The appointment is usually made for good reasons and without advice. A Dutch company takes on an investor, a co-founder or an experienced operator who happens to hold a United States passport, and puts that person on the board because the person is the right person. Nobody treats it as a tax event. It is not one, in the sense that no tax is triggered by taking the seat.
What the seat triggers is reporting, and the American information regime attaches penalties to reporting failures that do not depend on any tax being due. That is the shape of the problem. The company gains a director and the director gains a filing calendar, and the two facts are discovered at different times, usually several years apart.
The director becomes a filer before the company owes anything
United States tax law reaches its citizens wherever they live and whatever office they hold, because the regulation under section 1 makes every citizen of the United States liable to the income tax wherever resident and whether the income arises inside the country or outside it. A citizen sitting on a Dutch board is not filing because the Dutch company has American income. The filing duties attach to the individual’s status and to the position they occupy, and they do not wait for the company to earn anything in the United States or to make a profit anywhere.
This is the reversal that catches Dutch boards. Continental practice treats reporting as an obligation of the entity, discharged by the entity, in the country where the entity sits. The American obligations here are personal. They sit with the director, they are filed with the director’s own return or separately in the director’s own name, and the company has no standing to discharge them.
The practical failure is documentary rather than legal, but not in the way most boards assume. What a director has to produce in that capacity alone is short: section 6046 limits the information required of a person described only as an officer or director to the names and addresses of the shareholders concerned, and the regulation adds their identifying numbers and the date on which each became a reportable shareholder. The difficulty is not the accounting. It is that a Dutch board frequently does not know which of its shareholders are United States persons, or on what date each of them crossed, and the answer sits in a share register and a financing history that nobody has ever read with that question in mind.
The officer and director trigger in Form 5471
Category 2 of Form 5471 is the provision written for exactly this person. In the December 2025 revision of the instructions, a category 2 filer is a United States citizen or resident who is an officer or director of a foreign corporation in which a United States person has acquired stock meeting the 10 per cent stock ownership requirement, and the instructions set that threshold at 10 per cent or more of the total value of the foreign corporation’s stock, or 10 per cent or more of the total combined voting power of all classes of stock with voting rights.
Read the trigger carefully, because it is not about the director’s own shareholding. The director may own nothing at all. The obligation arises from somebody else’s acquisition. If an American investor, fund or individual crosses 10 per cent in the BV, the American on the board becomes a filer for that year by operation of the other person’s transaction.
The trigger is also transactional rather than continuous. It fires on that acquisition, and it fires again when a United States person acquires a further 10 per cent or more of the outstanding stock, in one transaction or in several, while the American holds office. The regulation works this through in a set of examples, and the point they make is that an officer who takes the seat after an earlier crossing is caught by the next qualifying acquisition and not by the one that preceded the appointment. A director who was told once that no filing was needed has been told something that was true on a single set of facts, and a subsequent funding round changes those facts without anyone revisiting the question.
Two exceptions in the instructions can remove the filing, each on conditions that have to hold together. There is no return if, immediately after the reportable acquisition, three or fewer United States persons own 95 per cent or more in value of the outstanding stock and the person making the acquisition files for it as a category 3 filer. There is also none where the director’s obligation arises solely because stock is attributed constructively from another United States person, and that person furnishes all of the information the director would have had to give. Further exceptions apply across every category of filer. Where a return is due, a category 2 filer completes the identifying information on the first page of the form and Part I of Schedule O; the balance sheets, income statements and earnings and profits schedules that make the form intimidating are required of other categories, not of this one.
The penalty runs whether or not tax is owed
The penalty matched to this obligation is section 6679, and it is a different instrument from the one usually quoted in this context. A person required to file a return under section 6046 who does not file it on time, or who files one that does not show the information the section calls for, pays 10,000 dollars, unless the failure is shown to be due to reasonable cause. If the failure continues more than 90 days after the Internal Revenue Service mails notice of it, a further 10,000 dollars applies for each 30 day period or fraction of one, and that continuation penalty cannot exceed 50,000 dollars. The same section disapplies the deficiency procedures, so the amount is assessed rather than argued in advance, and the instructions add that criminal penalties under sections 7203, 7206 and 7207 may apply. None of this is calibrated to tax at stake, because the obligation being enforced is informational.
The penalties usually quoted belong somewhere else, and the difference matters in both directions. Section 6038 imposes 10,000 dollars for each annual accounting period and reduces the foreign taxes otherwise available for credit by 10 per cent, rising by a further 5 per cent for each three month period the failure continues after the 90 day notice period and limited to the greater of 10,000 dollars or the income of the entity for the period. That obligation follows control, which the same section defines as more than 50 per cent of voting power or of value, and where the company is a controlled foreign corporation the same section also lets the Secretary require the information from a United States shareholder of it. Neither description fits a person who sits on the board and holds nothing. Attaching the section 6038 machinery to a board seat alarms directors who are not within it, while hiding the more useful point that a director who also buys into the company can land in the ownership categories where it genuinely bites.
