Groups that decide to move a company to the Netherlands rarely mean the same thing by the phrase. Some intend to relocate the board and leave the foreign corporate form intact; some want the legal entity itself to become Dutch; some simply want a Dutch company to end up owning the business. These are not three variants of one project. They differ in what happens to the legal person, in what the departure state may tax on the way out, and in what has to be renegotiated with counterparties, employees, lenders and regulators. Choosing between them is the first substantive decision, and it is usually taken far too late, after a completion date has already been promised internally.
Three routes with different legal characters
The first route transfers the place of effective management while the company remains incorporated abroad. The legal person is untouched: the same registration number, the same articles, the same contracts. Only the location of central management and control changes, and with it, potentially, tax residence. The second is a cross-border conversion inside the European Union or the wider European Economic Area, in which the entity changes the law governing it and re-emerges as a BV or an NV with legal continuity preserved. The third is not a migration at all. A Dutch entity is incorporated and the business, or the shares in the operating companies, is contributed or sold into it; the foreign entity is then retained for other purposes or wound up.
Each route carries a different evidential burden. The seat transfer is the lightest to execute and the heaviest to defend, because nothing on paper changes and everything depends on facts. The conversion is the heaviest to execute and the cleanest to hold. The contribution route is a transaction, with the diligence and consent mechanics that implies, and the only one of the three that lets a group leave history behind.
Moving the seat and keeping the foreign form
Dutch law treats entities incorporated under Dutch law as resident here: article 2, paragraph 5 of the Wet op de vennootschapsbelasting 1969 deems a body incorporated under Dutch law to be established in the Netherlands for the purposes of that act, save for the provisions it expressly carves out. For a foreign entity the question is answered by article 4 of the Algemene wet inzake rijksbelastingen, under which where a body is established is judged according to the circumstances. That is a factual test, satisfied by board composition, by where decisions are actually deliberated, by who holds bank mandates and by the quality of the minutes. It is not satisfied by an address. Where the departure state continues to assert residence, the resulting dual residence falls to be resolved under the applicable treaty, and article 4 of the Multilateral Instrument replaces the old tie-breaker with an obligation on the competent authorities to endeavour to settle residence by mutual agreement, having regard to the place of effective management, the place of incorporation and any other relevant factors; absent such agreement, the company is entitled to no relief or exemption under the treaty beyond what those authorities themselves allow. Whether that article reaches a given treaty is a question of the two deposited positions rather than of the Instrument itself, because a party may reserve the whole of it, in which case the original tie-breaker stands.
Two further constraints deserve attention before this route is chosen. The company law of the state of incorporation may not tolerate management abroad; some systems treat it as a ground for dissolution or as a trigger for exit taxation in itself. And the group is left administering two legal systems indefinitely: Dutch tax and reporting obligations sitting on top of foreign corporate law and foreign filings. Once resident here, the company falls within Dutch corporate income tax, which article 22 of that act sets at 19 per cent on the first EUR 200,000 of the taxable amount and at EUR 38,000 plus 25.8 per cent above it, and its distributions within the dividend withholding tax that article 5 of the Wet op de dividendbelasting 1965 fixes at 15 per cent of the proceeds, subject to treaty reductions and EU exemptions that are themselves policed by anti-abuse rules.
Cross-border conversion inside the European Union or the EEA
A conversion changes the applicable company law without interrupting the legal person. Directive (EU) 2019/2121 defines it as an operation by which a company converts the legal form under which it is registered in the departure Member State into a form of the destination Member State and transfers at least its registered office there, without being dissolved or wound up or going into liquidation and while retaining its legal personality. There is no liquidation, no transfer of assets and no novation of contracts as a matter of law: the same entity continues under a Dutch form. The Directive splits the file in two, leaving the law of the departure state to govern the procedures and formalities up to the pre-conversion certificate and the law of the destination state those that follow its receipt. Its transposition deadline was 31 January 2023; the Dutch implementing act took effect, seven months late, on 1 September 2023.
