International tax planning - Dutch emigration and immigration tax issues for corporations

Last updated: 18-01-2006

It is a quite common phenomenon in the Dutch market place that existing offshore companies are transferred to the Netherlands (immigration) or vice versa (emigration).

From a Dutch tax perspective there is in many situations no real necessity for a Dutch holding, finance or licensing company to be incorporated under Dutch law.

The transfer of a company can in most cases be effectuated by transferring the place of effective management of the company.

The immigration or emigration of a company may however raise Dutch tax issues.

In case of immigration in particular the following Dutch (tax) issues need to be considered:

    1. Upon immigration of a foreign corporation the intrinsic value of the company (capital plus reserves) is subject to the Dutch capital tax, unless the corporation was incorporated under EU law or it was previously a resident of an EU member state.
    2. Despite the levy of capital tax over the amount of the reserves upon immigration, Dutch dividend withholding tax may become due upon future distribution of existing reserves.
    3. The EU tax exemptions for dividends, interest and royalties do generally only apply to qualifying corporations incorporated under EU law.
    4. It is generally not possible under Dutch corporate law to transfer the statutory seat to the Netherlands i.e. a foreign incorporated corporation cannot adopt Dutch nationality. As a consequence, a corporation incorporated under foreign law will as a general rule stay governed by the rules of corporate law of the country of incorporation.
    5. As the statutory seat of the corporation stays in the country of incorporation, the company may stay subject to taxes in that country (dual residency issues).
    6. For the application of the Dutch tax treaties it is technically not a requirement that the Dutch holding company is incorporated under Dutch law, but both from a Dutch and foreign tax perspective the Dutch substance of the holding company (effective place of management) will become more relevant.

In case of emigration in particular the following Dutch tax issues need to be considered:

    1. Upon emigration the Dutch holding company must revalue all its assets and liabilities against fair market value. A subsequent revaluation gain or loss is subject to the normal Dutch corporate income tax rate, be it that the gain/loss on shares may qualify for the participation exemption.
    2. For Dutch corporate tax a Dutch BV is in essence always regarded as a resident taxable entity, unless a tax treaty determines otherwise. It is therefore essential for a successful tax emigration, that the new state of residence of the company has concluded a favourable tax treaty with the Netherlands.
    3. The emigration itself does not trigger the Dutch dividend withholding tax, but the Dutch dividend withholding tax claim on existing reserves stays alive also after emigration. In most cases however the tax treaty with the new state of residence prohibits the Netherlands from exercising this right on taxation.
    4. After emigration the Dutch holding is no longer eligible for Dutch treaty benefits.

We have advised many clients on emigration or immigration issues and we are gladly prepared to advice you on this subject.

If you are interested in our services please feel free to contact us via e-mail or to call us at our offices under number +31 (10) 2010466.