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Holding companies, both domestic and international, have found a welcoming home in The Netherlands. The country’s liberal policies, minimal regulatory oversight, and favorable tax climate have made it an attractive destination for entrepreneurs worldwide. For those considering this route, we present a comprehensive guide on establishing a Holding Company in The Netherlands, outlining the primary benefits, the key regulations, and the practical steps involved.

Why a Holding Company in The Netherlands?

As an entrepreneur planning to extend your business horizons beyond local confines, you may find the landscape of the Netherlands particularly inviting. The country’s business-friendly practices, coupled with a strategic location in Europe, provide a conducive environment for holding companies.

International Connectivity

The Netherlands is an intriguing country for non-EU entities looking to establish a Holding company to effectively manage their European subsidiaries. One of the key factors that make the Netherlands an attractive choice is its extensive network of tax treaties, which can provide significant benefits for multinational corporations. Additionally, the country offers an appealing participation exemption, allowing companies to avoid paying taxes on certain types of income derived from their subsidiaries. Moreover, the Netherlands permits dividend payments to tax havens, further enhancing its appeal as a conduit for profit distribution. However, the advantages of establishing a Holding company in the Netherlands extend beyond its favorable tax environment. The country’s strategic location provides easy access to major commercial and industrial centers such as Paris, Frankfurt, Brussels, and even London. This exceptional connectivity not only facilitates access to the European market but also positions the Netherlands as an ideal gateway for international operations on a global scale.

Favorable Tax Climate

The Double Tax Treaty Network, of which the Netherlands is a proud member, plays a crucial role in significantly reducing taxes for both local and foreign holding enterprises. This network not only fosters a favorable tax environment but also promotes fairness and equality among investors and entrepreneurs. It ensures that domestic and foreign companies are subject to the same regulatory standards, creating a level playing field for all.

The Structure: What Does a Dutch Holding Company Look Like?

A Holding Company in The Netherlands is essentially a business entity that ‘holds’ the stock of other corporations. It does this by acquiring enough shares of an existing corporation to gain voting rights, thereby influencing, controlling, or even absorbing the target company.

This structure allows the holding company to manage the actions of one or several other companies. The holding company may not produce its own goods or services but collects dividends, interests, and royalties from its subsidiaries.

Legal Forms: What Are Your Options?

When setting up a Holding Company in The Netherlands, you have several legal forms to choose from. The choice will depend on your specific circumstances and business goals. Some of the most commonly used legal forms include:

Private Limited Liability Company (BV)

The Private Limited Liability Company, or “Besloten Vennootschap met beperkte aansprakelijkheid” (BV), is the most commonly used legal form for holding companies in the Netherlands.

Public Limited Liability Company (NV)

If you’re considering listing your holding company, the Public Limited Liability Company, or “Naamloze Vennootschap” (NV), is your go-to option.

Co-operative Society (CV)

A unique variety of legal forms for a Dutch holding company is the Co-operative Society, or “Vereniging op Coöperatieve Grondslag” (CV). This form can be advantageous if you plan to create a holding company with a more cooperative model.

European Societies (SE, SCE, and SPE)

For holding companies operating across Europe, European Societies such as the Public European Society (Societas Europaea, or “SE”), the Private European Society (Societas Privata Europaea, or “SPE”), or the European Cooperative Society (Societas Cooperativa Europaea or “SCE”) might be suitable options.

Foreign Legal Entities

Foreign legal entities that have their (tax) residence in The Netherlands can also serve as Dutch holding companies. Tax residence is generally defined as the place where effective management is exercised.

Participation Exemption: An Exceptional Advantage

One of the main advantages and key attractions of establishing a Dutch holding company is the ‘Participation Exemption’. This provision, which is enshrined in Dutch tax law, offers a significant benefit to holding companies by allowing them to be exempt from corporate tax on profits (dividends) and capital gains derived from qualifying participations.

In order to qualify for this valuable exemption, it is necessary for the holding company to hold a minimum of 5% of the nominal paid-up share capital of the subsidiary. However, it is important to note that there are also additional conditions that must be met in relation to the assets and activities of the subsidiary.

By meeting these requirements, a Dutch holding company can take advantage of the Participation Exemption, which provides a favorable tax treatment and can greatly enhance the overall profitability and attractiveness of such a corporate structure. This exemption serves as a powerful incentive for businesses and investors considering the establishment of a holding company in the Netherlands.

Dividends to Non-EU Shareholders: The Tax Scenario

One of the key considerations when setting up a holding company is the tax treatment of dividends distributed to shareholders. In the Netherlands, dividends paid to non-resident shareholders are typically subject to a 15% withholding tax. This means that a portion of the dividends earned by shareholders who are not residents of the Netherlands is withheld by the government. However, it is important to note that this tax can be reduced or even eliminated under several circumstances.

For instance, if the shareholder is a company resident in a country that has a tax treaty with the Netherlands, the withholding tax may be reduced. This is because tax treaties between countries often aim to prevent double taxation and promote cross-border investments. These treaties establish specific rules and regulations regarding the taxation of dividends, interest, and royalties, among other things.

Similarly, under the EU Parent-Subsidiary Directive, dividends paid to a parent company in another EU member state are exempt from withholding tax if certain conditions are met. This directive, which is designed to eliminate tax obstacles within the European Union, allows for the free movement of capital and profits between parent and subsidiary companies.

In summary, while dividends paid to non-resident shareholders in the Netherlands are typically subject to a 15% withholding tax, there are various circumstances in which this tax can be reduced or eliminated. This includes situations where the shareholder is a company resident in a country with a tax treaty with the Netherlands or when the dividends are paid to a parent company in another EU member state under the EU Parent-Subsidiary Directive. These provisions aim to facilitate international business transactions and promote economic cooperation between countries.

Protecting Profits of the Operational Company

A significant advantage of implementing a holding company structure is the robust protection it provides to the profits of the operational company. By strategically placing the operational company under the umbrella of the holding company, the profits are effectively shielded from any potential losses or bankruptcy that the operational company may face. This safeguarding mechanism ensures that the hard-earned profits remain secure and unaffected, allowing the operational company to continue its business operations with confidence and stability.

Reinvest Profits in New Subsidiaries

Holding companies provide an effective structure for reinvesting profits. The income received from one subsidiary can be used to invest in or establish new subsidiaries, fostering business expansion and diversification.

Tax Treaties: A Key Consideration

The Netherlands, a country renowned for its extensive network of tax treaties, has successfully established agreements with a multitude of nations. These crucial treaties serve the primary purpose of preventing the issue of double taxation and effectively reducing withholding tax rates on dividends, interest, and royalties. For Dutch holding companies, the strategic utilization of these tax treaties can result in significant tax savings. Consequently, it is highly advantageous for businesses to capitalize on the numerous benefits offered by these international agreements.

The Role of House of Companies

House of Companies, a renowned incorporation service provider, offers a self-governance portal that lets you start a holding company in the Netherlands, without personal, at a fixed yearly fee. By simplifying the process of setting up and managing businesses overseas, House of Companies is an indispensable partner for those expanding their operations to the Netherlands.

Start your Holding Company in the Netherlands

Setting up a Holding Company in The Netherlands can be an effective strategy for business expansion and diversification. With its favorable tax climate, minimal regulation, and ease of establishment, The Netherlands offers a thriving environment for holding companies. However, to navigate the complexities of incorporation and management, partnering with a reliable service provider like House of Companies can be invaluable.