April 22nd, 2025
The Anglo-Saxon trust is a legal arrangement commonly used for asset protection, estate planning, and potential tax deferral. A trust is not a legal entity, but rather an agreement between the settlor, who is the founder of the trust, and the trustees, who are the individuals or entities responsible for managing the trust. The individuals or organizations for whose benefit the trust is established are referred to as beneficiaries. In the context of family trusts, beneficiaries typically include spouses, children, grandchildren, or other close relatives.
Afgezonderd Particulier Vermogen
Since January 1, 2010, Dutch tax law has included a specific regime in the Income Tax Act for secluded private assets, classified as ‘Afgezonderd Particulier Vermogen’ (APV). An APV refers to a structure where assets are isolated and serve a private interest that is more than incidental. While trusts are a typical example, other structures such as the Antillean Stichting Particulier Fonds, a foundation, Anstalt, Stiftung, or Genossenschaft can also fall within the APV scope. If a Dutch taxpayer, their fiscal partner, or underaged children have any legal or economic entitlement to an APV, this must be reported in their annual personal income tax return.
Please note that the Dutch Supreme Court has recently ruled that the APV regime under the Income Tax Act does not apply in situations where an individual can treat assets held in a trust as their own. In such cases, that individual will be taxed directly on the trust’s assets under income tax.
Fiscal Transparency and Taxation
An APV is considered fiscally transparent under Dutch tax law. This means that the rights to the underlying assets are attributed to individuals rather than the trust entity itself. The tax consequences depend on how these rights are exercised and on the roles of the settlor and the beneficiaries.
Taxation may occur in:
- Box 1: Income from work and home;
- Box 2: Income from substantial interest;
- Box 3: Income from savings and investments; or
- Under Dutch inheritance or gift tax laws.
The default rule is that if the settlor is alive, the assets are attributed to them for Dutch income tax purposes. Upon the settlor’s death, the assets are attributed to the beneficiaries, potentially triggering inheritance tax. Until that point, the beneficiaries are not taxed on the assets unless specific rights, such as entitlement to regular distributions or withdrawals, are granted.
Practical Considerations and Recent Developments
Tax treatment ultimately depends on the trust deed, the legal and economic rights defined, and the facts and circumstances surrounding the structure. Dutch courts have ruled differently in cases involving annual withdrawal rights sometimes qualifying them as a taxable annuity in Box 1. However, these rulings vary and are highly fact dependent.
Additionally, the OECD’s push for transparency, the Common Reporting Standard, and the Mandatory Disclosure Rules (DAC6) in the EU have increased scrutiny of opaque structures such as trusts and similar APVs. Structures involving APVs are also more likely to be flagged and reviewed by Dutch tax authorities, particularly when involving cross-border elements.
Trusts can still serve useful estate and asset protection purposes. However, careful planning, tailored documentation, and timely disclosure are essential to ensure compliance and avoid unintended tax consequences. Tax treaties between the Netherlands and other jurisdictions may influence how certain elements of the trust are treated, particularly in determining residence, taxation rights, and relief from double taxation. These should always be carefully reviewed.
Contact
If you would like more insight in the possible tax implications a trust might have on your situation, please contact our tax consultants at Broadstreet by calling + 31 (0) 20 262 43 00 or emailing info@broadstreet.nl