What it inserted is title 7a of Book 2 of the Civil Code, which covers conversions of a Dutch NV or BV into a capital company governed by the law of another EU or EEA state and the reverse, and states that the conversion does not end the existence of the company. For a company arriving here, the procedures and formalities up to the pre-conversion certificate are governed by the law of its departure state, so the draft terms, the reports, the general meeting and the protection of members and creditors are matters for that law. The Directive sets common rules every state must respect, among them approval by the general meeting with a majority that each state fixes at not less than two thirds and not more than 90 per cent of the votes attached to the shares or to the subscribed capital represented at the meeting, a right to dispose of their shares for adequate cash compensation for at least the members who voted against, which a state may extend to other members, and a right for creditors dissatisfied with the safeguards offered in the draft terms to apply to the appropriate administrative or judicial authority, within three months of their disclosure, for adequate safeguards, provided they can credibly show that the conversion puts the satisfaction of their claims at stake and that they have not obtained adequate safeguards from the company.
Title 7a sets out its own version of those earlier steps for the reverse case, a Dutch NV or BV converting out of the Netherlands, and so for the return journey discussed at the end of this note. It requires a conversion proposal, a written explanation in two parts for shareholders and employees, an accountant’s statement on the compensation that article 335i offers to shareholders who voted against, to every holder of non-voting shares and to the holders of depositary receipts it treats as shareholders, and a notice inviting shareholders, creditors and the works council, or the employees where there is none, to submit comments up to five working days before the meeting; the title allows the explanation and the accountant’s statement to be dispensed with in the cases it defines. The proposal is filed at the commercial register and announced in the Staatscourant; the general meeting cannot resolve on it until a month after that announcement, and needs a majority of at least two thirds of the votes cast. Creditors who ask for it must be given security unless they already have sufficient safeguards or the company’s financial position after the conversion offers no less assurance than before, and they may oppose the conversion in court for three months from the announcement.
On the inbound leg a deed before a Dutch civil-law notary is required, and before executing it the notary obtains from the register the pre-conversion certificate issued by the competent authority of the departure state, which he must accept as conclusive proof that the procedures and formalities there were correctly carried out. Where the company becomes an NV, an accountant’s statement on its equity is attached to the deed as article 335m requires, and on any conversion into a Dutch company the way employee participation is worked out is laid down in the articles. The conversion takes effect the day after the deed, and the converted company has eight days to register it with the KVK.
A UBO filing follows, into a register that is no longer open to the general public. The Court of Justice held on 22 November 2022, in joined cases C-37/20 and C-601/20, that the amendment obliging Member States to make beneficial ownership information accessible in all cases to any member of the public was invalid. Among those that article 22a of the Handelsregisterwet 2007 now allows to consult the data it specifies are institutions carrying out the client due diligence that the anti-money-laundering or trust-office legislation requires of them, institutions complying with the financial-transaction obligations of the sanctions legislation and, on request, categories of persons designated by decree who show a demonstrable legitimate interest connected with preventing or combating money laundering, related predicate offences or terrorist financing, while the financial intelligence unit and other authorities have their own access under article 28; where a request of that last kind succeeds, the beneficial owner is told of it and of the purpose it serves.
The destination form is chosen in the same breath and should not default to a BV out of habit. On this route the choice lies between a BV and an NV, the two forms title 7a converts into; a cooperatie or a stichting, which solve different governance and membership problems, come into play where a new Dutch entity is incorporated instead, as we set out in our note on choosing the Dutch vehicle. What groups most often miss is that continuity of the legal person does not deliver continuity of the tax base. The departure state will generally treat the conversion as a realization event, and the Netherlands will open the file at a value it is entitled to test.
Incorporating a Dutch entity and contributing the business
Where the foreign entity carries litigation, legacy tax exposure or a shareholder register that nobody wishes to inherit, the contribution route is the honest answer. It is executed as a transaction: a valuation, a contribution in kind with the applicable statutory formalities, then either an asset-by-asset transfer or a transfer as a going concern, which article 37d of the Wet op de omzetbelasting 1968 treats as no supply of goods or services at all where a totality of assets or part of one passes, whether or not for consideration and including by way of contribution to a company, with the transferee stepping into the transferor’s position unless ministerial regulation provides otherwise.
