One of the best guarded secrets of the Netherlands is its role in international tax planning via so-called conduit companies, which collect interest, dividends, capital gains and royalty payments for multinational enterprises worldwide. The Dutch Central Bureau for Statistics recently published details on the importance of this sector to the Dutch economy, based on Dutch Central Bank filings of so-called trust companies. An astonishing amount of some €400bn hits the Netherlands every month for tax reduction purposes! This chapter deals with royalty type income only but it should be noted that the international tax definition of 'royalty' does not only apply to cross-border licensing fees and payments for authors' rights and copyrights (the royalty payments under civil law or common law), but it also applies to cross-border operational lease fees and consultancy fees (technical service fees included).

Here we describe some of the key considerations as to why 'everybody' still uses the Netherlands to route such payments through. We will also provide information on a relatively new way in which internationally operating businesses, from small to very large, could benefit from the Dutch tax treaty network without having to set up their own Dutch subsidiary: in some cases they will be able to rent a Dutch legal entity from a third party, with equally positive, or even better, tax results!

Introduction

The Netherlands is host to many thousands of so-called 'royalty conduit' companies, in use by multinational enterprises of all sizes to either repatriate royalty income as defined in tax laws and tax treaties, i.e., including operational lease fees and (technical) consultancy fees to the parent company of a multinational group, whilst ensuring the lowest possible foreign withholding tax rates, or to put this foreign income into group entities in tax haven locations, in a tax effective manner. Both options are intertwined, because from a Netherlands tax viewpoint it makes no difference whether the royalties received are paid onwards to a recipient in the US, Germany, France, China, Russia etc. (high tax countries) or to a recipient in the Cayman Islands, the BVI, Guernsey etc. (zero tax locations). The Netherlands has no royalty tax itself and even has no definition of what a royalty is. The Ministry of Finance has issued guidance on this point as follows for incoming royalty payments: "a royalty in the sense of a tax treaty is, whatever that particular treaty defines as a royalty''.

The absence of a tax on outgoing royalties, in combination with the often zero rated royalty income based on the Dutch tax treaty network, obviously makes the use of Dutch royalty conduit companies very attractive. Even the largest multinationals of the world therefore use Dutch conduit entities to save themselves considerable amounts of foreign withholding taxes. In addition, this 'Holland routing' of royalty income allows them to transfer part of their earnings capacity to tax haven locations, even with all the transfer pricing restrictions in place in today's tax world. After all, if intangibles are owned by tax haven companies, no transfer pricing rule will forbid any taxpayer to make that jurisdiction the final destination of the payments he will receive from the exploitation of such intangibles. And the preferred way to do so tax efficiently is via the Netherlands. So even if royalty income would be only 10% of the total of the four big money flows in the world that are treated separately for tax purposes (dividends, capital gains, royalties and interest), there still is an astonishing monthly royalty flow via the Netherlands of €40bn. The immanent double count (what comes in usually also goes out) has already been eliminated from this calculation.

A closer look at royalties in a tax sense

Royalties, for the application of tax laws and tax treaties, are not only payments for the use of intellectual property rights (patents, author's rights, trade marks etc.) but also consist of cross-border payments for:

  • operational leases of moveable business assets (including ships and aircrafts);
  • consultancy (of any kind);
  • technical services fees; and
  • management fees.

As a consequence, such payments are subject to rather steep withholding taxes usually between 25% and 40%. Please note that the withholding tax is levied from the gross payment. In the absence of a tax treaty, therefore, the withholding tax might well be close to 100% of the profits which the enterprise realises: there is no way in which costs and expenses might be deducted from the royalty payment before the withholding tax is charged.

