DISCLAIMER: This post was last modified on 6 November 2024. Some information in this article may not be updated.

Under the new Dutch “Entity Tax Classification” rules, foreign legal entities will be classified for Dutch tax purposes as either transparent (not liable to tax) or non-transparent/opaque (liable to tax) beginning 1 January 2025.  

According to a draft decree published in March 2024, the Dutch tax treatment of foreign legal entities will be identified by how similar they are to Dutch legal entities through a comparability analysis. If there is no clear equivalent Dutch entity, foreign entities formed outside of the Netherlands will follow the tax classification of the country where they are established.  

Dutch tax entity classification rules: What are the changes?

The Dutch Ministry of Finance initially planned to address mismatches with foreign entity classification rules by amending the Dutch entity classification rules as of 1 January 2022. There are now two methods being proposed for new entity classification rules that outline the relevant characteristics of Dutch legal forms and foreign entities: 

• Fixed method: This approach applies in cases when an entity is established under foreign law and is a tax resident in the Netherlands. The entity will be classified as non-transparent and, therefore, independently liable to tax.  

• Symmetrical method: This approach applies in cases when an entity is incorporated under foreign law and is not a tax resident of the Netherlands. The Netherlands will follow the classification of the entity in the country where the entity is considered a tax resident.  

For Dutch tax purposes, foreign entities based in the Netherlands with no clear Dutch equivalent will always be classified as non-transparent, making them Dutch domestic taxpayers. Effective 1 January 2025, the fixed and symmetrical methods will be implemented into the Dutch corporate income tax, personal income tax, dividend withholding tax and conditional withholding tax acts.  

New tax classification rules for a CV and FGR

With the new rules, there will be changes in the definitions of Dutch limited partnerships (commanditaire vennootschap; CV) and the Dutch Fund for Joint Account (fonds voor gemene rekening; FGR).  

Starting in 2025, all Dutch partnerships will be classified as transparent for Dutch tax purposes. As a result of the transition to a tax-transparent classification, existing non-transparent CVs will no longer be considered Dutch corporate taxpayers as of 1 January 2025.  

The tax classification rules that apply to FGR have also been amended. An FGR may only be considered opaque if it is regulated and the participations are freely tradeable. Suppose the participations in an FGR may only be repurchased by the FGR itself. In that case, it is considered non-tradeable, and even if the FGR is regulated, it will be classified as tax-transparent. 

Why work with Bolder Netherlands

The new classification rules for Dutch and foreign entities will better align the Netherlands with international standards. If you have business activities in the country and want to learn how these new rules will affect you and what actions you should take, our strong presence in the Netherlands can help you navigate the Dutch entity tax classification framework. We provide expert advice and comprehensive services to ensure compliance with Dutch tax laws and avoid potential consequences. 

For more information about the above classification rules, please contact our Bolder team.  

Bolder Group does not provide financial, tax or legal advice and the information contained herein is meant for general information purposes only. We strongly recommend that before acting on any of the information contained herein, readers should consult with their professional advisers. The Bolder Group accepts no liability for any errors or omissions in the information, or the consequences resulting from any action taken by a reader based on the information provided herein.

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