Dutch Limited Partnership
Commanditaire Vennootschaap (CV)

CV Corporate Taxation

The Dutch Commanditaire Vennootschap (CV), or limited partnership, can be structured in a way that affects its corporate taxation. The taxation of the Dutch CV depends on whether it is classified as tax transparent or non-tax transparent. Below is an overview of the corporate taxation rules and the respective tax exemptions applicable to a Dutch CV.

Tax Transparent CV

A tax-transparent CV is not treated as a separate legal entity for tax purposes. Instead, the CV itself is not subject to corporate income tax (CIT), and the profits are attributed directly to the partners (either individuals or corporations). The partners are taxed in their respective jurisdictions based on their share of the CV’s profits.

Key Points for a Tax Transparent CV:

– No corporate income tax at the CV level.
– The partners (whether individuals or companies) are taxed on their share of the CV’s profits.
– If the partners are foreign entities or individuals, the profits allocated to them are not subject to Dutch tax, unless the foreign partner has a permanent establishment in the Netherlands.

This tax-transparent feature makes the Dutch CV attractive for international tax structuring, especially when used in global investments, as it allows the avoidance of double taxation at both the entity and partner levels.

Non-Tax Transparent CV

A non-tax transparent CV is treated as a separate taxpayer and is subject to Dutch corporate income tax (CIT). In this case, the CV itself is taxed as a corporation in the Netherlands.

Corporate Income Tax (CIT) Rates for a Non-Tax Transparent CV:

– 19% on taxable profits up to €200,000 (2024 rate).
– 25.8% on taxable profits exceeding €200,000.

Key Features:

– The CV is taxed as a corporation, meaning the partners are not directly taxed on their share of the profits until distributions are made.
– If the CV makes distributions to partners, those distributions might be subject to dividend withholding tax.

Dividend Withholding Tax

If the CV is non-tax transparent, distributions to its partners may be subject to Dutch dividend withholding tax. The standard withholding tax rate is 15%, but it can be reduced under tax treaties or the EU Parent-Subsidiary Directive.

– For corporate partners that own at least 5% of the CV and are based in the EU or in a jurisdiction with a favorable tax treaty, the withholding tax can be reduced to 0%.
– Tax transparent CV: No withholding tax applies at the CV level, but dividends distributed from Dutch companies to the partners may be subject to withholding tax.

Value-Added Tax (VAT)

A Dutch CV, whether tax transparent or non-transparent, may be required to register for Dutch VAT if it conducts VAT-taxable activities. The standard VAT rate in the Netherlands is 21%. Certain goods and services qualify for a reduced rate of 9%, and some are exempt altogether (e.g., financial services, medical care).

Anti-Avoidance Rules

The Netherlands has implemented several anti-abuse rules to prevent tax avoidance through hybrid entities like the Dutch CV:

– Substance requirements: Foreign partners must meet certain economic substance requirements to benefit from tax exemptions.
– Anti-hybrid rules: The ATAD II directive, effective in the Netherlands, addresses mismatches between countries’ tax classifications of entities, including CVs. A hybrid mismatch occurs when an entity like the CV is classified differently for tax purposes in different jurisdictions, leading to potential double non-taxation. The anti-hybrid rules aim to neutralize these mismatches.

Double Taxation Treaties

The Netherlands has an extensive network of double taxation treaties that reduce or eliminate withholding taxes on cross-border payments, including dividends, interest, and royalties. Foreign partners of a Dutch CV can benefit from reduced withholding taxes if their home country has a tax treaty with the Netherlands.

Dutch CV
Corporate Taxation and Exemptions

Tax Transparent CV:
– Not subject to corporate income tax at the CV level.
– Partners taxed in their home jurisdictions.

Non-Tax Transparent CV:
– Subject to Dutch corporate income tax at 19% up to €200,000 and 25.8% above €200,000.
– Potential to benefit from exemptions like the participation exemption (for dividends and capital gains from subsidiaries), the innovation box, and fiscal unity.

Dividend Withholding Tax:
– 15% withholding tax on distributions, with potential reductions under tax treaties or the EU Parent-Subsidiary Directive.

Other exemptions: Include loss carry-forward, carry-back rules, and anti-avoidance measures.

In Resume:
The corporate taxation of a Dutch CV depends heavily on whether it is structured as tax transparent or non-tax transparent. The Dutch tax system offers several exemptions, such as the participation exemption and innovation box regime, that can significantly reduce or eliminate tax liabilities for non-tax transparent CVs. In contrast, tax-transparent CVs are treated as pass-through entities, with no corporate taxation at the CV level.