Even if a tax treaty would reduce the withholding tax rate on a given royalty payment to, say, 10%, this might still imply an effective tax rate which is much higher than the corporate income tax rate of the multinational group in its home country: if the net pretax profit on the transaction would be 25% after deduction of the expenses incurred in the home country to earn the foreign royalty, a 10% withholding tax rate equals a 40% income tax rate. If a country levies less than 40% income tax, like most countries do, this calculation implies that the taxpayer will not be able to fully credit the foreign withholding tax against his corporate income tax. Countries never give foreign tax back: the maximum reduction in home country corporate income tax is the home country tax on the foreign income. If the home country tax is, say, 30%, and the net margin on the foreign income is 25%, the taxpayer may only use a 7.5% tax credit. So even with foreign withholding tax rates that have been reduced to 10%, as is the case under most tax treaties between countries which levy a royalty tax, it makes sense to interpose the Netherlands in the royalty loop since the tax treaty of that country with the Netherlands will usually provide for 0% royalty tax. After all, the Netherlands does not levy such a tax, so in the bilateral treaty negotiations, treaty partners are usually willing to reduce their withholding tax rate, for Dutch taxpayers, to nil as well. If the rate cannot go down to 0% because the other country is afraid that this might cause discussions with its other tax treaty partners, the Dutch treaty negotiators have often found ways to still reduce the withholding to zero, even though the official withholding tax rate is a positive number. Two basic methods have successfully been used by Dutch treaty negotiators in the past:

  1. Trimming the definition of what constitutes a royalty under the treaty, so many payments no longer qualify as a royalty in the sense of that tax treaty and are therefore no longer subject to the withholding tax.
  2. Creating a special article in the Protocol to the treaty with the Netherlands which says: "the official rate of article 12 will not be applied if and as long as the Netherlands does not levy a royalty withholding tax itself ''.

The royalty articles in the Dutch tax treaties therefore differ very markedly from similar articles in tax treaties between countries which levy a royalty tax themselves and it pays to study the Dutch ones very closely, since they will often lead to zero foreign withholding tax even if the treaty itself mentions a 5% or 10% nominal rate!

The 'traditional' Dutch royalty conduit entity

The above explains why inserting a legal entity in the Netherlands in a corporate money flow which consists of royalties in an international tax sense, (within a multinational group itself or from third party customers), brings substantial withholding tax savings to the recipient. Just to reiterate:

  1. A Dutch entity which invoices royalties as defined in tax laws and tax treaties, may rely on the Dutch tax treaty network, which is very favourable in comparison to the tax treaty network of most other countries with regards to reducing foreign royalty withholding tax.
  2. Once the royalties are inside the Netherlands, free or almost free from foreign royalty withholding taxes, the fact that the Netherlands does not have a royalty withholding tax itself once again plays a crucial role in the tax planning: the royalties can now be paid onwards from the Dutch company to an 'ultimate beneficial owner' in any jurisdiction, including a tax haven. The Dutch tax authorities show no interest at all in the destination of the outgoing royalty payments: they can't charge any tax on the flow, so they usually do not even ask questions.

These features have caused the Netherlands to host many hundreds, if not thousands, of 'royalty conduit' companies. The traditional set-up for these structures was always as follows:

Step 1: The foreign multinational sets up a Dutch royalty conduit subsidiary.

Step 2: The Dutch entity is contractually allowed to charge 'royalties' to group companies or third party customers, against an obligation to pay a high percentage (say 95%) of its receipts onwards, also as 'royalties', to another group entity (often located in a tax haven). This is done by splitting the contracts which give rise to 'royalty' income into two mirroring parts: in the case of cross-border leasing, the Dutch entity enters into a master lease agreement with the owner of the moveable asset (computers, slot-machines, trucks, as the case may be) and at the same time it enters into sub-lease agreements with the end customers (inside the multinational group or outside). In a licensing of intangibles case, the Dutch entity will normally obtain an exploitation license from the IP owner in the group and offer user-licenses to its customers (inside the group or outside).

Step 3: Because the Dutch entity only sends out a relatively small number of invoices per month, it does not really require any personnel or office space: the company can easily be managed by a professional service organisation, of which the Netherlands has many, which will give domicile to several of such entities owned by different customers. These 'trust companies' are appointed as statutory directors of the entities they manage in addition to the directors which the multinational group itself will appoint to ensure 'control' and they also take care of the invoicing, the bookkeeping, the preparation of the annual accounts and the filing of the corporate income tax return, if the group does not want to do so itself. The trust companies charge their assistance on fixed fee basis for the domicile element and the directors' fees, plus a fee per hour for any real activities they have to perform, such as organising directors' meetings for 'substance' reasons, keeping the books, creating the annual accounts etc. High-level legal and tax advice is obtained from third parties, usually the legal and tax advisers appointed by the parent company in the group.

