Netherlands to become less appealing for letterbox companies

In the coming years the Netherlands plans to make itself a less attractive option for companies to establish shell companies in the country. The government is taking a number of measures to ban companies that only choose the Netherlands to avoid taxes at their home base.

The number 2 at the Finance Ministry, Menno Snel, wants to get rid of the image of the Netherlands as a place to dodge taxes.  "The Netherlands is not a tax haven," he says. "We are going to make sure that the [business] constructions that were in the news are no longer possible."

American coffee behemoth Starbucks made international headlines when EU authorities took aim at its deal with the Netherlands. Starbucks Manufacturing BV, based in the Netherlands, was alleged to have overestimated its royalty fees paid to a limited partnership as a way of lowering its Dutch tax burden with permission from the Dutch government.

The Rolling Stones and U2 also use Dutch letterbox firms to so they do not have to pay a tax on royalties.

A new tax on royalties will begin in the Netherlands in 2021. In addition, the Netherlands wants to establish treaties by which companies that transfer their capitals here, still have to pay taxes in their own country. The abuse of Dutch treaties at the expense of the treasury of other countries will no longer be possible.

To make it more difficult for the tax advisors of letterbox firms and tax evaders, the law stipulates that they must fully register all their customers. At the moment the person who benefits from the tax construction often remains out of the picture. Lawyers and civil law notaries who have cooperated and received a fine for illegal constructions will be made public.

He wants the Netherlands to attract companies with real economic activities that generate jobs. Those would be received "with open arms". "But we close them when a company only comes for the transfer of money", says Snel. Because, he says, the willingness of ordinary citizens and entrepreneurs to pay taxes also decreases as long as internationally operating companies are allowed to continue to come up with structures to pay as little as possible.