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The transatlantic business landscape is undergoing a fundamental transformation. With the August 2025 US-EU trade framework imposing 15% tariffs on a broad category of goods EU goods and the EU's commitment to invest $600 billion in the US by 2028, internationally active businesses face unprecedented opportunities alongside heightened regulatory scrutiny. For companies structuring cross-border operations, success now hinges on demonstrating genuine substance while maintaining tax efficiency. In this article, we will describe a practical approach on how to deal with another set of court cases recently issued around the theme of substance impacting the use of holding companies in international tax structures.
This article was written by Dick Brinkhof ([email protected]) and Mario van den Broek ([email protected]). Dick and Mario are senior consultants with RSM Netherlands International Tax Consulting, focusing on global tax developments.
The substance imperative
Recent judicial developments have dramatically elevated substance requirements across Europe. The July 2025 Dutch Supreme Court rulings (22/02691 and 22/02695) have crystallized what many tax advisors suspected: tax authorities are systematically challenging structures lacking genuine economic activity. The court's decisions, involving Belgian holding companies in Dutch private equity structures, demonstrate that even technically compliant arrangements can be denied treaty benefits if they lack real substance.
The European Commission's ATAD III proposal, though currently stalled but potentially revivable, signals the direction of regulatory thinking. Companies must now prepare for a future where "letterbox" entities—those existing primarily on paper—face systematic exclusion from tax benefits. This shift affects not just obvious shell companies but also legitimate holding structures that may appear passive to tax authorities.
Private Equity and investment structures under pressure
The 2025 European private equity outlook reveals a market in recovery, with deal volumes expected to increase significantly in the second half of the year. However, this growth occurs against heightened substance scrutiny. Private equity structures, traditionally relying on intermediate holding companies for tax efficiency, now face challenges.
The Dutch Supreme Court's emphasis on shareholder control over dividend allocation has broad implications beyond family structures. Where ultimate beneficial owners maintain discretionary control over profit distribution, tax authorities may look through intermediate entities to the true economic owners. This principle could affect multinational investment platforms, particularly those where parent companies maintain operational oversight of Dutch entities.
VAT: the hidden complexity
Value-added tax considerations often receive insufficient attention in cross-border structuring, yet they can significantly impact transaction economics. The Netherlands has intensified scrutiny of entities created solely for VAT registration purposes, particularly in acquisition structures.
For internationally active businesses, VAT planning must integrate with overall substance strategies. Advisory costs related to acquisitions must demonstrate clear links to ongoing taxable activities. Companies should establish detailed business plans showing anticipated substance before incorporation, ensuring VAT registrations support genuine economic activities rather than one-off transactions.
Pillar Two's expanding reach
The OECD's continued guidance on Pillar Two implementation adds another layer of complexity to international tax planning. With over 70 jurisdictions now implementing these rules, the 15% global minimum tax rate affects virtually all large multinational enterprises. Recent guidance clarifies that qualifying Pillar Two top-up taxes may satisfy various "subject-to-tax" tests in Dutch legislation, potentially offering relief in some anti-abuse scenarios.
For companies with effective tax rates below 15% in any jurisdiction, Pillar Two creates additional compliance obligations while potentially triggering top-up taxes. This development particularly affects structures historically designed to achieve low tax rates in specific jurisdictions.
Strategic recommendations for internationally active companies
Substance-first planning: Modern tax planning must begin with genuine business substance. Companies should document real decision-making processes, maintain adequate local personnel, and demonstrate active involvement in subsidiary management. The Danish and Dutch case law shows that minimal presence is insufficient; tax authorities expect demonstrable functional activity.
Integrated VAT strategy: VAT planning should align with broader substance requirements. Companies should establish clear business rationales for new entities, document ongoing taxable activities, and maintain proper advisory cost allocation to VAT-taxable transactions.
Pillar Two compliance: Organizations must implement robust ETR monitoring systems and prepare for potential top-up taxes. The complexity of Pillar Two calculations requires significant investment in compliance infrastructure, but proper planning can identify optimization opportunities within the rules.
Treaty position management: With heightened anti-abuse scrutiny, companies must carefully document treaty positions. This includes maintaining proper substance documentation, ensuring entities have genuine business purposes, and preparing for potential challenges to historical arrangements.
Looking forward
The convergence of US trade policy changes, European substance requirements, and global minimum tax rules creates a complex but navigable landscape. Success requires abandoning pure tax optimization in favor of integrated business planning that demonstrates genuine substance while achieving appropriate tax outcomes. Companies that adapt proactively—establishing real substance, implementing comprehensive compliance systems, and aligning tax strategies with business operations—will emerge stronger. Those clinging to outdated structures risk significant penalties and lost opportunities in an increasingly substance-focused regulatory environment.
The new reality demands sophisticated, collaborative approaches combining local expertise with global perspective. For internationally active businesses, the question is not whether to adapt but how quickly to embrace substance-driven strategies that ensure both compliance and competitive advantage in the evolving transatlantic marketplace.
RSM is a thought leader in the field of International Tax Structuring. We provide frequent insights through training and the sharing of thought leadership, based on our detailed knowledge of industry developments and practical applications gained from working with our customers. In case of any questions, please contact one of our consultants.