Dutch 'anti-letterbox company rules' per September 1, 2006

Many of the Dutch entities which serve as royalty conduits for the multinational group of which they form part, used to have little or no 'substance' or 'nexus' at all. In the past (before new rules were introduced from September 1, 2006 onwards), the directors were often foreign, the bookkeeping and the preparation of annual accounts were done elsewhere in the group, outside the Netherlands, so the Dutch entity was often in fact a fairly empty legal shell. But it still qualified as a Dutch resident entity under Dutch tax law and consequently also under the Dutch tax treaties. But although foreign tax authorities are in principle allowed to attack such 'substance-less' Dutch conduits on the grounds that such entities are not the beneficial owners of the income they receive, which is generally also a tax treaty requirement, in addition to the Dutch residency requirement, it is difficult for them to prove this, so in practice they often do not bother (exceptions noted).

Because royalty withholding taxes are also applicable to most 'royalty' payments between legal entities in EU countries, despite an EU directive which aimed at the contrary but was overly restrictive, over the years the European Commission received many complaints from governments in EU countries about these Dutch 'letterbox' entities which cost them substantial withholding tax money. On the basis of these complaints, The European Commission decided in 2000 to force the Dutch Ministry of Finance to do something about the situation. In early 2001, new conduit company rules were therefore enacted in the Netherlands, mainly for interest conduit companies with a note that these new rules would also apply mutatis mutandis to royalty conduit entities. However, a transition period of five years was granted for 'existing situations', which in practice meant that only as of September 1, 2006, Dutch interest and royalty conduit companies would come to fall under a strict new set of rules. As mentioned in the introduction, we will leave interest conduit entities out of the discussion and only deal with royalty conduits.

Any Dutch royalty conduit entity which from September 1, 2006 onwards could still be considered a 'letterbox', would risk an international exchange of tax information: the Dutch tax authorities committed themselves to Brussels that if they encountered a Dutch conduit entity which had not adapted to the new standards, they would write an official letter to the tax authorities of the countries where the royalties originated that the Dutch entity which contractually received the royalties could not be considered the so-called beneficial owner of the royalties. The foreign country would on that basis not have to allow a reduction of its royalty withholding tax rate, despite the fact that the Dutch revenue service might have issued a so-called residency certificate for that entity at an earlier stage. Such an international exchange of information, coming from the Dutch revenue service, could cause total havoc, of course, because the foreign tax authorities would consider such a letter a reason for a tax audit and they would certainly go back in time (usually five years) to assess the withholding taxes they missed out on in previous years, including fines and interest.

But if the Dutch entity met several new 'substance' tests, no such international information exchange would take place. Two forms of substance requirements were introduced:

  1. 'Legal substance':

    1. At least 50% of the directors of the Dutch entity should be Dutch residents (foreign nationals are therefore not excluded as long as they reside in the Netherlands);
    2. The directors should have a proper understanding, by education and/or experience, of basic company law aspects of running a Dutch entity, understand basic business economics and have an adequate understanding of contract law, in order to properly manage the Dutch entity;
    3. The directors should take their decisions in the interest of the Dutch entity which they manage and not rely solely on instructions from the shareholder; and
    4. The bookkeeping and annual accounting of the Dutch entity should be done in the Netherlands and not elsewhere in the group.

  2. 'Economical substance':

    1. The Dutch entity must run real business risks such as debtors' risks, staffing risks and financial risks (e.g., currency risks);
    2. The financial risk requirements implies that the company must use 'substantial' equity to acquire the rights for which it charges a royalty fee; this equity must not only be at risk in theory, but the taxpayer should be able to demonstrate that the risks it runs are real and could lead to the loss of its formal capital and retained earnings with the actual agreements it has entered into with the IP owner and/or its customers;
    3. The Dutch entity must be able to show that the margin it earns between its royalty charges to customers on the one hand and its royalty payments to the ultimate right holder on the other hand, is 'at arm's length' i.e., in line with what a Dutch entity which would not be related to the rights holder or the royalty payors would earn from similar economical activities, taking into account similar contracts and cost and risk levels; and d) This 'at arm's length' criterion requires the group to be able to show a transfer pricing report to the Dutch tax authorities which contains a benchmark study. Without this, the risk of an international exchange of information increases substantially, including the potential very adverse tax effects mentioned above.

