Q1. Dutch corporate laws recognize two kind of companies: N.V.'s and B.V.'s. What are the main differences?

Q2. What is the participation exemption?

Q3. What is the Dutch corporate income tax rate?Q4. For what kind of companies is the tax system and treaty network of the Netherlands attractive?

Q4. For what kind of companies is the tax system and treaty network of the Netherlands attractive?

Q5. Do the Netherlands levy withholding taxes or capital tax?

Q6. Can a BV issue share certificates?

Q7. How can we transfer shares in a B.V.?

Q8. How much is the minimum capital of a B.V. ?

Q9. How can we set up a B.V.?

Q10. Does the B.V. need to prepare financial statements and file a tax return?

Q1. Dutch corporate laws recognize two kind of companies: N.V.'s and B.V.'s. What are the main differences?

There are two main differences between the Dutch N.V. and the Dutch B.V.:

• The minimum issued and paid up share capital of the B.V. amounts to EUR 18.000, for the N.V. the minimum issued and paid up capital is EUR 45.000,-
• The B.V. can only issue registered shares (name shares), the N.V. can issue bearer shares and registered shares.

Only an N.V. can be listed on a stock exchange.

Q2. What is the participation exemption?

Under the participation exemption, proceeds from qualifying subsidiaries, including dividends, realised as well as unrealized capital gains, are excluded from the taxable base for corporate income tax purposes. Accordingly, capital losses are not tax deductible, even though an important exception is made for losses in connection with the liquidation of a participation, provided a number of requirements are met. For the participation exemption to be applicable the following criteria should be met:

• the B.V. should hold at least 5% of the subsidiary's paid in capital;
• if the assets of the subsidiary consist of less than 50% in portfolio investments or passive finance income there is no subject-to-tax requirement to benefit from the Dutch participation exemption;
• if the assets of the subsidiary consist of 50% or more in portfolio investments or passive finance income the subsidiary should be taxed at a rate of at least 10% based on Dutch taxation standards.;
• if the subsidiary's assets consist for at least 90% of real estate the participation exemption applies notwithstanding the possible passivity of the real estate investment. This makes the Netherlands a very attractive holding jurisdiction for real estate investments!

Q3. What is the Dutch corporate income tax rate?

Q4. For what kind of companies is the tax system and treaty network of the Netherlands attractive?

For holding companies, as well as finance and royalty companies, the Dutch tax system and treaty network are especially attractive because they may reduce overall withholding taxes on foreign income streams.

Q5. Do the Netherlands levy withholding taxes or capital tax?

The Netherlands levy withholding tax on dividends of 15%, but not on royalties or interest. However, the dividend withholding tax may be reduced based on tax treaties.

When using a Dutch Cooperative the Dutch withholding tax on dividend can even be reduced to 0%.

Dutch capital contribution tax has been abolished effective 1 January 2006.

Q6. Can a BV issue share certificates?

A Dutch BV cannot issue share certificates, the transfer of B.V.'s registered shares (i.e. shares in name) is subject to the provisions of an obligatory blocking clause, laid down in the articles of association of the BV. Note, that these registered shares are not quoted shares, the shares in a Dutch B.V. are registered on name in the company's shareholders register.

Q7. How can we transfer shares in a B.V.?

In order to transfer shares in a B.V. a notarial deed of transfer is required. This deed is based on an agreement between parties to sell and purchase the shares. The company must acknowledge the transfer. The transferability of shares of a B.V. must be restricted in its articles of association either by including provisions which grant pre-emptive rights to co-shareholders and/or making the sale of shares subject to prior approval by one of the company's corporate bodies, usually the general meeting of shareholders.

Q8. How much is the minimum capital of a B.V. ?

At least 20% of the B.V.'s authorized capital is to be issued and paid up with an absolute minimum of EUR 18,000.

Q9. How can we set up a B.V.?

A B.V. is incorporated by notarial deed executed by one or more incorporators before a civil law notary in The Netherlands. Before the notary can execute the Deed of Incorporation, a declaration of no-objection is to be obtained from the Ministry of Justice. Such declaration is provided for after the draft of the deed has been approved and the identity and credentials of the incorporator/UBO has been verified. Upon receipt of the ministerial declaration of no-objection and a declaration from a bank confirming that the minimum required capital has been deposited on a bank account in The Netherlands in name of the company, the notary may execute the Deed of Incorporation.

Q10. Does the B.V. need to prepare financial statements and file a tax return?

Yes, the managing directors have to arrange for the preparation of the financial statements for each financial year in accordance with the fourth EC directive as implemented in Dutch legislation. B.V.'s and N.V.'s are required to file a publication report with the Chamber of Commerce. Subsequently a corporate income tax return needs to be filed with the Dutch Tax Authorities.

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