From Heavy Tax Burden to Tax-Free Repatriation: A Dutch BV Success Story

The client's problem

A couple from abroad has owned the shares in a profitable Dutch BV-company with distributable reserves. The shareholders intended to repatriate part of the Dutch profits to the motherland. A dividend distribution from the Dutch BV-company to the private individual shareholders, however, would trigger a combination of Dutch dividend withholding tax, Dutch personal income tax as well as taxation in their home country (State and Federal).

Our solution

We noticed that the Dutch BV-company had a share premium reserve that could still be repaid. The repayment of share premium by a company with a positive equity can be qualified as a taxable payment of dividend.

However, when certain formal requirements are met, share premium can be repaid exempt from Dutch dividend withholding tax.

What did we do?

We advised the client to convert the share premium of the BV company first into shares. As a second step the nominal value of the shares had to be decreased before the repayment could be effected. We assisted with the paper work. Moreover, we introduced the client to a Dutch notary public, who took care of amendment of the articles of association of the company.

Current situation

The Dutch company was able to repay the share premium of the Dutch company exempt from Dutch tax to its shareholders. The client is extremely happy and engaged us for a subsequent reorganization of its Dutch real investment portfolio.