Definition of conduit companies

The Committee concludes that there is no clear definition of a conduit company. Multiple criteria should be met to qualify as such, including the presence of an international structure, transactions with related parties, limited genuine presence in the Netherlands, tax, financial or legal motives and large international cashflows or balance sheet positions.
The Committee concludes that the limited tax revenue and direct employment opportunities generated by these conduit companies do not outweigh the negative effects such entities have on other jurisdictions and the reputation of the Netherlands. In the reaction to the Report, it is mentioned that this conclusion is based on 2019 statistics, which do not yet reflect many of the anti-abuse rules that entered into force since.


The Report describes three categories of motives for the presence of conduit companies in the Netherlands: tax reasons, non-tax reasons (e.g., flexible corporate legislation, legal services, infrastructure etc.) and money laundering. To the extent these reasons are deemed harmful, the Committee recommends discouraging the use of conduit companies. These recommendations are divided in tax and non-tax recommendations.

The tax recommendations include:
1. Expanding the number of situations in which information on the conduit companies is exchanged with relevant jurisdictions
2. Including a general principal purpose test in all Dutch tax treaties
3. Being proactive and supportive regarding the EU proposal on shell entities
4. Seeking clarification within the EU on the existing EU anti-abuse rules

Reaction to the Report and what’s next?

The Dutch caretaker government indicated that the Netherlands currently takes a pro-active stand in the further steps to revise the international tax system. Given the current caretaker status of the Dutch government, the still-to-be-formed government will assess the recommendations of the Committee and possibly translate them into policy.
Furthermore, already for quite some time, the Dutch government has had the intention to introduce substance requirements for Dutch holding companies as of 1 January 2022. It follows from the reaction to the Report that measures in this respect will be reconsidered in light of the proposal for an EU directive fighting the abusive use of shell entities, which is expected at the end of this year. We expect that this EU proposal will shape the future Dutch tax legislation on conduit companies.

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