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Interest and Royalties

It is a bit of a public secret that both U2 and the Rolling Stones receive their royalties via the Netherlands.

No source tax

Most countries levy tax on dividend, interest and royalties you receive from that country. This is referred to as ‘source tax’. The Netherlands does not apply any source tax on interest and royalty payments. Furthermore, source tax on dividends is often decreased to zero due to the wide range of tax treaties that the Netherlands concluded.

This is one of the reasons why the Netherlands is frequently used in structuring international interest and royalty flows. This is referred to as ‘conduit companies’.

Low or no tax on conduit activities

Subject to strict conditions

If you are interested in such constructions, contact Bol International’s advisors to see what the most favourable construction would be in your case. They will be happy to advise you.

FAQ

When is a company considered to have sufficient substance in the Netherlands?

A B.V. as a legal entity in itself does not suffice. The following requirements apply for the ‘substance rule’:

  • At least half of the Board members must reside in the Netherlands;
  • The Board members need to have the expertise required for conduit companies;
  • The company must have a Dutch address;
  • The company must have a Dutch bank account;
  • The company’s records and accounts must be carried out in the Netherlands.

Also take legislation in your own country into account. This may have to be considered too.

When is the company considered to run a realistic risk on its activities?

A conduit company is considered to run a realistic business risk if the company has sufficient capital to cover any risks and the capital is actually affected if a risk occurs.

The requirements for interest conduit companies and royalty conduit companies differ in this respect. The minimum capital for an interest conduit company, for example, must amount to at least 1% of the loan outstanding, or € 2,000,000 if that is lower.

How can I obtain a Dutch address and Board members residing in the Netherlands?

Of course, you may decide to hire an office in the Netherlands and a Dutch manager.

Another option is to involve a so-called trust office. A trust office is a company focusing on the management of companies, offering services in management and providing a statutory address.