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Incorporating Dutch BV with non resident managing director

The Dutch BV company is a link in a chain of companies that can result in a lower corporate tax burden, but it is not simply incorporating a BV company and put it in the structure. The managing director can be the weak link. What does this imply?

The main rule is that the BV company is situated in the country where the managing director is living. That implies if a foreign based company would like to have a Dutch BV company, then also a Dutch resident managing director is required to actually have this company in the Netherlands. The managing director being a non resident creates issues.

Always liable for Dutch corporate income tax

The Dutch deed of incorporation does state that it is assumed that the BV company is a Dutch resident company, facts and circumstances determine the actual tax due. Dutch corporate income tax always applies, but if the company is actually situated abroad, the Dutch tax base is nil.

No tax treaty protection

The problem is in the applicable tax treaties. The tax treaties are based on the assumption that the company is resident in one of the two countries between whom a tax treaty has been drawn. If then it turns out that the managing director is living in another country then the countries mentioned in the tax treaty, the tax treaty no longer applies and you could have serious issues.

Besides the tax treaties the issues can also be with value added tax. If you claimed back VAT, but during an audit the residence of the BV and therefore for the VAT is abroad, all the claimed VAT needs to be returned.

The issue can be solved by either having a fully authorized managing director living in the Netherlands or use the services of a Trust company that can act as managing director on behalf of the company.

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