In the Dutch and European fiscal environment, a Dutch Cooperative (in Dutch: “coöperatie”) is a commonly used legal form for a holding company.

The main reason for using a Cooperative for this purpose is that this legal form is flexible (for instance: no minimum capital requirement is applicable at the moment of incorporation), and under certain circumstances no Dutch dividend withholding tax is due with regard to profit distributions by the Cooperative.

Under the tax rules up to 2011, a Dutch Cooperative was never subject to Dutch dividend withholding tax, but as from 2012 certain restrictions apply. As of 1 January 2012, profit distributions by a Cooperative are subject to dividend withholding tax, but only if it concerns an qualifying tax abuse structure. In 2018 these rules for further specified. This will be explained in more detail below.

Parallel to the introduction of the dividend withholding tax for Cooperatives, the general Dutch dividend withholding tax exemption for foreign corporate shareholders was extended. Bottom line, under the new regime any foreign corporation that would qualify for applying the participation exemption for its (Dutch) share interest if it would have been a Dutch tax resident, is eligible for exemption of the Dutch dividend withholding tax unless this corporation is caught by the Dutch anti-tax treaty shopping rules. See also below.

The changed regime for the dividend withholding tax, made the Cooperative less popular as legal form for a holding company, but under the appropriate (factual) circumstances it can and it is still used for this purpose. 

Below you will find a summary of relevant legal and tax information which may enable you to determine whether or not a Cooperative may also be a suitable legal entity for your business. 

Legal characteristics of a Cooperative

The Cooperative Association (in Dutch:"coöperatieve vereniging") can be incorporated as a legal entity with limited liability for its participants (members), in legal terms: the cooperative will then be comparable with an ordinary Dutch limited liability company (BV or NV).

The Cooperative is in fact a species of the legal form of Association (‘vereniging’), and therefore it does not have shareholders, but members. As such, it should always have at least two members upon incorporation.

In general terms, the statutory objective of a Cooperative is to provide for certain material needs of its members pursuant to their "membership rights". The basic idea is that a Cooperative conducts activities for the benefit of its members. The objective of a Cooperative can be to act as holding (or finance) company and perform related activities.

The Cooperative can be set up in such a way that the members of the Cooperative will be entitled to the profits of the Cooperative, which makes the position of the “member” comparable to the one of “shareholder” in an LLC (like a Dutch BV or NV). The Cooperative does not have a capital divided in shares and therefore there is no minimum capital or minimum equity requirement.

The Cooperative has legal personality, which implies that the articles of association of the Cooperative can be worded in such a way that the Cooperative can independently own assets and liabilities in its own name.

The articles of the Cooperative can be worded in such a way that the members have limited liability for the losses and liabilities of the Cooperative. This limited liability must be expressed in the statutory name of the cooperative, by including the abbreviation "U.A.", which stands for "excluded liability" (in Dutch: “uitgesloten aansprakelijkheid” or "UA") or “B.A.”, which implies that there is a limited liability (in Dutch: “beperkte aansprakelijkheid”).

Normally speaking a Cooperative has a general members meeting (comparable with the general meeting of shareholders of a BV) and a board of directors. The articles of association of a Cooperative may provide for other bodies, such as a supervisory board.

As a general rule, each member has one vote, unless the articles of association provide for a certain member to have more than one vote.

There are no mandatory rules with respect to contributions and distributions.

The articles of association of the Cooperative can provide for transferability of the membership rights. However, the acquirer of the membership rights cannot become a member before admittance by the board of directors and written notification to the Cooperative. 

The Cooperative must annually prepare financials statements, have them approved by the general meeting of members and file them with the Dutch Chamber of Commerce for publication in the Trade Register. The articles of association generally provide for the procedure of acceptance/approval of the financial statements by the general meeting of members.

The procedure of the liquidation of a Cooperative is also in essence the same as for a limited liability company (BV). For more information about the procedure of liquidating a Dutch company, we refer to the page Liquidation of a Dutch BV. 

