When you start a business in the Netherlands you may consider to engage a trust company who can provide registered office address and Dutch directorship services.
In this post we will explain the advantages and disadvantages of engaging a trust (office) company in the Netherlands considering the tax regulations of today, and the best practise solution for international companies to start a corporation in the Netherlands.
What is a trust office ?
A trust office is also known as a ‘corporate service provider’ or ‘csp’. In some countries, typical trust services are provided by law firms, or even accounting firms. In the Netherlands, ‘trust offices’ are regulated by the Dutch Central Bank.
A trust office provides (nominee) director and shareholder services. Which means that the trust office has professionals which can act as the director for your company. Similarly they can act as your shareholder, for example for privacy purposes (although the latest UBO register further complicates privacy protection).
From a tax perspective, it can be very important where the directors of the Dutch company are resident, as explained in our article on substance requirements in the Netherlands.
A trust company can provide a certain level of ‘substance’, which a foreign based shareholder/ investor needs in the Netherlands for maintaining a Dutch corporation. This may include (limited) management services (the appointment as director), providing registered addresses for the company, bookkeeping, legal services, etc.
Does the "trust solution" still create substance from a tax perspective ?
Not so much as before. Recent legal updates have made it more complicated for ‘passive’ companies to create substance in the Netherlands by means of a trust service. But certainly not yet impossible. Furthermore, many companies use trust services, for other than tax motives.
In case tax motives are the primary focus, and the Dutch cooperation wants to qualify for the benefits of the Dutch tax treaties, or the EU Directives for effectuating reduced foreign withholding taxes on dividends, interest or royalties (or even a full exemption thereof), the Dutch corporation will then need a real presence in the Netherlands in order to meet the criteria for avoiding the application of Dutch (exchange of information) and foreign anti-abuse rules (no exemption withholding tax).
Maintaining a Dutch corporation without the engagement of a trust company
There is no legal requirement to appoint a Dutch director. So international entrepreneurs can incorporate a Dutch company themselves, and even act as director and shareholder. The ‘substance’ discussion is not relevant for many entrepreneurs that start a Dutch business, for example, because they don’t make a profit in the Netherlands, or because they create substance in a different manner (via staff, or a local warehouse, etc etc).
INCO has assisted hundreds of entrepreneurs that incorporated a company in the Netherlands, without the use of Dutch trust services.In some cases, it’s simply decided to postpone the involvement of a Dutch director, until this matter becomes more relevant (say; when the company starts to make a profit).
INCO Business Group is not a regulated trust office, but if you wish to receive more information about the engagement of a trust company, please feel free to contact us. We have an extensive network within the trust industry and we can connect you to an appropriate and trustworthy firm who can supply the trust services for your Dutch company.