Why using the Dutch jurisdiction

In addition to a range of tax treaties (which underpin various tax benefits), the Netherlands is party to numerous bilateral investment protection treaties. These treaties confer the benefit of protection against nationalisation of assets by a host state through international arbitration. Access to the benefit of such treaties is often gained by merely interposing a Dutch legal entity in the group (or joint venture) structure.

Tax structuring

Proper tax structuring reduces the overall global tax burden of internationally organised groups. The extensive tax treaty network traditionally maintained by the Netherlands with a series of other countries, its membership of the European Union and the favourable Dutch tax regime for withholding tax, capital gains, income received from subsidiaries and certain other specific tax benefits are all available to foreign investors and joint venture partners. This makes the Netherlands a jurisdiction of choice for group structuring and for international joint ventures alike. In order to benefit from the Dutch tax regime applicable to all Dutch corporate entities, so-called substance rules need to be observed. This implies, amongst others, that a specific percentage of the Managing Directors must be resident in the Netherlands (regardless of their nationality). The proper implementation of the necessary requirements to qualify for tax benefits is a critical element in dealing with the chosen governance model of a joint venture, for example.

Limited liability; no piercing the corporate veil

A fundamental principle of Dutch corporate law is that shareholders in limited liability entities are almost assured that no piercing of the corporate veil will occur. Beyond the agreed contributions on shares issued, in principle shareholders will not be liable for debts of the subject entity. Exceptions to this are limited and primarily concern abuse and tort situations.

Neutral forum

Particularly where international enterprises are involved, the Netherlands is often considered a stable and neutral forum in which to base the joint venture to avoid either side having the advantage of domiciling the joint venture in its home country. The Dutch court system is reliable and functions in a transparent manner.