Incorporation procedure for a Cooperative

The incorporation of a Cooperative requires the involvement of a public notary and is to be done by notarial deed.

The incorporation is in fact the signing of the membership's agreement by the members (articles of association). The articles of association contain the agreement made between the members and applicable procedures with regard to capital contributions, voting rights, profit distributions, etc.

As stated above, there is no minimum capital requirement, so no “bank statement” is required

A Cooperative is in fact a species of the legal form of “association” and it should therefore always have at least two members upon incorporation. The law does not provide for a minimum percentage of ownership of a member and does in essence allow the memberships to be transferred to one and same member after incorporation

Directly after incorporation, the Cooperative will be registered in the Trade Register of the Chamber of Commerce. The Trade Register is accessible by the public.

Time schedule for the incorporation of a Cooperative

The incorporation procedure of a Cooperative only requires a notarial deed which can in theory be adopted in one day.

It is common that the process starts with a standard version of the articles of association with complies to the requirements for a standard holding (or finance) company.

However, the following time delaying factors may need to be considered:

• compliance to the client acceptance procedures of the public notary and other professional service providers involved; 
• tailoring the articles of association to the exact needs of the members;
• clarifying the tax status of the Cooperative at parent and subsidiary (source country) level; 
• the registration with the Chamber of Commerce.

The costs for the incorporation of a Cooperative 

The public notary fee for the incorporation of a standard holding cooperative starts at approximately  € 2,000 - € 3,500 (plus normal disbursements and VAT, if applicable). 

It is common that the articles of association need to be tailored to the wishes of the members and in some case the legal requirements imposed by other legal jurisdictions involved, like the one of the member(s) or the subsidiary(ies). Due to the extraordinary legal form of the Cooperative, it is also common that the (legal) mechanics and applicable procedures require more clarification than usual.

Usually we coordinate the incorporation of the Cooperative on behalf of our clients. Our fees are calculated on a time spent basis. For the coordination of a straightforward incorporation of a standard holding cooperative our fees are usually in the area of € 500 to € 2,500, depending on the complexity of the case. Other services rendered (like tax advice and tax compliance services) are charged separately.

If you are interested in our services please feel free to contact us for a comprehensive service and fee proposal.   

Dutch taxation of a Cooperative

According to the Dutch Corporate Income Tax Act, the Cooperative is subject to corporate income tax, in essence the same way as any other Dutch corporation.

Profit distributions are not tax deductible if distributions are made to members/legal entities (Note: to a certain extent they can be tax deductible if made to members/ individuals).

The Cooperative, like every Dutch corporate tax payer, can be eligible for the participation exemption which means that dividends received and capital gains realized on shares in qualifying subsidiaries, are tax exempt.

Members of the Cooperative can under certain conditions become subject to corporate income tax for their income out of the Cooperative (profit distributions and capital gains) and certain forms of other income (like interest and leasing payments) received from the Cooperative. We will explain this further below.  

Dividend withholding tax aspects of a cooperative

As stated above, under the rules up to 2011, a Dutch Cooperative was not subject to Dutch dividend tax.

As of 1 January 2012 the Dutch cooperative is subject to a 15% dividend withholding tax to the extent that

(i) there is an “abuse structure” and

(ii) the interest cannot be allocated to an active business of the member (“active enterprise test”).

The law qualifies a structure as an “abuse structure”, if the Cooperative directly or indirectly holds shares in a company with the main purposes to avoid Dutch dividend withholding tax or foreign tax. With regard to the “active enterprise test” we note that this is the same test as in the corporate income tax with regard to substantial shareholders (see below).

In 2018 the rules for the Dutch dividend withholding tax exemption for members in a Cooperative were further specified. For more detailed information about this latest change we refer to our news item on this topic dated the 19th of January 2018.

If you require more information about this topic, please feel free to contact us.

Taxation of the members of a Cooperative

Foreign based members of a Cooperative may become subject to Dutch corporate (or individual) income tax for the income which they derive from their membership in the Cooperative.

