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Dutch Government To Tighten Trust Office Rules

Tuesday, November 21, 2017

The Government of the Netherlands intends to strengthen the regulatory regime for Dutch trust offices as part of its ongoing efforts to reduce tax avoidance and fraud.

Core elements of the proposed new supervision of trust offices legislation were announced recently by Minister of Finance, Wopke Hoekstra, following approval by the Council of Ministers.

Under the changes, a trust office must be organized as a private or public company (a BV or NV), and satisfy a minimum physical presence test, which will require day-to-day management activities to take place in the Netherlands by at least two trust office managers.

In other changes, trusts will no longer be permitted to provide both trust and tax planning advice to the same client, and will be prevented from outsourcing their compliance functions to external parties. They will also be obliged to share due diligence information with one another, so that if a client fails due diligence checks with one company, they will be unlikely to be taken on by another.

The new legislation provides the Dutch Central Bank (DNB) with tougher supervisory powers and sanctions. The maximum fine that the DNB can impose on a trust office will rise to EUR5m (USD5.9m) from EUR4m, and the bank will have the abilty to withdraw operating licenses.

Commenting on the proposals, Hoekstra said: "In recent years the trust sector has not adequately defended our system and in some cases even facilitated matters such as tax evasion. DNB has repeatedly found that trust offices do not sufficiently comply with the law, both in letter and in spirit. That is reason for the cabinet to intervene. Trust offices must be honest and reliable and check carefully for whom they work."

The Council of Ministers has sent the draft law to the Council of State for advice. The bill will be published following its subsequent introduction into the House of Representatives.