Where Dutch immovable property is involved there is real estate transfer tax, which article 14 of the Wet op belastingen van rechtsverkeer sets at a general rate of 10.4 per cent and at 8 per cent for a dwelling. Its 2 per cent own-home rate calls for a natural person who declares beforehand, clearly and unconditionally, that he will use the dwelling as his main residence other than temporarily, which is not a route a contributing company can take; the article fixes further rates of its own for the other cases it lists. The same tax may also reach the acquisition of shares in a property-owning company, because article 4 treats such shares as immovable property where the company’s assets, at the time of acquisition or at any time in the preceding year, consist or consisted largely of immovable property, at least 30 per cent of them situated in the Netherlands, where that property taken as a whole serves or served wholly or mainly the acquiring, disposing of or exploiting of immovable property, and where the acquirer, alone or together with the related parties that article counts, reaches the interest it sets, which for a corporate acquirer is at least one third.
Intra-group transfers are priced at arm’s length under article 8b, which sets no threshold and requires the companies to keep in their own records the material showing how the prices came about and whether they are what independent parties would have agreed. A master file and a local file follow from consolidated group revenue of at least EUR 50 million in the reporting year immediately preceding the year of the return, country-by-country reporting once that revenue reaches EUR 750 million, and the Pillar Two minimum rate of 15 per cent applies where the group had revenue of at least EUR 750 million in two of the four preceding reporting years, which is a different test from the country-by-country one and is routinely assumed to be the same.
Qualifying shareholdings contributed into the Dutch entity fall within the participation exemption, which article 13 grants to a participation as that article defines it, the commonest case being a holding of at least 5 per cent of the nominal paid-up capital, and which is mandatory and symmetric, so losses as well as gains sit outside the base. The exception is the liquidation loss: article 13d takes it out of the exemption once the participated company has been dissolved and caps it at EUR 5 million unless the conditions set out there are met. The motive, subject-to-tax and asset tests are examined in our note on the participation exemption. The cost of the route is contractual: consents, assignments, licences that do not travel, and counterparties handed a negotiating moment they did not have before.
Exit taxation in the departure state
Whichever route is taken, the departure state asks one question: what is leaving its tax net, and at what value. Inside the Union the pattern is set by Directive (EU) 2016/1164, which applies to taxpayers subject to corporate tax and which, on a transfer of tax residence, charges the market value of the assets less their value for tax purposes, except for the assets that remain effectively connected with a permanent establishment in the departure state. Payment may be deferred in instalments over five years where the destination is another Member State or an EEA state that has concluded an agreement on mutual assistance for the recovery of tax claims equivalent to Directive 2010/24/EU.
Interest may be charged, and the Directive allows a guarantee to be required where there is a demonstrable and actual risk of non-recovery, though not where the legislation of the departure state provides for recovery of the tax debt through another group member resident there. The deferral is lost if the assets or the business are sold or otherwise disposed of, if the assets, the residence or the business move on to a third country other than such an EEA state, if the taxpayer goes bankrupt or is wound up, or if it fails to honour the instalments and does not correct that within a reasonable period, which may not exceed twelve months. Around that core sit the secondary effects that cause most of the damage: trapped loss carryforwards, clawback of incentives and prior rulings, deemed distributions with their own withholding, and the loss of grandfathered positions nobody expected to have to prove.
A migration is only as clean as its opening balance sheet. If the value that left the departure state is not the value that arrives, the difference will be taxed twice, and rarely at a convenient moment.
The step-up on entry is not a matter of grace. Where the transfer is from one Member State to another, the same directive obliges the destination state to accept the value established by the departure state as the starting value of the assets for tax purposes, unless that value does not reflect market value. It is in that reservation, and not in the exit charge itself, that disputes are born, and it is the reason the two filings should be prepared as one file rather than by two advisers who never speak. The rule reaches only a transfer between Member States; for a company arriving from further afield, the opening position is worth what the file behind it can support.
Valuations and the opening position
The valuation work is the spine of the project. What is being valued has to be identified item by item: goodwill, intellectual property registered and unregistered, customer relationships, contracts in progress, inventory, receivables and provisions. The method has to be defensible on both sides of the border, prepared contemporaneously, and consistent across the departure filing, the Dutch opening position, the transfer pricing documentation and the statutory accounts. The step-up determines deductions for years, so the file supporting it will be read long after everyone involved has moved on.