The Dutch tax authorities, in their compliance discussions with the European Commission in 2000, have taken it upon themselves to regularly audit all Dutch royalty conduit companies which are covered by the new rules, to check if the above substance requirements are met. They will do so either upon these entities filing their annual corporate income tax return or upon their (annual) request for a so-called 'residency certificate', a declaration by the Dutch tax authorities that the Dutch entity qualifies as a resident of the Netherlands under the tax treaty between the Netherlands and the country of the royalty payor. These residency certificates are vital in any royalty conduit concept: the payor of the royalties must keep this document in his administration to prove that he was right in applying the reduced withholding tax rate under the tax treaty with the Netherlands.

So far there has not been an increase in Dutch tax audits of conduit entities, but it may be expected that Brussels will one day ask the question to the Dutch Ministry of Finance: "What have you done to fulfill our agreement back in 2000 to get rid of these annoying Dutch 'letterbox' entities?" If that question is raised, the Netherlands will feel compelled to act as promised and a tsunami of tax audits of conduit entities can be expected. After all, the revenue service can go back five years in time plus often another year or two if extensions for the filing of corporate income tax returns were granted which is standard practice in the Netherlands. So a tax audit in 2011 could well go back to 2004.

The results of this expected increased tax audit activity will not offer a pretty sight. Many traditional Dutch trust companies have not informed their clients sufficiently against the new rules, so many royalty conduit structures in place today still do not meet the new substance requirements. The usual problems are: too many foreign directors; preparation of the annual accounts of the Dutch entity still abroad (even though the books are kept in the Netherlands, but that is not enough), and last but not least, the existence of management agreements between the trust company and the (ultimate) beneficial owner, which disclose that the Dutch entity will only act upon instructions. Such agreements, although almost 'killing' from a tax viewpoint, are still in high demand since the Dutch trust companies invariably suggests them, to limit their directors' liabilities.

Each of the above flaws, but certainly a combination of them, could bring the roof down on a tax audit. The new rules are unambiguous in this respect.

Interestingly, and at the time unexpectedly, these new rules, as laid down in a new article 8b of the Dutch Corporate Income Tax Act, were restricted to (interest and) royalty conduit entities which form part of the same group as where the royalties come from or are paid to (defined as 33.3% or more common shareholdership). So only if the royalty conduit entity is related to either the recipient of the royalties and/or the payors thereof, would the new rules apply. The tax legislator apparently and deliberately disregarded independent royalty conduit entities! This feature has some wide ranging consequences which are easily overlooked. Owning the Dutch entity which collects a multinational's royalties obviously has control benefits: the shareholder appoints the directors of the entity and can oust them if needed. This benefit is limited however, due to the legal substance provision above that the Dutch directors should not act on shareholder instructions.

Owning the Dutch entity also implies that one could combine the Dutch royalty conduit business with other businesses which the group may have in the Netherlands. In such a case there will be no need to appoint outside directors and to arrange for a separate legal address with a 'trust company'. Many of the larger multinationals operate 'in-house' Dutch royalty conduits, often in combination with intra-group financing activities and group holding structures.

Owning the Dutch entity also implies that in case of difficulties, of whatever kind, one can quickly mend the situation, either by appointing new Dutch directors or by taking over management of the company from within the group. Again, one must be careful with this since it could violate the legal substance requirements discussed above. But as a short-term solution this will work.

However, if an internationally operating company owns the Dutch conduit entity, as is the traditional set-up for such conduits, the group does not only risk the above mentioned international exchange of tax information, there are several other tax disadvantages under the new rules, which are becoming increasingly burdensome:

