Keywords: Conduit Company, Substance Requirements, Disclosure Requirements, Dutch
The conduit company has been an important vehicle in international tax planning for companies looking to reside in the Netherlands through a conduit company in the form of a BV.
In light of most recent requirements for Dutch conduit companies (substance requirements and disclosure requirements that go along with that) it is important to know when your BV is considered a conduit company and what kind of consequences it has for you as a Dutch taxpayer.
Definition of a conduit company
An entity qualifies as an conduit company for Dutch law when it is liable to corporate income tax and its activities in any one year consist primarily of the direct or indirect receipt of payment, in law or in fact, of interest, royalties, rent or lease instalments, under in whatever name and form, from or to entities not resident in the Netherlands which belong to the same group of companies (this last phrase can also be read as related transactions).
Consequences of being defined as a conduit company
If a taxpayer qualifies as a conduit company, it must provide information on its substance. In addition, these substance requirements have been tightened (wage omnibus requirement and office space requirement). When taxpayers qualify as a conduit company, they must meet these substance requirements and declare this in their corporate income tax return. When these DVL's do not meet the substance requirements, the taxpayer itself will have to indicate which substance requirements it does not meet. The tax authorities will then use this data/information on the DVL will then spontaneously be provided to the relevant foreign tax authority/ies. In addition, the new regulation makes it possible to impose a penalty on a taxpayer if the taxpayer fails to provide timely or complete information.
How to assess a conduit company
To assess whether or not your Dutch entity is a conduit company, this is tested by the ratio of the scope of work to the total activities of the taxpayer. The factors that play a role in this assessment are factors such as the types of assets and liabilities on the balance sheet, the composition of sales achieved, the activities performed, and the time commitment of employees.
If you would like to know more about conduit companies or would like to assess whether one of your Dutch entities can be qualified as such, we are happy to be of any assistance.
Please send an email to: firstname.lastname@example.org
 Artikel 3a Uitvoeringsbesluit Internationale bijstandsverlening bij de heffing van belastingen (IBB)
 Primarily means 70% or more.
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