Greenberg Traurig, LLP



GT Alert

Advantageous Dutch CV-BV Tax Structure Still Alive

July 2005

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In the past, numerous U.S. multinationals established so-called Dutch CV-BV structures. The purpose of this structure is to defer U.S. taxation on foreign source interest income, royalties and dividends, while the interest and royalty payments remain deductible in the source country. Upon implementation of the Protocol to the U.S./ Netherlands tax treaty, January 1, 2005, it seemed that the benefits of this structure would no longer apply. However, in his Decree of July 6, 2005, the Dutch State-Secretary of Finance issued conditions under which the benefits of this structure may still be granted to U.S. shareholders.

CV-BV Structure

The following is a simple diagram of the operation of a CV-BV structure:

Diagram of the operation of a CV-BV structure


The CV is a reverse hybrid entity (Dutch partnership/U.S. corporation). For U.S. tax purposes, the foreign companies and the BV are tax transparent entities, so that dividends, interest and royalties received by the BV are considered active income of the CV. Accordingly, the earnings of this entity will not be subject to U.S. corporate income tax until such amounts are remitted to the U.S. corporation.


The BV is a hybrid entity (Dutch corporation/ U.S. branch (check-the-box election)). Dependent of the activities of the BV, its profits will be remote due to the pass-through of the royalties and/or interest income to the CV. Dividends are normally exempt from Dutch corporate income tax under the participation exemption.

Interest and royalties paid from the BV to the CV are not subject to Dutch withholding tax, while in general dividends are taxed at a maximum of five percent Dutch dividend withholding tax (but possibly taxed at zero percent).


The benefits of this structure include royalty and interest deduction at the source, and no pick-up of this income in the Netherlands or the U.S. In addition, dividends paid by the BV to the CV are not subject to U.S. taxation.

New Protocol

The new Protocol to the U.S./Netherlands tax treaty provided for a new article 24, para. 4. Based on this article, from a Dutch taxation point of view the U.S. corporation has no treaty protection with respect to the interest, royalty and dividend income received from the BV. Consequently, the Netherlands may levy a corporate income tax on the interest income received by the U.S. corporation from the BV, and may levy a 25 percent Dutch dividend withholding tax on dividends distributed by the BV. Consequently, the benefits of this structure would no longer apply.

Decree of July 6, 2005 of the Dutch State-Secretary of Finance

In the Decree of July 6, 2005, the Dutch State-Secretary of Finance announced that article 24, para. 4 of the U.S./Netherlands tax treaty would not be applied, with the condition that the CV participates in a Dutch resident entity (e.g., a BV) that performs substantial activities in or via the Netherlands. Whether or not substantial activities are performed in or via the Netherlands will be judged by the Dutch ruling team.


Clients that have established a CV-BV structure should be contacted to check whether or not all requirements under the Decree of July 6, 2005 are met.

Other clients should also be contacted, as appropriate, to introduce them to this CV-BV structure, which may be a valuable proposition for them. The CV-BV structure can be used as an international acquisition structure or as a beneficial tax finance or royalty structure.


This Alert was written by Gerwin de Wilde of the Amsterdam office. Please contact Gerwin de Wilde at + 31 20 30 17 419 or your Greenberg Traurig liaison if you have any questions regarding the subject matter of this Alert.

© 2005 Greenberg Traurig

Additional Information:

For more information, please review our Tax Practice description, or feel free to contact one of our attorneys.

This GT ALERT is issued for informational purposes only and is not intended to be construed or used as general legal advice. Greenberg Traurig attorneys provide practical, result-oriented strategies and solutions tailored to meet our clients’ individual legal needs.