  1. Both the royalties charged to the customers of the Dutch entity (if these customers are group member companies) and the royalties paid by the Dutch entity to the rights holder are subject to scrutiny by tax authorities because they fall under the 'transfer pricing' rules. In fact, the taxpayer must prove himself right these days, as regards intercompany payments of whatever kind, which he can only do via a transfer pricing study with benchmark information. This is an expensive and time consuming exercise which will periodically need to be repeated/updated.
  2. The new Dutch tax rules apply to 'affiliated conduit companies'. This means that the risk of an international exchange of information is always present, even if one believes to have followed the rules. This risk calls for the conclusion of an 'advance tax ruling' with the Dutch tax authorities, another expensive exercise which needs to be repeated every four years. Without such a ruling, one may be sitting on a ticking time bomb without knowing it. (iii) Owning an entity in a foreign jurisdiction is always relatively expensive: rules constantly change, whether they are accounting rules, or legal rules (company law; contract law; or compliance laws) not to mention tax rules. As soon as this happens, one needs (expensive) professional outside advice to adapt to the new situation; this usually also requires the foreign owner to send executives over to the Netherlands. For mid-sized and smaller multinational enterprises this outlook is far from attractive: management time is already scarce because only a few people deal with 'everything' and one usually does not have any expertise 'in-house' to manage these discussions abroad and to make the right decisions on how to adapt to the new rules. The fees to be paid upon a restructuring, often required to adapt to new rules, are very substantial because one needs senior international legal and tax advisers to make sure a Dutch solution does not trigger problems elsewhere in the group; these people, as we all know, charge fees in excess of €400 per hour.
  3. The usual charges from 'fiduciary services' companies to host a Dutch BV for a foreign client are rather steep anyway. Under the substance rules disclosed above, one needs Dutch directors, Dutch bookkeeping and annual accounting and Dutch tax assistance; this does not come cheaply. Dutch royalty conduit entities also tend to become more expensive over time. Tax audits, central bank audits, statutory audits of the books and records under the Dutch accounting standards will not take place in the first couple of years but later on (but often with retrospective effect such as a tax audit) which also calls for professional assistance, which again attracts high fees.
  4. Incorporating a Dutch legal entity from a foreign shareholder is a time consuming process due to the shareholder scrutiny which the Dutch Ministry of Justice undertakes before the Dutch entity can be incorporated. Many forms must be filed and many signatures must be obtained before the new Dutch entity sees the light of day. A three-month incorporation period is not unusual. If the new BV is set up from within the Netherlands, by a Dutch shareholder, the process takes just two weeks.

Why own the Dutch conduit entity?

All the above disadvantages are overcome if one would use a Dutch royalty conduit entity which is owned by a third party. A third party owned royalty conduit entity will have just one source of income, from which it must pay all its expenses and which must cover all of its business risk: a pre-agreed percentage of the royalty flow which it receives and pays onwards. This margin is negotiable and is usually contractually arranged in the form of a declining percentage as income increases, for instance:

  • 4% on the first €500,000 of annual royalty receipts;
  • 3.5% on the next €1m;
  • 3% on any additional royalty income up to €5m; and
  • 2.5% on any excess royalty income.

Still, most traditional Dutch trust companies will not engage in this potential new line of business, although in theory they could. This alternative business model would force them to take business risks (other than the usual staffing risk for service providers), which they find hard to quantify and translate into a gross margin on the income they help push forward. These service providers are happy with providing legal, treasury and accounting services against hourly fees and do not normally want to engage in the type of risks which other businesses encounter every day.

But some Dutch providers have taken an entirely different view and have engaged in this new concept, some even as early as 1999, before the new tax rules were published: they own and manage the Dutch conduit entities themselves and put them at the disposal of their foreign clients. In fact, they are 'renting out' Dutch legal entities for royalty conduit purposes. The new tax rules, per September 1, 2006, have obviously given these novel structures a considerable boost, because they can now offer several very substantial additional benefits:

  1. The Dutch conduit entity is not affiliated to either the companies from which they obtain their royalty income, nor to the party to which they pay their royalties onwards; this eliminates the need for the rather expensive transfer pricing studies, benchmark reports and advance tax rulings (which all need to be renewed every four years).
  2. The new Dutch tax rules are legally limited to royalty conduit entities which are affiliated to either the payor of the royalties or the ultimate recipient (or both). This implies that the international exchange of information risk, whereby the Dutch tax authorities actively provide information to foreign revenue services, does not apply to third party owned Dutch conduit structures.
  3. Not only the royalties charged but also the price which the multinational enterprise agrees to pay to the Dutch conduit entity is a third party price by definition; tax authorities have to accept this price because they can only audit 'intercompany' prices, not third party prices.
  4. Smaller and mid-sized multinational enterprises will benefit substantially from the fact that when the Dutch conduit company is not owned by them, they do not risk all kinds of unexpected expenses for outside advice needed by their conduit entity: all of this is taken care of via the commission payment, the only expense they will incur from the conduit entity. There will be no need to come over to the Netherlands from time to time to discuss the impact of any changes in the Dutch legal, tax, accounting or compliance rules applicable to the conduit because that is the owner's worry and any fees incurred to adapt to new rules are for the account of the owner too: his only income is his gross commission; all expenses and risks are for his account.
  5. The tax authorities of the country where the royalties originate, cannot 'look through' the Dutch entity to find out where the royalties ultimately end up, because there is no transfer pricing information available from their Dutch peers. Independent conduit companies have no obligation to set up and maintain the special transfer pricing books on what their dealings are with the party from which they obtained the primary right to charge royalties, as this is by definition an unrelated party.
  6. Setting up a royalty structure in the form of a third party owned Dutch conduit entity can be done without most of the ongoing 'compliance' necessities which would apply if one were to set up a Dutch conduit company within the group, from outside the Netherlands. Third party owned Dutch conduit companies are, for instance, not covered by the Dutch central bank rules for the 'supervision of trust companies'. A trust company, in the legal definition of these rules, is a provider which hosts and manages legal entities owned by others. Providers who manage their own legal entities consequently have no reporting obligations in this area which gives them very considerable additional flexibility.
  7. Setting up a Dutch conduit in the traditional way is not only a slow exercise (due to all kinds of compliance rules), but also an expensive one. A Dutch BV requires €18,000 of initial capital, which is normally depleted within weeks because of the incorporation expenses (notary fees plus initial legal fees to split the contracts in two parts, plus initial fees for the tax structuring elements) plus the advance tax ruling expenses, which must include a transfer pricing report and a benchmark study. If one uses a third party owned Dutch entity, these expenses are partly non-existent so also not payable indirectly (the advance tax ruling is not needed so a transfer pricing report with an underlying benchmark study is not needed either) and partly for the risk and account of the Dutch owner and included in the handling fee or gross margin in the performance agreement (the owner earns his expense back over time, not immediately, another reason why he will want to make sure the structure runs perfectly).

Switching from an existing traditional royalty conduit set-up to the more modern version

Interestingly, switching from an existing traditional royalty conduit set-up to a third party owned royalty conduit solution can be relatively easy: the fiduciary service provider who offers third party royalty conduit solutions can purchase the existing Dutch royalty conduit entity from his client so that the business can continue with the same legal entity (no need to change contracts and bank accounts, the two most vital practical considerations). The only elements that will change are minor: the company's business address and its directors. In addition there will be an (undisclosed) agreement with the rights holder as regards the financial compensation which the Dutch entity may charge for its conduit activities, usually in the form of the 'sliding scale' commission percentages shown in the example above.

Final observations

Larger multinational enterprises, who usually combine their Dutch royalty conduit efforts with other central group functions in one Dutch legal entity, may not benefit from switching to a third party owned Dutch royalty conduit to collect their worldwide royalty income, although the above might have brought news to them as well. But mid-sized and smaller multinational enterprises should in my view certainly rethink their position if they operate a traditional royalty conduit company in the Netherlands. They will be able to obtain a far better tax position by no longer owning their Dutch royalty conduit entity themselves but renting it. If they are considering setting up such a company, my advice again is to think twice and consider and compare both alternatives. In a new set-up, a third party owned Dutch royalty conduit is substantially cheaper because the service provider advances not only the capital of the entity but also the fees for the tax and legal structuring, the domicile expenses and the directors fees. If someone wants to set up a group owned Dutch royalty conduit, he must count with usual practice that these expenses will need to be paid up-front, before the Dutch entity starts to bring any revenues. This used to deter small and mid-sized multinational companies from setting up a Dutch royalty conduit in the past, but with a third party owned Dutch entity, this financial hurdle is out of the way too.

One service provider in the Netherlands which has been offering third party owned royalty conduit structures and has gained considerable experience with these structures is the Merlyn Fiduciary Services Group, our sister division. It has successfully offered third party royalty conduit solutions to clients since 1999 and is experiencing substantial additional demand for this type of service since the introduction of the new Dutch tax rules, effective September 1, 2006. 'Merlyn Fiduciary' (e-mail: astrid@merlyn.eu) will gladly offer further explanations and suggestions on a 'real case' basis of what the gross margin on the royalty flow through could look like (the only expenses, spread over time, which the client will pay). This could either be for interested readers who wish to set up a Dutch royalty conduit company 'new style' or to readers who already operate a Dutch royalty conduit entity of their own and may now, based on the above, consider a switch in the ownership of their Dutch entity to a third-party, all else remaining unchanged, given the many tax and operational advantages which such a switch may bring.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.