Whether the Service could assess the section 6038 penalties administratively was in genuine doubt after the Tax Court held that it could not. The Court of Appeals for the District of Columbia Circuit reversed on 3 May 2024 in Farhy v. Commissioner, holding that the text, structure and function of section 6038 authorise assessment of the penalties imposed under its subsection (b). That opinion says nothing about section 6046 or section 6679, and it did not need to, because section 6679 excludes the deficiency procedures on its own terms.
The consequence that outlasts the penalty is the assessment period. Section 6501 provides that where information required under section 6046, among other sections, is not furnished, the time for assessing any tax relating to the return, event or period to which that information relates does not expire until three years after it is furnished, and that where the failure is due to reasonable cause and not wilful neglect the extension is confined to the items related to the failure. A year that should have closed stays open, and outside the reasonable cause limb it stays open on everything in it.
Where the board fee is actually taxed
Article 17 of the convention with the Netherlands deals with directors’ fees, and it does not follow the pattern of the employment article. Fees or other remuneration derived by a resident of one state in the capacity of member of the board of directors, a bestuurder or a commissaris of a company resident in the other state may be taxed in that other state. The article then adds a limitation: such remuneration is taxable only in the first mentioned state to the extent to which it is derived from services rendered in that state. The protocols of 1993 and 2004 amended other articles and left this one as it was drafted.
The second sentence is what makes the analysis fact heavy. A United States resident director of a Dutch BV who attends board meetings in Amsterdam has Dutch source remuneration for that portion. The portion attributable to work performed at home in the United States falls back to residence only taxation under the same sentence. Splitting the fee therefore requires a record of where the work was done, kept contemporaneously.
The allocation does not remove the fee from the American return. Article 24 of the same convention lets each state tax its own residents and nationals as if the convention had not come into effect, and its second paragraph carves out the relief given by Article 25, a carve-out that the 2004 protocol left standing when it amended the article elsewhere, so for a United States citizen the effect of Article 17 is delivered through the credit rather than by taking the income out of the calculation. Boards rarely keep the record that supports the allocation, because for every other purpose it does not matter. Minutes that say where the meeting was held, and a simple calendar of days worked on company business by location, convert an argument into an arithmetic exercise. Reconstructing three years of travel from expense claims does not.
Accounts, signature authority and the two American forms
A director who is given authority over the company’s bank accounts acquires a reporting obligation independent of ownership. The FBAR, FinCEN Form 114, is required where the aggregate value of the foreign financial accounts exceeded 10,000 dollars at any time during the calendar year reported, and the regulation defines the signature or other authority that brings a person within it as the authority, alone or together with another, to control the disposition of the money by direct communication with the institution holding the account. The report is due on 15 April following the year reported, with an automatic extension to 15 October that does not have to be requested. The regulation does relieve certain officers and employees from reporting signature authority, but each of those exceptions is written for a supervised bank, a registered financial institution, an authorised service provider or a company with listed or registered equity securities, and each requires the individual to have no financial interest in the account. None of them reaches the director of a privately held BV.
The threshold is aggregate and it is low. A single Dutch operating account with a working balance will exceed it, and the director reporting it owns none of the money. This is the obligation most often missed, precisely because the individual reasons from ownership rather than from control.
Form 8938 is the separate statement of specified foreign financial assets, and its thresholds turn on filing status and on a residence test that is narrower than the ordinary word suggests. A specified individual who is not living outside the United States files at more than 50,000 dollars on the last day of the tax year or more than 75,000 dollars at any time during it, and at 100,000 and 150,000 dollars on a joint return. The higher figures, 200,000 and 300,000 dollars, and 400,000 and 600,000 dollars on a joint return, are available only where the individual’s tax home is in a foreign country and the presence abroad test is met, which means a citizen who has been a bona fide resident of a foreign country for an uninterrupted period including an entire tax year, or a citizen or resident present in a foreign country for at least 330 full days in twelve consecutive months ending in the year reported. A director who commutes to Amsterdam for meetings is on the lower set of figures.
Stock issued by a foreign corporation is a specified foreign financial asset where it is held for investment and is not held in a financial account, so a director who also takes equity in the BV is holding a reportable asset. Where the same interest is reported on a Form 5471 filed on time, it is not listed again on Form 8938, but the form filed has to be identified there and the value still counts in deciding whether the threshold is met at all.
The line at 5 per cent, and the salary the Dutch side expects
Dutch law draws its own line, and it is drawn at ownership rather than office. Article 4.6 of the Wet inkomstenbelasting 2001 gives a person an aanmerkelijk belang where, alone or together with a fiscal partner and directly or indirectly, they hold at least 5 per cent of the issued capital of a company whose capital is divided wholly or partly into shares, or rights to acquire shares up to that 5 per cent, or profit certificates carrying at least 5 per cent of the annual profit or of what is distributed on a liquidation. The voting limb of the article is narrower than it is usually reported. The right to cast at least 5 per cent of the votes in a general meeting creates a substantial interest in a cooperative or an association on a cooperative basis, which are the legal persons the article points to, and not in a BV, where the test runs on capital and on profit entitlement.
