Does this result in tax benefits or anonymisation?
The anonymisation of assets and the avoidance or reduction of taxation are topical issues. To save on tax, assets can, for example, be held within a private limited company, also known as a ‘savings company’ (see also: I’ve decided to put my savings into the company after all). A CV can probably be used for anonymisation (you can find more information in our article: Tax returns, anonymisation or tax evasion).
But what about the foundation?
Judgment of the Court
The Court of Appeal in The Hague recently ruled that a foundation’s assets could not be attributed to its director(s). The foundation was not fiscally transparent and there were no separate assets.
The facts were as follows. A woman had set up a foundation with the aim of promoting the teaching of modern languages. The foundation owned four properties, which it let out. The woman served as a director alongside her son. Following the woman’s death in 2013, her son became a director alongside her grandson. The son rented one of the foundation’s properties. The tax inspector is of the opinion that the foundation’s assets in 2012 can be attributed to the son.
According to the Court, it had not been demonstrated that the son had actual control over the foundation’s assets, as if they were his own. Although the board consisted of family members, this did not in itself mean that the board was not independent. It had not been proven that the board was free to dispose of the income and assets held by the foundation. The foundation could therefore not be regarded as fiscally transparent.
Furthermore, according to the Court, there was no separate estate intended to serve a private interest to more than a minor extent. Where there is a separate private estate (an APV), that estate is attributed to the contributor for tax purposes.
The foundation
Like many other legal entities, a foundation is, in principle, an independent entity. This means, amongst other things, that the foundation is a separate taxpayer. There are two exceptions to this: if the foundation is fiscally transparent, or if there is a separate private asset pool.
A foundation is tax-transparent if its board has free disposal over the foundation’s income and assets. The board must be able to dispose of the foundation’s assets as if they were its own.
Separate private assets are deemed to exist if the aim is to serve a private interest to more than a minor extent. Exceptions to this are situations where economic participation arises, or where the separation of assets is offset by the issue of, amongst other things, shares. A private interest is served; it is not, therefore, almost exclusively a general or social interest.
Anonymisation
The UBO register is expected to be introduced this year. This register contains details of the ‘ultimate beneficial owners’ of legal entities. The UBO register also applies to foundations. Using a foundation will therefore not help to maintain anonymity. However, using a foundation in combination with a limited partnership (CV) may potentially help to achieve this.
The CAHR (Central Shareholders’ Register) is expected to be introduced in the near future. The CAHR is seen as a tool that can help prevent and combat financial and economic crime. It is expected that the CAHR will not apply to foundations.
Tax relief
Where a foundation qualifies as a tax-transparent foundation or as a separate private asset, it is not the foundation that is liable for tax, but the natural persons behind the foundation. The assets contributed to the foundation are attributed to these natural persons, and are subsequently subject to income tax. Although the assets are no longer technically in Box 3, they are nevertheless taxed there. There is therefore no tax advantage to speak of. The situation is different if assets are contributed to a foundation and the board does not have free disposal of those assets, for example because the foundation serves a social purpose.