to give certain control rights to trusted persons<br />Dutch Antilles Trust (Stichting Particulier Fonds – SPF)beneficiaries have no assets that can be seized as such<br />
  18. 18. OpCo<br />NL<br />FinCo<br />Interest payment<br />Interest payment<br />No WHT under NL domestic tax law<br />No / reduced WHT under DTT<br />NL has to report a taxable remuneration<br />Via Dutch tax treaty network source withholding tax can be reduced/eliminated<br />Interest is tax deductible at the level of OpCo<br />No withholding tax on payment from NL to FinCo, even if FinCo is resident in a tax haven<br />NL- Use of treaties: financing<br />
  19. 19. NL - Trading Structure<br />Group/Market<br />NL<br />Sale raw materials/ products<br />ProdCo<br />Transfer price sale to NL: minimum acceptable price from ProdCo country perspective<br />NL sells onwards against market prices<br />Difference between market price and transfer price less allocable Dutch remuneration: deemed dividend distribution to NL, tax exempt in the NL under the participation exemption <br />NL taxable profit: usually 0.5-2% of turnover as remuneration for trading activities<br />
  20. 20. Your Houthoff Buruma contacts<br />Jean Paul Antoine Dresen<br />Tax lawyer<br />T: + 31 (0)20 605 6988<br />M: + 31 (0)6 43 550 853<br />E:<br />