A renewable energy group rarely owns a single thing. It owns a set of projects, each with its own site, grid connection, permits and offtake contract, and each at a different point between development and operation. A solar park in one country and a wind farm in another share very little at the level of the asset. What they can share is an ownership structure, and the choice of where that structure sits determines how risk is separated, how debt is raised, how outside capital is admitted and how a disposal is taxed. This note sets out how such platforms are commonly organised through the Netherlands, and, as importantly, what that arrangement does not change.
Project companies and the holding above them
The building block is the project company. Each asset is held in its own entity, which owns the plant, the land rights or lease, the grid connection agreement, the construction contracts and the power purchase agreement. Nothing about the asset is shared with its neighbours. Above these project companies sits a holding company, and in a cross-border portfolio there are often intermediate holdings organised by country or by technology. The Dutch entity typically sits at or near the top of that chain.
The purpose of the layering is separation. A construction defect, an environmental claim or a contractual dispute at one project is contained within the company that owns it; it does not reach the cashflows of the others. Lenders can take security over a single project without a claim on the wider group, and the failure of one asset does not cascade into the rest. This is not a tax feature; it is a structuring feature that the tax analysis has to respect rather than undo.
Where the income is actually taxed
The most common misunderstanding about a holding structure is that it moves income. It does not. Electricity sales, capacity payments and any rent from the site are taxed where the asset is situated. A wind farm’s revenue is taxed in the country of the wind farm, under that country’s rules, regardless of who owns the shares above it. The holding company does not relocate that base.
The same is true of gains. Under the immovable property article found in most double tax treaties, gains on land and the assets attached to it are taxable in the country where they sit. Many treaties extend this to shares in companies whose value derives principally from immovable property, so that even a sale of the project company’s shares can be taxed in the country of the asset. A Dutch holding sits above all of this; it does not lift the situs country’s taxing right off the asset or the land-rich company that owns it.
The Netherlands can organise ownership of a European portfolio; it does not move the tax on the megawatt-hour away from the country where the turbine turns.
Project finance and non-recourse debt
Renewable projects are financed against their own contracted cashflows. Debt is raised at the project company and sized to the revenue the offtake contract is expected to produce, with lenders taking security over that project’s assets and receivables. The debt is non-recourse or limited-recourse: if the project underperforms, the lenders look to the project and not to the sponsor’s balance sheet or to the other assets in the portfolio. The holding above may carry its own acquisition or shareholder debt, but that sits in a different place in the structure and answers to different rules.
The limitation on interest
Leverage is central to these projects, which makes the deductibility of interest central to the tax outcome. Under the earnings-stripping rule that the Netherlands adopted from the EU Anti-Tax Avoidance Directive, a company’s net interest expense is deductible only up to a proportion of its taxable EBITDA, subject to a fixed floor below which interest remains deductible in full. Interest that cannot be deducted in a year is generally carried forward. For a capital-intensive project company carrying substantial senior debt, this rule can leave part of the financing cost outside the deduction, and it has to be modelled at the level of each entity rather than assumed away. The mechanics, the floor and the interaction with other limitations are set out in our note on the interest deduction limits under ATAD.
Two further points attach to intra-group debt. Interest between related parties must be set at an arm’s length rate, and the pricing has to be documented; the Dutch transfer pricing obligation bites once the group crosses the Master and Local File threshold of 50 million euro in revenue, with country-by-country reporting from 750 million. Anti-hybrid rules can also deny a deduction where the same payment is not correspondingly taxed in the hands of the lender.
Admitting institutional capital
Renewable platforms are built to take in outside capital, whether infrastructure funds, pension investors or a co-investor on a single project. The structural question is where that capital enters. Admitting an investor by selling a direct stake in the asset is disruptive: the power purchase agreement, the permits, the grid connection and the financing documents commonly contain change-of-control provisions, and a change at the level of the operating company can require consents from counterparties, regulators and lenders. Admitting capital at the holding, or at an intermediate holding, leaves the operating company and its contracts untouched.
This is why the platform matters. New capital is subscribed above the asset, through ordinary and preferred share classes that can carry different economic entitlements, so that a co-investor takes an agreed share of returns without becoming a party to the project’s own arrangements. The asset keeps operating under the same permits and the same offtake; only the ownership above it changes.
Exit and the participation exemption
Most exits in this sector are share deals: the holding sells the company that owns the project rather than the plant itself. Here the Dutch layer does its principal work. Under the participation exemption, qualifying dividends from the project companies and gains on the sale of qualifying shareholdings are exempt at the level of the Dutch holding, so that returns are not taxed again as they pass through it. The conditions of the regime, and the cases where it does not apply, are covered in our explanation of the Dutch participation exemption.
Two qualifications belong next to the exemption. First, it removes Dutch tax on the gain; it does not remove any tax the situs country levies on the disposal of a real-estate-rich company, which is a separate charge in a separate jurisdiction. Second, the exemption and the wider structure depend on the holding having real substance in the Netherlands, a matter we address in our note on the Dutch substance requirements. A holding without people, premises or genuine decision-making is exposed both to Dutch challenge and to the anti-abuse tests in the countries where the assets sit.
A worked example
Consider a group with three operating assets: a solar park, an onshore wind farm and a portfolio of rooftop installations, each in a different European country. Each asset is held in its own project company, financed by non-recourse debt raised against its offtake contract. The three project companies are held, directly or through country holdings, by a single Dutch holding company that carries the group’s staff, offices and board.
While the assets operate, each project company is taxed in its own country on its electricity revenue, after deducting financing costs to the extent the earnings-stripping rule allows. Distributions rise to the Dutch holding, where the participation exemption keeps them from being taxed a second time. When an infrastructure fund invests, it subscribes for a preferred class of shares in the Dutch holding; the operating companies, their permits and their offtake contracts are unaffected, and no change-of-control consent is triggered at asset level.
When the group later sells the wind farm, it sells the shares in the project company. The gain is exempt at the Dutch holding under the participation exemption, though the country where the wind farm stands may tax the disposal under its own rules for real-estate-rich companies. If the Dutch holding then distributes proceeds to its shareholders, a dividend withholding tax of 15% can apply, subject to treaty relief or an available exemption. For groups above the 750 million euro consolidated revenue threshold, the minimum effective rate of 15% under Pillar Two sits over the whole structure and has to be tested alongside the domestic charge, which in the Netherlands reaches 25.8% in the top bracket.
The structure, then, does something precise and limited. It separates the risk of each project, it lets debt and outside capital enter at the right level, and it allows returns and exits to pass through a single holding without a second layer of tax. It does not move the tax on the energy, or on the land, away from the country that hosts the asset. A structure that promised otherwise would be describing avoidance, not organisation.
Montclare structures and operates Dutch and cross-border platforms for international groups. Our services are set out on our services page.
This article is informational and does not constitute tax advice. Each engagement is subject to scope and applicable regulation.