Furthermore, non-operational cooperatives are now in principle subject to Dutch dividend withholding tax. Any other allocation of the payment would in principle be void in as far as it deviates from the aforementioned allocation, as a result of which such payment would be undue and could be reclaimed by the BV (or by a bankruptcy trustee on its behalf in case of a bankruptcy). Formal solvency test to protect creditors The purpose of formalising the solvency test is to protect creditors by clearly linking the timing and amount of any distribution to the economic reality facing the company. amount of dividend withholding tax withheld by the dividend paying company. If dividends are paid to non-resident shareholders, tax is required to be withheld at 20%, plus applicable surcharge and cess, subject to tax treaty benefits where a lower rate can be availed. Consumentengoederen, Retail, Food & Beverages. Reserves that have to be maintained by virtue of the articles of association within the meaning of section 2:216 DCC are rare and can, if desired, in almost all cases be removed by means of amending the articles of association of a BV (provided that any requisite approvals and consents are granted). The profits of a company can be distributed to the shareholders in the form of dividends, which are subject to taxation.But the dividends can also be invested, if stocks are attractive with the certainty of generating more incomes.Our Dutch accountants are able to provide you with complete information about the dividends, the taxes and the investments you should consider in the Netherlands. All Rights Reserved. Subscribe and stay up to date with the latest legal news, information and events... Norton Rose Fulbright © 2021. ... test to determine if dividends can be paid in which corporation may pay a dividend if it has current profits even if there is a deficit for the prior year. By default, only the nominal amount that has actually been paid on each share will be taken into account in calculating the amount that will be paid as a distribution on each share (in case of multiple shareholders). Based on the Tax Treaty between The Netherlands and South Africa, 5% Dutch dividend withholding tax was withheld. Shareholder X holds 100 shares with a nominal value of EUR 1 each, which have not been paid up. investment funds resident in a non-treaty country investing directly in Netherlands). When certain debts cannot be paid after a dividend payment, directors are not seldom held liable by creditors. It is however possible to deviate from the above mentioned statutory allocation by providing for a different allocation in the articles of association of the BV. The payment of dividends follows immediately upon approval of the dividend distribution by the General Meeting of the EIF. If a BV would nonetheless not be able to pursue the payment of its due and payable (short-term) debts after making the proposed distribution, the managing directors who at the time of the distribution (payment) knew or should have reasonably foreseen this situation, are jointly and severally liable towards the BV to make up the deficit caused by the relevant distribution (including statutory interest). The management board may in its sole discretion determine on which documentation its assessment will be based. Shelly is verbonden aan het team Vastgoed en houdt zich bezig met verschillende huurrechtelijke vraagstukken. Two tests need to be applied to distributions: the balance sheet test and the distribution test. Moreover, directors are considered to be jointly and severally liable for the deficit resulting from the dividend distribution if  the company is unable to pay its debts when they fall due after the management board effectuates a distribution. The distribution test is an exclusive authority/duty of the management board as well as the only ground for the management board to refuse its approval of a proposed distribution in accordance with section 2:216 paragraph 2 DCC. The management board of a BV may only refuse to approve a proposed distribution if it knows or should reasonably know that the BV cannot pursue the payment of its due and payable (short-term) debts after making the proposed distribution. One of the changes is that directors of private companies with limited liability (besloten vennootschappen met beperkte aanprakelijkheid or BV's) may only distribute dividends if they 'know or should reasonably anticipate the company will be able to pay its immediately due and payable debts'. If a managing director can prove that he cannot be blamed for the BV making the distribution and that he/she was not negligent in taking measures to avoid the adverse effects, it is possible to exculpate oneself from this liability. Although it remains important to duly review if mandatory reserves exist when making distributions, they usually do not have to form an obstacle. Dutch law provides for anti-dividend stripping rules under which a reduction of the Dutch dividend withholding tax rate or the creditability of withholding tax is denied. distribution made to shareholders when a corporation liquidates. In 2013, the BV made a dividend distribution to the South African entity. If a BV nevertheless does have to maintain reserves by virtue of law and/or its articles of association and the general meeting resolves to distribute an amount which would result in the BV’s equity no longer exceeding its relevant reserves, the resolution would in principle be void in as far as the distribution affects such reserves. The subjective test is met if the foreign shareholder is interposed to avoid the Dutch dividend withholding tax. As a practical example of how this works out, say there would be two shareholders in a BV: shareholder A and shareholder X. if a related party grants a loan with respect to: Profit distributions or repayment of capital to a related company or related person; One of the changes is that directors of private companies with limited liability (. ) Deduction of interest may also be denied e.g. The exemption of Dutch dividend withholding tax at source does however not apply if: Our lawyers in the Netherlands can provide complete information about tax compliance for any Dutch company. In the purchase agreement, the buyers and X BV agr… Nevertheless, the general meeting can still only resolve to make a distribution in as far as the BV’s equity exceeds the reserves that have to be maintained by virtue of law and/or the articles of association. This altered dividend payment test also has consequences for directors. Of je nu op zoek bent naar een stage, net bent afgestudeerd of toe bent aan de volgende stap in je carrière. It is possible for a director to exculpate himself by proving he is not to blame for the dividend payment or has taken measures to prevent the negative effects. Publication |  Distributions - flexibility. The company that issues the dividend withholds the dividend tax and pays this to the Dutch Tax and Customs Administration. We use cookies to deliver our online services. Therefore, it could be possible that the articles of association of a BV contain certain provisions that are no longer in force because they are overruled by the mandatory ‘new’ BV laws. A REIT declares a consent dividend by … Once a distribution resolution has been duly adopted and approved and as such the total amount to be distributed has been determined, the BV can carry out the corresponding payment. Whether or not directors should approve a dividend distribution depends on the circumstances at hand whereby a director may not completely rely on the advice of an expert such as an accountant. Although special circumstances may occur, it should be sufficient to look one year ahead. Werken bij Van Doorne is werken aan je eigen ontwikkeling. ‘co-op’) in a business-driven structure, a widely used vehicle for holding and financing activities, although anti-abuse rules are applicable. If any managing director has already made payments to the BV to make up for any deficit, the beneficiary will have to make its relevant payment to (reimburse) this managing director. Profit or surplus, it should be sufficient to look one year ahead is the actual financial of. Liable by creditors duly review if mandatory reserves exist when making distributions, this does not to... By distributing all equity as well as certain borrowed capital ) surplus, dividend distribution test netherlands... 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