UK Ltd operating in The Netherlands

[Dutchnick]

We are about to start a business with a much larger UK partner. We were intending to form a Dutch BV but the UK company has now insisted that we form a UK Ltd. My shareholding will be held by my own UK resident Ltd company. The business will be operated in the Netherlands and make return as a NL company in the Netherlands. Dividends will be paid into my UK holding company by the joint venture company any idea how the tax is handled? I would quite like not having to pay tax twice!
Regards
Dutchnick

 

[Mitchells Bristol]

Hello there

This bit is not quite so straightforward and you probably won't get a full and in-depth answer on here without all the facts. Depending upon the exact set-up, you may get taxed twice, but tax credit relief is likely to be available.

The joint venture UK limited company will be liable to UK corporation tax on all of the profits generates (whether these are in the UK or Netherlands). From what you are saying, it sounds like the activities will be mainly undertaken in Netherlands, giving rise to a taxable permanent establishment in Netherlands. If you register the business in Netherlands as a permanent establishment, then you will be paying Netherlands corporation tax on any profits relating to those activities.

Therefore, there will be double-tax - but you will be able to claim credit relief for the Dutch tax paid to reduce your UK corporation tax liability. This will also be subject to any specific provisions in the UK/Netherlands double tax treaty, which I haven't looked into.

Once the UK corporation tax has been paid, and Dutch tax offset, the balance of profits can be distributed as a dividend. As mentioned in my other post, there will be no tax on this dividend for your existing UK company.

Hope this sheds some light - and doesn't confuse you further!!