Tax questions for UK Ltd setting up a BV entity
We are close to moving ahead with the need to form a BV entity and fit this into our group structure. The main company is a UK Ltd.
I understand that it is usual for Netherlands-registered entities to levy a witholding tax of 15% on any dividend payments made to shareholders
We also, however, understand that in the case of the BV being wholly/substantially owned by a UK-registered legal entity (as will be the case here) an exemption from this witholding tax is usually granted by the Netherlands tax authorities. This exemption needs to be requested by the Netherlands entity making the dividend distributions (in advance of such dividend payments).
One further question – would the same apply in the case of any loan interest payable to the holding company? In other words it the UK HoldCo makes a capital loan to the BV on which it charges notional interest payments, are those interest payments subject to a withholding tax (I don’t believe so) and are those interest payments deductible expenses for NL corporate tax purposes (I think they are).
Answer:
What you are saying about the dividends is correct. In practice this means that qualifying dividends from a Dutch subsidiary to a UK Ltd. mother company, are usually not taxed.
Such interest payments are normally not subject to withholding tax (that would only be different for a low-tax jurisdiction). Interest payments from a holding to an operational entity are normally deductible expenses, correct.
You can read more about taxes here in our tax guide or more general information in the Netherlands country guide.