Offshore companies in the Netherlands
Offshore companies are businesses that have been registered, established or incorporated outside of the country of residence. Here we focus on the Netherlands.
Offshore incorporation is a straightforward process in all of the popular offshore financial centres and tax havens, and can provide a wide range of benefits to the company and company principal(s). Offshore company registration is undertaken by individuals primarily for the following reasons:
- Asset protection
- Reduced tax liability
- Protection against law suits
- Flexible business laws
- Ease of operation
Advantages of offshore companies
Overseas company formation can provide a wealth of benefits:
- offshore asset protection,
- enhanced privacy,
- tax savings, or
- simply grow your business outside of the European Union.
Conducting business and undertaking banking transactions in the name of a legal entity, such as an offshore corporation, provide significant privacy and confidentiality benefits. Most offshore financial centres will not divulge the responsible individuals within the offshore corporations to a third party or foreign government. However, exceptions will be made in the event that an act of terrorism or a criminal atrocity has taken place and is being investigated.
Although the Netherlands should not be considered as an offshore finance centre, it provides outstanding opportunities to use Dutch corporations in structuring international financial transactions. This is due to its extremely wide network of double taxation treaties (over 78 taxation treaties have been concluded, including treaties with most of the major developed nations of the world), its participation exemption, its 0 percent withholding tax on interest and royalty distributions, and its tax ruling system in conformity with OECD standards.
The Netherlands has a liberal tax regime including generous participation exemption where dividends received and capital gains realised are exempt from Dutch Corporate Income Tax. Dutch tax law has many other aspects but specialist advice is required to successfully navigate the complexities.
The placing of assets into offshore corporations and overseas legal structures can provide a strong layer of protection from future liabilities. By having trusts, investments or bank accounts and other assets owned by your offshore corporation, it makes tracking them down via an asset search difficult. Offshore companies provide highly effective asset protection and effectively screen your finances from public view.
Legal protection through incorporating offshore
If a legal opponent is pursuing a legal action against you, it typically involves an asset search to make sure there will be money to pay out, in the event a judgment is awarded against you. Forming offshore companies and having assets held by the overseas company mean they are no longer associated with your name. Therefore your assets can be effectively shielded from legal opponents, judges and court rulings simply by incorporating offshore.
An additional benefit is simplicity and ease of operation. Most overseas jurisdictions make it simple for anyone who is interested in offshore incorporation. The statutory obligations in the running of the offshore entity have also been simplified.
Disadvantages of offshore companies
One of the main drawbacks is in the area of remittance and distribution of the assets and income of the offshore company. Once monies are transferred to the resident country, they become subject to taxation, which can negate the benefits of the initial tax-free environment.
Due to the absence of detailed publically maintained registers, proving ownership of a company registered offshore can be difficult. Whilst anonymity can be an advantage for overseas companies, when it becomes in the owner’s interests to declare themselves as the beneficial shareholder, this might be a difficult exercise.
Risks related to an offshore company
Some offshore jurisdictions are more stable than others, whether from a political or economic perspective. Physical distance, lack of knowledge of local customers, government and social attributes can increase the risks of financial loss occurring in some countries.
Additional risks for offshore corporations are similar to those for onshore corporations e.g. risks associated with the market, interest rates and credit. A further consideration is that of reputational risk.
Renowned offshore locations
The following locations are renowned offshore locations
- The Caribbean
- British Virgin Islands
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