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How An Individual Can Invest In A Dutch Company



Jimmy Cox- How do I invest In The Netherlands

If you want to invest as an individual in a Dutch company, there are various options for doing so. In this blog we will discuss a few different options and what the consequences might be. We focus on the possibilities with profit-sharing certificates and shares.

Participate Through Profit-Sharing Certificates

A profit-sharing certificate entitles the person who owns this, the participant, to the profit of a company. This right only concerns the net profit of the company, not the capital. In addition, a profit-sharing certificate does not give ownership to the company or the shares of the company. This also means that a profit certificate does not give the right to vote and / or control.

Because there are many types of profit-sharing certificates and they do not have to be registered with the notary, many elements of a contract can be determined themselves. You therefore have control over how complex the contract becomes and how the profit certificate will be valued. There is also no decision required for the issue of a profit certificate.

Participate Via Shares

Participation via shares gives the participant a right to ownership of the company. Shares can be issued without voting rights and without profit rights. Please note that this cannot be done at the same time. Shares cannot contain no voting right and no profit right at the same time.

Issue or sale of shares does require the intervention of a notary. A disadvantage of participation via shares is that there is little possibility of deviating from standard shares, so that there is less flexibility in the valuation of shares.

Participate Through A Portfolio Investment

When a natural person holds an interest in profit-sharing certificates and / or shares of less than 5% in total in companies with share capital, the value of the profit rights and / or shares is taxed in box 3 at a notional return. The advantage of this is that the value of the profit-sharing certificates and / or shares in box 3 can be kept limited in a simple manner, namely by purchasing with borrowed money. By buying in with borrowed money, a debt is created in the same box 3 that is offset by the value of profit-sharing certificates / shares. As a result, less or even no income tax in box 3 is due on the profit-sharing certificates and / or shares held.

Profit and dividend distributions are subject to Dutch dividend tax of 15%. The 15% dividend tax paid can be taken into account in the corporate income tax return.

It is possible to own both less than 5% profit-sharing certificates and fewer than 5% shares at the same time, without being qualified as a substantial shareholder. This is advantageous, because then you remain taxable in box 3, where it is not taxed separately. The net income in box 3 is therefore equal to the gross income in box 3.

Participate Through An Investment That Generates Substantial Interest

If the interest in profit-sharing certificates and / or shares is more than 5%, the resulting income is no longer taxed in box 3, but in box 2. This means that the income will be taxed at 25% tax due substantial interest.

You can choose to hold the profit-sharing certificates and / or shares through a personal holding company, as a result of which the 25% box 2 tax can be postponed. The dividends paid will then be exempt from tax on the basis of the participation exemption. As soon as the dividends received are paid to the natural person, this is taxed with the 25% box 2 tax.

Have a question? Contact Jimmy Cox.

 

 

Jimmy Cox

One thought on “How An Individual Can Invest In A Dutch Company

  1. Avatar Howard M. Liebman says:

    Nice article!!

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