The liquidation of a Dutch BV is a relatively easy and smooth procedure. Under certain circumstances it is even possible to liquidate a BV with an single resolution (the so-called "turbo liquidation"; see below)

However, in daily practice the liquidation of a BV may become burdensome and time consuming, in particular if the financial position of the company is not clear at the moment of liquidation or if there are more shareholders which are entitled to a stake in the company's assets/ liabilities. Also the tax aspects of the liquidation may be a complicating factor.

Below we will elaborate on the legal procedure for the liquidation of a Dutch BV and the Dutch tax implications of such a liquidation.

The following topics will be discussed below:

The legal procedure for the liquidation of a Dutch BV

The procedure for the liquidation of a Dutch BV is described in Dutch corporate law and specified in the company's Articles of Association.

The law provides for three possible procedures for the liquidation of a Dutch BV:

• the standard procedure,
• the so-called accelerated liquidation and
• the so-called turbo liquidation.

The standard procedure

The standard liquidation procedure starts with a resolution of the General Meeting of Shareholders to dissolve the company and to liquidate its assets/liabilities. In the same shareholders' resolution the directors are dismissed, the liquidator(s) is appointed, and a custodian for the corporate books and records of the company is appointed. It is common that in the same resolution the directors are discharged from their (potential) liabilities in relation to their deeds of management for the company.  In the event that the company has a Supervisory Board, this body should approve the shareholders' resolution to dissolve the company.

The resolution to dissolve and liquidate must be registered with the Trade Register of the Chamber of Commerce.

As from the moment of the dissolution, the Dutch words "in liquidatie" (in liquidation) should be added to all publications, letters and announcements of or by the company.

The liquidator prepares a final account of the liquidation ('rekening en verantwoording"), and if there are multiple shareholders a plan of distribution ("plan van verdeling").

The plan of distribution describes the way the company's assets and liabilities are divided between the parties entitled thereto. If there is only one shareholder the plan of distribution is not necessary. The final account and the plan of distribution must be deposited at the company's office, if such office still exists, and must be filed with the Trade Register of the Chamber of Commerce.

The liquidator must publish a notice in a nationally distributed daily newspaper, stating where the final account and the plan of distribution have been deposited for public inspection. Upon publication of such a notice in the newspaper a two-months waiting period commences, during which any interested party may institute opposition against the final account and/or the plan of distribution.

After expiration of the two-months waiting period, the actual distribution of the assets/liabilities may take place, unless objections were raised.

Upon termination of the winding-up procedure, the company's books and records must remain stored with the custodian for a period of seven years. For tax purposes a longer storage period may be required for certain specific documents.

The Trade Register of the Chamber of Commerce must be notified of the termination of the liquidation procedure, and of the name and address of the custodian of the corporate books and records.

Should it appear after the liquidation has been completed that there still remains an asset to be liquidated, or that a creditor or beneficiary has not yet been taken into account, then the liquidation may be "reopened" by a decision of the Court. In such case the company "revives", but solely for the purpose of re-liquidating the balance; to the extent that the beneficiaries have received too much, the liquidator is authorized to reclaim the balance already distributed.

The accelerated liquidation (distribution in advance)

The standard liquidation procedure may be accelerated if the liquidator, after the shareholders' resolution for the liquidation has been adopted, the registration with the Trade Register of the Chamber of Commerce have taken place, and the (then known) debts of the company have been settled, is willing to distribute the remaining assets of the company among the beneficiaries by way of a so-called distribution in advance. In the event that such a distribution takes place during the two months waiting period, prior approval of the appropriate district court is required in order to make such distribution.

Since the possibility exists that the assets distributed in advance may have to be (partly or wholly) recovered to effect a redistribution (see below), an "accelerated liquidation" is only recommendable if (1) the liquidator has reason to assume that all creditors are known to him, (2) the beneficiaries of the final balance of the company are few in number, and (3) the beneficiaries ensure, for instance by way of a guarantee, that they will restitute (part of) the distribution in advance if a creditor still comes up or opposition is still (successfully) instituted.

