Dutch company emigrates with shareholder

If a Dutch shareholder is actually in charge of a Dutch company (hereinafter: ‘BV’), the emigration of the shareholder will result in the change of domicile of the BV, being applied for in most tax treaties. This in turn affects the (im)possibility of levying dividend withholding tax. 

In a case for the Noord-Holland District Court, the sole shareholder and director of a company, established under Dutch law, emigrated to Belgium on October 14, 2013. For tax years 2013 and 2014, the Dutch tax authorities imposed dividend withholding tax assessments.  

According to the tax inspector, the BV was still based in the Netherlands after emigration of its shareholder. The court points out that the tax treaty between the Netherlands and Belgium stipulates that a company is established in the state where the actual management is located. This is the location where key decisions regarding the activities of the company are made by the management and where the management bears ultimate responsibility for those decisions. In certain cases, the management also gives instructions to employees from that location. Who is in charge of day-to-day business is not decisive for determining where a company is located under the tax treaty.  

In this case, the tax inspector fails to prove that a person other than the shareholder takes the key decisions and bears ultimate responsibility. Moreover, there are no indications that the key decisions were made by the shareholder in the Netherlands. Therefore, the court ruled that the BV is located in Belgium under the tax treaty after emigration of its shareholder. The Netherlands is therefore not allowed to levy dividend withholding tax on dividends paid by the BV after the emigration of the shareholder. 

Source: Taxence, 4 July 2019