Netherlands clarifies substance requirements for Dutch conduit companies

In 2013, the Dutch government announced new measures against so-called Dutch conduit companies. These measures came into force in 2014.

In 2013, the Dutch government announced new measures against so-called Dutch conduit companies. These measures came into force in 2014 (see our previous article). Conduit companies are Dutch companies which are used by foreign multinationals in order to lower the tax pressure on, among other things, finance and royalty flows. These measures (‘substance requirements’) ensure that the management and administration of these companies are actually carried out in the Netherlands, with a capital which fits with the functions and risks of the company. The measures have a highly preventative character and try to prevent excesses going forward. The starting point of these measures is nonetheless that the Netherlands must remain attractive to foreign investors from a tax point of view. As the interpretation of these substance requirements could be quite difficult in practice, the Dutch State Secretary of the Ministry of Finance issued a Decree on 3 June 2014 to clarify some of these substance requirements in more detail. These clarifications provide helpful guidance for taxpayers in practice.

If you have clients or prospects for whom these new measures are interesting or if you have any questions, please do not hesitate to contact us.