Based on the Dutch Corporate Income Tax Act, non-resident corporations are subject to Dutch corporate income tax for the income which they receive from a substantial interest in a Dutch resident company, which includes a Cooperative, if this substantial interest cannot be allocated to the equity of an "enterprise". The term enterprise is a technical term and does in any case include operational businesses and intermediary holdings with a real and substantial presence in their country of residence.  The law provides for minimum substance requirements.

When the condition of an enterprise cannot be met, any dividend payments, profit distributions, liquidation proceeds, capital gains and certain other sources of income from the Dutch entity derived by the non-resident tax payer (like interest on loans) are subject to Dutch income tax. According to Dutch tax law, a substantial interest is present when a non-resident tax payer owns directly or indirectly at least 5% of the (economic) shares or voting power in the Dutch entity.

The meaning of the phrase “if this substantial interest cannot be allocated to the equity of a business enterprise” has not been defined by the law, but must be interpreted on the basis of policy statements and case law. Typically a passive holding company located in a tax haven country may not be able to comply with this condition.

If you require more information about this topic, please feel free to contact us.

Application of tax treaties and the EU Directives

Tax treaties usually apply to any corporate body or any entity which is treated as a resident corporate body for tax purposes. Since the Cooperative is treated as a corporate body for Dutch corporate income tax purposes, from a Dutch perspective, the Cooperative can qualify as a company eligible for tax treaty benefits. It is then still required that the Cooperative meets the other conditions, like for instance the condition that is qualifies as a tax resident of the Netherlands and that it qualifies as the beneficial owner of the income.   

This means that a Cooperative will - from a Dutch perspective - usually be eligible for treaty benefits, like the reduction of foreign withholding taxes on dividends, interest or royalties received from another treaty state.

As the Cooperative is however not a standard legal form, the tax authorities in the source state may scrutinize the payments made to a Cooperative and ultimately even deny treaty benefits. Some countries have even adopted special policies for the tax treatment of a Cooperative as recipient of income from their country. In order to prevent these kinds of issues, it may be recommendable to interpose an ordinary BV between the Cooperative and the foreign company which makes the payments.

From the Dutch perspective, the Cooperative also qualifies for the EU withholding tax exemptions for dividends, interest and royalties. It is noted however, that a Cooperative as shareholder of an EU subsidiary will have to meet the anti-abuse rule (real presence/ main purpose test) like any other intermediary (EU) holding company. 

Advance tax ruling for a Cooperative

It is generally possibly in the Netherlands to obtain an advance tax ruling on the Dutch tax treatment of a Cooperative and its members. 

The tax ruling may include confirmation of:

• application of the participation exemption (if the cooperative acts as holding company);
• taxable margin to be reported (if any) in lieu intra group financing (if the Cooperative acts as finance company);
• the entitlement to a residence statement from the Dutch tax office, which is generally required to obtain treaty benefits;
• tax exemption of the members of the cooperative for the income which they receive from the Cooperative.

A ruling procedure is a rather time consuming procedure and many of our clients decide to proceed on the basis of 'confidence on policy and case law' which is an accepted principle in Dutch tax law.

If you require more information about this topic, please feel free to contact us.

What can we do for you?

We are engaged on a daily basis by non-residents (corporations and individuals) who want to incorporate a Dutch Cooperative. 

It usually starts with an inventory of the plans for the Cooperative and the potential tax consequences and tax compliance requirements. Once the decision to set up the Cooperative has been taken, we can execute and arrange for the incorporation on your behalf.

To the extent required we can further co-ordinate the input of other parties involved (like banks, lawyers, etc.) and make sure that the incorporation process goes smoothly and efficiently.  

Once the BV has been set up we can monitor the tax registration and handle the administration, payroll and ongoing tax compliance matters. 

The services we provide include:

If you have any questions please feel free to contact us via e-mail or call us at our offices in Amsterdam +31 (20) 5709440 or Rotterdam +31 (10) 2010466. Of course you are also welcome to visit our offices.

We will make time for you!