Dutch BV with Dutch assets
A Dutch BV may for certain assets be entitled to a tax exemption.The most important tax exempt assets are shares in (foreign) subsidiaries (participation exemption) and foreign assets (tax treaties), as briefly describe below.Apart from these specific exemptions, the Dutch corporate tax regime has some general features which can make The Netherlands an attractive location for the ownership of assets.For certain categories of income, the Dutch tax regime provides the possibility to defer taxation.According to the Dutch tax rules income is taxed on an accrual basis, but income recognition can in general be deferred until realisation. Losses and expenses can be taken in the year when they occur.It is generally allowed to defer income recognition of capital gains until the moment of the realization. If a business asset is sold, it is under certain conditions allowed to form a “replacement reserve”, which basically allows the capital gain to be rolled over into the taxable basis of the new replacing asset.
The Dutch tax regime generally allows tax depreciation of an asset and interest deduction on funding loans. Basically all business assets which decrease in value over time are allowed to be depreciated. This includes real estate and most intellectual property rights. Interest on loans utilised to fund the acquisition of an asset are within certain limitations tax deductible. Due to the aforementioned features of the Dutch tax regime, the Netherlands can offer a tax friendly environment for the ownership of assets which: Tend to generate low cash flows but high capital gain, like most categories of real estate and certain categories of intellectual property Are acquired with a relatively high leverage Are acquired with a significant amount of goodwill Qualify for the benefits provided by tax treaties or EU Directives, like reduced foreign withholding tax rates, tax (sparing) credits for foreign withholding tax incurred or tax exemption for certain categories of foreign sourced income.
The Attractive Structure Netherlands BV and Curacao
As the Netherlands has a special relationship with Curacao (previously the Netherlands Antilles) the ownership of the assets is usually transferred to a corporation established in Curacao (the Netherlands Antilles). The Curacao company may be eligible for a 0% tax rate, 3% rate, or alternatively a 1.75% effective tax rate.We note that due to the fact that the Netherlands does not impose a withholding tax on outbound royalties and interest, the corporation which owns the assets can also be established in other tax havens.