The position of relatives is a separate rule in article 4.10 and works the other way round from aggregation. Shares or profit certificates belonging to a taxpayer who has no substantial interest of his own are nonetheless treated as a substantial interest where his fiscal partner, or a relative by blood or marriage in the direct line of the taxpayer or of that partner, holds one in the same company. The relative’s holding is not added to the taxpayer’s to make up the 5 per cent. It pulls the taxpayer’s own holding across the line however small that holding is.
Crossing the line engages the customary salary rule, which is statutory rather than a practice of the tax authority. Article 12a of the Wet op de loonbelasting 1964 sets the wage taken to have been received in the calendar year, for an employee working for a body in which he or his partner holds a substantial interest, at not less than the highest of the wage from the most comparable employment, the highest wage of the employees of that body or of a body connected with it, and 58,000 euro for 2026, that last figure having stood at 56,000 euro for 2025. Wage tax is withheld on the amount so established whether or not it is actually paid.
Two qualifications sit in the same article and are routinely left out. If the withholding agent makes it plausible that the highest of those amounts exceeds the wage from the most comparable employment, the wage is set instead at that comparable figure, which can be below the statutory amount. And the rule does not apply at all where the wage to be established for the work performed for that body and the bodies connected with it is not more than 5,000 euro in the calendar year.
For an American director who also takes equity, the two systems meet awkwardly. A deemed Dutch wage is real Dutch wage tax on an amount that may never leave the company. Whether the same amount is income for American purposes is a question of American law and does not follow from the Dutch characterisation, and where both systems reach it the relief is the credit under Article 25 of the convention. The distance between a holding of 4 per cent of the issued capital and one of 6 per cent is therefore not a difference of degree. One side of the line carries no customary salary obligation at all and the other carries the whole of article 12a.
What the appointment does to the company
The board seat has consequences for the BV itself, and they are structural rather than procedural. Where a person other than an agent of an independent status is acting on behalf of the company and has, and habitually exercises, in the United States an authority to conclude contracts in the company’s name, Article 5 of the convention deems the company to have a permanent establishment there in respect of the activities that person undertakes for it, unless those activities are limited to the storage, purchasing, information gathering and other preparatory or auxiliary activities listed in the fourth paragraph of the same article. A director with commercial authority who signs from an American desk is the classic fact pattern.
There is also the question of where the company is managed, and the first thing to say is that a BV does not stop being a Dutch taxpayer because its board travels. Article 2 of the Wet op de vennootschapsbelasting 1969 deems a body incorporated under Dutch law always to be established in the Netherlands for the purposes of that act, and the fiction is displaced only for the articles that same paragraph lists, which are articles 13 to 13d, 13i to 13k, 14a, 14b, 15 and 15a. What a migrating board puts in play is the treaty position, not the domestic charge. Dutch substance is built on decisions being taken in the Netherlands and on being able to show it. Adding a director who attends by video from another continent does not by itself move the place of effective management, but a board whose center of gravity has quietly relocated is a different company for treaty purposes than the one described in its own minutes.
The classification question is separate and easily missed. Treasury Regulation 301.7701-2 lists the Dutch entity always treated as a corporation for American purposes as the Naamloze Vennootschap. The Besloten Vennootschap is not on that list, which makes it an eligible entity whose American classification can be elected. Left alone it is an association, and so a corporation, because all of its members have limited liability, so the default and the deliberate answer usually coincide. The point is that the choice exists, and that a company which is not a foreign corporation for American purposes is not the subject of a Form 5471 at all, which moves the Form 5471 obligations onto a different footing.
Appointing without the surprises
What decides the outcome is settled before the appointment rather than after it. Whether a filing arises turns on whether any United States person stands at or near 10 per cent of value or voting power on the day the director takes the seat and on the day of each later round, on whether the director is given signature authority over the company’s accounts, and on how the fee is divided between work done in the Netherlands and work done elsewhere. Each of those facts is knowable at the time. None of them is recoverable afterwards without reconstruction.
The obligations described here are personal to the director. They run with the director’s own return, they recur, and they remain the director’s in law even where the company undertakes to fund the preparation. The company’s own position is a different question with different evidence behind it, answered by where its contracts are concluded and where its decisions are taken, and the fact that the same person sits at the center of both questions is what makes the appointment worth thinking about in advance rather than explaining later.
This article is informational and does not constitute tax or legal advice. The treatment of any structure depends on its facts and on the law of each jurisdiction involved. Each engagement is subject to scope and applicable regulation.