The same discipline applies to the financing arrangements that come across. Interest deductibility is constrained by the earnings-stripping rule of article 15b, which disallows the net interest balance to the extent it exceeds the higher of 24.5 per cent of the profit corrected for interest, depreciation and write-downs, or EUR 1,000,000, so intra-group debt that worked in the departure state may behave differently here. Outbound interest and royalties have been within the conditional withholding tax since the Wet bronbelasting 2021 came into force on 1 January 2021, and dividends since 1 January 2024, the date on which its article 3.4a entered into force. The rate is the highest percentage in article 22 of the corporate income tax act, so 25.8 per cent, and the charge reaches sums owed by a Dutch withholding agent to a recipient related to it, where that recipient falls within one of the situations its article 2.1 sets out; one of them is a recipient established in a jurisdiction designated as low-taxed because it taxes company profits at less than 9 per cent or appears on the EU list of non-cooperative jurisdictions. Legacy flows should be tested before the move rather than after.
Contracts, employees, banking and licences
Legal continuity is not commercial continuity. Change-of-control and assignment provisions, financing covenants that specify a jurisdiction of incorporation, insurance policies, intellectual property registrations and regulated permissions all need review on the assumption that some will require consent or reapplication. Employment is its own workstream. Where a business rather than a share changes hands, article 7:663 of the Civil Code passes the rights and obligations arising from the employment contracts to the transferee by operation of law and keeps the transferor jointly and severally liable for a year for those that arose before the transfer, while article 7:664 takes pension obligations out of that automatic transfer in the cases it sets out. Then come works council consultation, payroll and wage tax registration, and social security coordination for those who genuinely relocate. Banking should be assumed to be a fresh onboarding, with scrutiny of the rationale, the source of funds and the ownership chain up to the beneficial owners.
Substance from the first day
Substance is not a remediation exercise for year two. It is the evidence that the decision-making actually moved, and the first financial year is the one that will be examined. That means a board that is resident, competent and genuinely deliberating; meetings held and minuted here with the underlying papers retained; personnel or a documented and priced outsourcing arrangement; the company’s own accounts, premises and bank mandates; and the capacity to bear the risks its transfer pricing assumes it bears. The practical standard is set out in our note on Dutch substance requirements.
Anyone contemplating an advance ruling should note what the ruling policy has said since 1 July 2019 and says in its present wording of 22 December 2023. Advance consultation on a ruling with an international character is entered into only where the requesting body forms part of a group that carries on real operating activities in the Netherlands, the so-called economic nexus, and where such activities are carried on for the account and risk of the requesting party, with sufficient relevant personnel present here at group level and with the activities fitting the body’s function within the group; that requirement does not by its nature apply where the certainty sought is simply that there is no non-resident tax liability. The same policy refuses advance consultation where saving Dutch or foreign tax is the sole or decisive reason for the transaction, where the certainty sought concerns direct transactions with entities established in states on the Dutch list of low-taxed and non-cooperative jurisdictions, and where the applicant, a director of the applicant or a beneficial owner or intermediate holding company with a direct or indirect interest of 5 per cent or more in the applicant appears on the EU sanctions list, the first two of those refusals being subject to the exceptions the policy itself defines. A ruling request is therefore also an audit of the file.
Reportability under DAC6 belongs at design stage: Directive (EU) 2018/822 gives the intermediary thirty days running from the day after the arrangement is made available for implementation or is ready for implementation, or from when its first step has been taken, whichever comes first, runs that period, for the intermediaries it defines by the aid, assistance or advice they have undertaken to provide, from the day after they provided it, and shifts the obligation to another notified intermediary or, failing that, to the relevant taxpayer where there is no intermediary or where a waiver for legal professional privilege applies.
Redomiciliation is reversible in principle and expensive in practice: article 15c of the corporate income tax act treats those assets of a company that ceases to be treated as resident in the Netherlands whose income consequently falls outside the taxable profit as disposed of at market value immediately beforehand, so the return journey is itself a realization. Those who treat the move as a legal formality discover the tax and contractual consequences in the wrong order. Those who treat it as a relocation of decision-making, evidenced from the first board meeting, do not.
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This article is informational and does not constitute tax, legal or investment advice. Each engagement is subject to scope and applicable regulation.