Bringing you live news and features since 2006 

Briefing underlines need for substance in holding companies


Substance is no longer an option but a requirement in the setting-up of holding companies and other special purpose vehicles, according to speakers at an Equity Trust briefing in London.

“The era in which tax planning consisted of taking an international tax guide off the shelf, finding a country with a suitable tax treaty and setting up a post-box SPV there is over,” said keynote speaker Jeroen van der Wal. “Today there is a need to take substance and beneficial ownership a lot more seriously.”

Van der Wal, a tax adviser with the Dutch tax boutique Otterspeer, Haasnoot & Partners, outlined the growing awareness and focus on economic substance and beneficial ownership. He said this was reflected by an increase in both domestic and treaty-based anti-abuse measures, and had necessitated a change in approach to cross-border tax planning.

The question of substance is a key issue in determining whether tax authorities will regard a SPV that had been interposed as part of a tax-planning structure as legitimate or not, he said, describing a number of significant legal decisions on this topic.

Dik-Jan Jetses, commercial director for Equity Trust in Amsterdam, addressed key issues relating to the proper setting-up and running of holding companies and other SPVs in order to achieve and maintain demonstrable substance in line with required levels. He presented requirements in The Netherlands as an example, but pointed out that many of the factors were common to other jurisdictions.

“SPVs should be treated as real companies, not only as a box on a corporate chart,” he said. “The company should have proper administration and documentation of assets, and its directors should have a realistic role in transactions rather than playing a ‘puppet’ role.

“It is also advisable to let the holding company take a certain degree of risk, as is the case with real companies, otherwise the authorities could claim it was purely a conduit company.”

Recommendations to clients about substance had now become requirements, Jetses added. In his example, these included having a board which held most of its meetings in The Netherlands; was empowered to execute agreements; and had at least 50 per cent of Dutch-resident directors. Accounting, bank payments and other administrative functions should also be maintained within the jurisdiction.

Latest News

ETF data providers ETFGI has reported that the ETFs industry in the United States gathered net inflows of USD8.17 billion..
Chimera Capital LLC, an Abu-Dhabi-based investment management firm, has announced that BHM Capital, a UAE-based financial services firm, has become..
Fidelity International has announced the launch of the Fidelity Global Government Bond Climate Aware UCITS ETF, expanding its climate-focused ETF..
ETFs in Europe gathered net inflows of USD8.61 billion during February, bringing year-to-date net inflows to USD27.94 billion, according to..

Related Articles

Off the Record Episode 1
ETF Express is pleased to announce the launch of Off the Record, a new podcast series, in partnership with Truss...
February ETF flow figures from iShares at BlackRock reveal that inflows into global ETPs were moderate for a fifth consecutive...
Noel Archard, AllianceBernstein
Noel Archard has been in position as the global head of ETFs at AllianceBernstein for just over a year and...
Subscribe to the ETF Express newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by