The State Secretary for Finance has recently answered queries in the Dutch Lower House concerning the anonymization of assets by means of limited partnerships (cv). Since the adoption of the fourth anti-money-laundering directive in 2015, the Dutch Tax Authorities are no longer conducting pre-conciliation regarding structures intended to anonymize assets. Since the fourth anti-money-laundering directive has not brought about any change in Dutch legislative and regulatory provisions, rulings issued before that time have not been revoked or amended.
The Code of Commerce requires associations such as general and limited partnerships to function as a business. This obligation is generally fulfilled if there is participation in the course of trade for financial gain in order to obtain income. However, that does not necessarily mean that there is a company for taxation purposes. Certainly, trade in goods normally qualifies as a business for taxation purposes, but the mere possession of shares does not.
If a limited partnership is running a business for taxation purposes, the Supreme Court has determined that a general partner breaching the management prohibition is treated as a managing partner and, along with that, as an entrepreneur for income taxation purposes. The legal form of the limited partnership does not change because of this. If the limited partnership qualifies as an open limited partnership, it is obliged to pay corporate tax. When filing its corporate tax returns, the open limited partnership must deduct the managing partners’ dividends from its profits. This must also be done in the case of the dividend of the limited partner who, because of breaching the management prohibition, is now treated as a managing partner.
The State Secretary cannot rule out continued use of the limited partnership in order to anonymize assets in the future. The Tax Authorities still, on request, issue orders for a fiscally-silent share merger. These anonymization structures have not been set up in order to pay less income taxation or to put assets out of the grasp of the Tax Authorities. Thus, there is no reason not to put such structures in place.
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