Formally there are no minimum substance requirements in the Netherlands for a Dutch limited liability company. A Dutch limited liability company is always deemed to be a resident of the Netherlands for Dutch CIT purposes, irrelevant where it is managed and controlled or where its business activities are carried outs.
This means that a Dutch limited liability company is subject to Dutch corporate income tax on its worldwide profits (unless an exemption applies). It may however be advisable to have as minimum substance in the Netherlands:
- to prevent that another jurisdiction will treat the Dutch limited liability company as its tax resident;
- to ensure that a foreign jurisdiction cannot deny the Dutch limited liability company the benefits of the tax treaty (or any other treaty, such as a bilateral investment treaty) concluded between the Netherlands and that foreign jurisdiction.
The Dutch tax authorities have formulated the following minimum substance requirements that a Dutch limited liability company must meet before the Dutch tax authorities are willing to defend towards the foreign jurisdiction that a Dutch limited liability company is a tax resident of the Netherlands and entitled to the benefits of a tax treaty. Note that the foreign jurisdiction may require the Dutch limited liability company to meet more/other conditions.
- At least half of the statutory board members of the Dutch limited liability company with power to decide are resident in the Netherlands. The Dutch resident board members must at least have equal decision-making powers to the non-resident board members. Members of the supervisory board are not taken into account;
- The Dutch resident board members have sufficient knowledge and the capacity to perform their tasks, which at least include making decisions on transactions and managing the completion of transactions. Dutch board members appointed by the licensed Dutch trust company should meet this criterion and the Dutch board members should have at least equal representation authority as the non-Dutch board members;
- Dutch limited liability company has qualified staff to manage and register the transactions in the Netherlands. This qualified staff may be hired, for example, from a trusted company;
- The decision by the board meetings of the Dutch limited liability company should physically be made in the Netherlands. During the board meetings the key management and commercial decisions that are necessary for the conduct of the entity’s business should in substance be made. The board meeting may not be a mere rubber stamping of decisions made outside the Netherlands. The board meetings should not be held in another jurisdiction or be held electronically outside the Netherlands (through Skype/video conferencing or over the phone);
- The most important bank accounts are held in the Netherlands. This means that Dutch limited liability company has the decision-making power and the entitlement to the account, which account may be with a non-resident bank;
- The bookkeeping of the Dutch limited liability company should be done and kept in the Netherlands;
- The Dutch limited liability company should have an office space in the Netherlands that is used and properly equipped for a period of at least 24 months;
- The Dutch limited liability company has at least an appropriate equity with regard to the risks run relating to its activities.
- The Dutch limited liability company should incur salary expenses of at least EUR 100.000 per annuum.