U.S.-The Netherlands Qualifications Differences for Dutch C.V.s

The Dutch Commanditaire Vennootschap (CV) is the equivalent of a limited partnership under US law. However, the approaches used in the US and the Netherlands concerning the issue of entity characterization are markedly different. For example, a closed CV, transparent according to Dutch tax law, must be characterized for US tax purposes as an association that is taxable as a corporation. In addition, an open CV may be treated as a transparent entity for US tax purposes. Such organizations, treated as entities in one country and as fiscally transparent in another, are usually referred to as hybrid organizations. The ambiguous position of a hybrid CV could theoretically be used for tax planning purposes. However, the practical usefulness of a hybrid CV is extremely small; unintended double taxation seems a more likely prospect.