Although in practice there may be nothing left to be liquidated, the liquidators still need to prepare a final account of the liquidation, as well as plan of distribution. Normally, this will be a mere formality, but the possibility remains that an unknown creditor may still come up as a result of the announcement in the daily newspaper or opposition may still be instituted during the two months' period following the publication. In such case the assets distributed in advance may have to be (partly or wholly) recovered to effect a redistribution. Should recovery not be possible and should one or more creditors thus remain unsatisfied, the liquidator(s) will be personally liable for the loss(es) thus incurred.

The turbo liquidation

Notwithstanding the aforementioned, the company ceases to exist at the very moment of the resolution of the General Meeting of Shareholders and the Board of directors to dissolve the company if it does not have any assets or liabilities at the moment of liquidation. In such case there will be no process of winding-up, and consequently no liquidators have to be appointed. This procedure is referred to as the turbo liquidation. The Management Board must file the liquidation of the company with the Trade Register of the Chamber of Commerce. The company's books and records will remain stored with the custodian for a period of seven years.

The apparent downside of a turbo liquidation is the potential personal liability for the director(s) of the company for hidden debts and liabilities of the company. In order to avoid such liability the liquidation accounts must be correct and complete. 

The Dutch tax implications of the liquidation of a BV

For Dutch tax purposes the liquidation of a BV is treated like a (deemed) sale: the assets/liabilities of the company must be revaluated at their fair market value at the moment of liquidation and a subsequent gain or loss must be included in the company's taxable profits in the year of liquidation.

To the extent the participation exemption applies, a gain or loss on the shares in qualifying subsidiaries is tax exempt.

Accumulated tax losses or tax credits will usually vaporize upon liquidation.

The liquidation distribution (after revaluation) in excess of paid in capital will under normal circumstances qualify as a dividend and may as such be subject to Dutch dividend withholding tax. The standard Dutch dividend withholding tax rate is 15% (2020), but may be lower by virtue of applicable tax treaties or the EU Parent Subsidiary Directive.

We refer to the page "Overview Dutch dividend withholding tax rates under tax treaties" for an  overview of dividend withholding tax rates under applicable tax treaties.

To the extent the paid-in capital of the company originates from a share for share merger or legal merger, the repayment of capital may be subject to Dutch dividend withholding tax. The capital created upon such a  merger is referred to as "tainted capital" (besmet kapitaal). To the extent foreign corporations were involved with the merger a step up in tax basis may be possible.

The revaluation of loans and receivables my result in taxable currency exchange profits (even if non-realized).

The liquidation of a BV implies the end of the fiscal life of a BV. After the liquidation process is completed the BV must be deregistered with the Dutch tax authorities. For Dutch tax purposes a liquidation is final when the liquidation procedure is completed and the company has no assets or liabilities left. This implies that the last bookyear for tax purposes usually ends later than the last financial bookyear (which typically ends when the shareholders resolution with the decision to liquidate is adopted).

Following the above, a straightforward liquidation of a Dutch company can have significant Dutch and foreign tax consequences. Depending on the specific situation one of the following alternatives may give a better outcome:

• (crossborder) legal merger instead of liquidation (with possible deferral of taxation of hidden capital gains and avoidance of a taxable dividend);
• sale as shelf company (no Dutch dividend withholding tax levy over positive reserves);
• transfer tax residence to another treaty state (no Dutch dividend withholding tax levy over positive reserves);
• convert into another legal form (like a tax exempt portfolio investment company);
• conversion into a corporation of another state (transfer corporate seat).

What we can do for you

We advise you on possible scenarios for the liquidation of your Dutch entities and assist you with the actual liquidation.

We can take almost the complete liquidation process out of your hands and provide amongts others the following services in relation to a liquidation:

If you are interested in our services 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 also welcome to visit our office.