Videoconferencing by the Board of Directors: unwanted tax consequences?

22 April 2020 - We are living in strange times. About half of the world population is currently in some form of ‘lock down’. As a result thereof many plans cannot be carried out as they had been devised. However, creativity looms as well. Working from home is suddenly widespread and seems to have little impact on the productivity of people. Work is done ‘from a distance’ and meetings are held via applications such as Skype and Zoom.

This also applies to many formal meetings, such as meetings by shareholders or the board of directors of legal entities. Conference calling is not without corporate income tax risks. Questions such as ‘what is  deemed to be the place of a videoconference which obviously takes place in more than one place, but possibly also in more than one country’ rise. The answer to this question is not straightforward, but may have far reaching tax implications.

An entity qualifies, in short, as a Dutch tax resident in case the place of effective management is in the Netherlands. To determine this, the place where the board of directors usually performs such tasks, is leading. In normal cases this is determined by physical presence of said board of directors, where all board members are present on the same physical location. On 3 April 2020, The OECD has stated that, in their opinion, the absence of such physical presence, for a short period of time under COVID-19 restrictions should not lead to a change of the place of effective management of a company.


However, the place where a board resolution is deemed to be taken can also be relevant for the so-called Dutch substance requirements. The minimum conditions we ask in the Netherlands to be seen as a ‘real’ tax resident. These require i.a. that half of the board of directors are Dutch tax residents and that all important board meetings should take place in the Netherlands. In these strange times it is clear that important board resolutions need to be taken. Evidently foreign board members cannot attend these meetings physically.

Board resolutions by video conferencing

Based on the Dutch civil law, there are no legal obligations that prohibit the board of directors to have a general meeting via videoconference. Can taking adequate measures via videoconferencing have adverse tax consequences? It seems very unreasonable.

In a letter from the Dutch Association of Tax Advisors (NOB) to the Dutch Ministry of Finance on 17 March 2020,  they have requested to act lenient in relation to application of the substance requirements under COVID-19. They request the Ministry to approve such measures in policy, arising from the inability to travel. Similar policy has been adopted for cross-border workers who are now working from home. The Dutch Ministry has not yet responded to the request of the NOB.

Finally, what is the best approach for board meetings that need to take place? In our view it is evident that in case of a videoconference with only board members in the Netherlands, the place of said resolution should be deemed the Netherlands. But what in case 3 out of directors are in the Netherlands or only 2? Given the importance for the global health, Dutch tax law should not be providing contradictive incentives. We therefore see the solution in a confirmation that when at least half of the board members are in the Netherlands during a conference call, the meeting is deemed to take place in the Netherlands.

Want to know more?

Do you require more information? Please contact Thierry Boonstra by email or by phone +31 (0)88 277 21 78. He will be happy to help you.