Dutch letterbox companies out of favour with tax advisors: FD
Dutch tax advisors are increasingly questioning the way some companies use shell or letterbox companies purely to move income from interest and royalties through the Netherlands to tax havens, the Financieele Dagblad says on Friday.
A committee from the European parliament is in the Netherlands on Friday to look into the way multinationals use tax treaties and other benefits to avoid taxation, the FD says.
And according to Marnix van Rij, outgoing chairman of the Dutch tax advisors association Nob, the Netherlands needs to be careful that it is not punished for the unwanted side effects of its welcoming fiscal climate.
‘We do not close our eyes to the reality and are not on the defensive to keep everything,’ Van Rij said. ‘Shell companies which do nothing other than push money through the Netherlands are not good for our image. The Netherlands may be punished by the EU and OECD for a bi-product.’
Van Rij says a difference has to be made between shell companies and subsidiaries which start out modestly but which can develop into serious economic activities.
Jobs
Until recently, jobs and tax income were the main justifications for maintaining the letterbox system, the FD points out. But now, the paper concludes, consultants are realising these constructions have no future.
A report by economic institute SEO in 2013 said that €278bn flows through shell companies based in the Netherlands every year. This stems from the tax break on participations, relatively low tax on interest and royalties and the wide tax treaty network with other countries.
The SEO report states the Netherlands has some 12,000 multinational holding companies, of which 75% are based at trust offices. These holding companies generate between 8,800 and 13,000 jobs – or around one job per company.
