Tax law ICOs & STOs
The role of tax law in ICOs and STOs
In the recent period we have seen numerous Initial Coin Offerings (ICO’s) taken place all over the world. Also the Netherlands has been proven to be an attractive jurisdiction. As far as it concerns taxation the Netherlands provide for a stable fiscal climate, with an extensive treaty network and provides for enough incentives for a successful launch of an ICO.
Do not forget about tax law!
As with most of the ICO’s there a lot to think about. In general the most attention is paid to regulatory considerations. In most cases taxation at first glance takes a back seat. However, we experience more and more that along the road there is strengthen awareness that taxation may have a severe impact on how to structure the ICO. Especially in the beginning of a project there is not or little attention to tax considerations, although there are numerous to be considered. Not only with regard to the ICO itself and the entity that contemplated the ICO but also for the founders/advisors within ICO projects.
For founders for instance it is worth to consider how founders tokens may be received. Based on the actual facts and circumstances, the founder tokens may be taxed against a progressive rate of 52% in box 1, a flat rate of 25% in box 2 or in box 3 against a considerably lower rate. Stating the obvious, the preference is in general to have the founder tokens in box 3. The question is however whether this is always achievable. A careful advise in this regard indispensable. This means in most cases that it is important to involve a Dutch tax advisor at an early stage.
Taxation in general can have a severe impact on the structuring of an ICO. It is better to go with a suitable structure from the get-go than to have a structure that has to be changed (several times) in the near future. A suitable structure from the get-go can save a lot of hassles, time and in the end money, which can be reinvested to benefit the project. We have seen that more and more investors require that there is a solid plan also from a legal and tax perspective and that possible issues have been thought through well.
What is the viewpoint of the Dutch tax authorities?
The most difficult thing from a Dutch tax perspective is that the Dutch tax authorities issued no or little guidance on how to deal with ICO’s. Still, based on our experience it should be considered very carefully how Dutch tax law is observed when an ICO is envisaged. We have a solid-track record in advising parties that wish to launch an ICO […].
For more information contact Tom Zondag.