The Dutch Cooperative, an effective tax planning tool

For many years the Netherlands have been well-known for its favorable tax regime for the set-up of conduit companies such as Holding, Finance and Licensing.

An important tax advantage in the Netherlands is the exemption from corporate income tax of qualifying dividends and capital gains, under the so-called Dutch Participation Exemption Regime.

One problem, which made further structuring necessary, is the fact that further distribution of the profits accumulated in the Netherlands to the foreign shareholder, triggered a 15% withholding tax.

The typical tax planning technique used to avoid this 15% dividend withholding tax in the Netherlands is the use of a shareholding companies located in Cyprus, Luxembourg of Singapore.

However in many cases this technique has proven to be inappropriate or too expensive.

An effective solution to avoid this 15% dividend withholding tax can be found by using a Dutch Cooperative or Coop ( In Dutch Coöperatie). A Coop is an association incorporated by Notarial Deed and has legal personality. A Coop should have at least 2 members at incorporation. The members of the Coop can be individuals or body corporate. A Coop does not have a minimal capital requiremen

The main advantages of using the Coop are:

1.       No Dividend withholding tax is levied on dividend distributions by a Coop.

2.       Participation exemption applies to all qualifying shareholding, owned by the Coop.

Considering these benefits it is no surprise that Coop’s are very often used nowadays in international holding structures.