ACCOUNTING, LEGAL
AND TAX ENVIRONMENT
The Netherlands
CREDIBLE
RELIABLE
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ACCOUNTING, LEGAL AND TAX ENVIRONMENT The Netherlands
The objective of this brochure is to provide foreign
investors and their advisors with some basic knowledge
of the main areas of Dutch business law. We have
highlighted the areas that are most significant to foreign
investors based on our experience.
This guide takes into account the main legal provisions in
force as of 31 December 2015.
Although the greatest care has been taken in preparing
this guide, the information in this brochure is by no
means exhaustive. The law is constantly changing and it
is with this fact in mind that we stress the importance of
always obtaining expert advice when setting up business
activities in The Netherlands. Of course we would be
pleased to provide you with assistance in finding the right
legal and or tax expert.
Our knowledge and expertise is mainly based on practical
use of the law and our day-to-day management of many
client entities in the Netherlands with a wide variety of
objectives. It is this experience that can give you a head
start when deciding to do business in the Netherlands.
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PREFACE 3
INTRODUCTION TO NETHERLAND
The Kingdom of the Netherlands General Political environment Business environment Language skills Currency Cross border investments The advantage of doing business in the Netherlands 8
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SECTION I - CORPORATE LAW
1. GENERAL FRAMEWORK
1.1. Civil law
1.2. European influence
2. OVERVIEW OF DIFFERENT COMPANY STRUCTURES
3. PRIVATE LIMITED LIABILITY COMPANY (BESLOTEN VENNOOTSCHAP (BV))
3.1. Disclosure of shareholders
3.2. Limited liability of shareholders
3.3. Share capital
3.4. Capital contribution
3.5. Distribution of profits
3.6. Transfer of shares
3.7. Corporate bodies
3.8. Board of directors
3.9. Supervisory board (in case of a two-tier board system)
3.10. Single-shareholder Company
3.11. General meeting of shareholders
3.12 Periodic reporting and annual accounts
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4. PUBLIC LIMITED LIABILITY COMPANY (NAAMLOZE VENNOOTSCHAP (NV))
5. COOPERATIVE (COÖPERATIEF)
5.1. Liability of the cooperative and its members
5.2. Capital requirements
5.3. Capital contribution
5.4. Distribution of profits
5.5. Termination of membership
5.6. Corporate bodies
5.7. Board of directors
5.8. Periodic reporting and annual accounts
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6. FOUNDATION (STICHTING)
6.1. Liability of the foundation
6.2. Capital requirements
6.3. Distribution of profits
6.4. Corporate bodies
6.5. Board of directors
6.6. Periodic reporting and annual accounts and tax issues
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ACCOUNTING, LEGAL AND TAX ENVIRONMENT The Netherlands
7. FOUNDATION (STICHTING)
7.1. Liability
7.2. Capital requirements
7.3. Capital contribution
7.4. Distribution of profits
7.5. Corporate bodies
7.6. Periodic reporting and annual accounts
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8. EUROPEAN COMPANY (SOCIETAS EUROPAEA (SE))
8.1. Incorporation
8.2. Liability
8.3. Capital requirements
8.4. Capital contribution
8.5. Distribution of profits
8.6. Corporate bodies
8.7. Periodic reporting and annual accounts
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9. EUROPEAN COOPERATIVE (SOCIETAS COOPERATIVA EUROPAEA (SCE))
9.1. Incorporation
9.2. Capital requirements
9.3. Distribution of profits
9.4. Corporate bodies
9.5. Board of directors
9.6. Periodic reporting and annual accounts
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10. BRANCH
10.1. Legal formalities of a branch
10.2. Formal Foreign Company regime
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SECTION II - ACCOUNTING LAW
1. ANNUAL ACCOUNTS
2. TIMELINE FOR FINANCIAL REPORTING
3. EU INITIATIVE EXEMPTION ANNUAL ACCOUNTS MICRO ENTITIES
4. CURRENCY AND LANGUAGE
5. CONSOLIDATION EXEMPTIONS
5.1. 403 Exemption
5.2. 408 Exemption
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6. IFRS
7. ERROR CORRECTION
8. US GAAP
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SECTION III - BASIC PRINCIPLES OF TAXATION
IN THE NETHERLANDS
1. INTRODUCTION
2. DIRECT TAXES
2.1. Corporate income tax 2.2. Deductible expenses 2.3. Interest deduction limitation
2.4. Thin capitalization
2.5. Depreciation
2.6. Capital tax
2.7. Controlled Foreign Company (“CFC”) regulations
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3. DIVIDEND INCOME AND CAPITAL GAIN INCOME
3.1. Participation exemption 38
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4. DOUBLE TAX RELIEF
5. TAX INFORMATION EXCHANGE AGREEMENTS
6. WITHOLDING TAXES
6.1. Dividend tax 6.2. Interest and Royalties 39
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7. FISCAL UNITY
7.1. Non-Resident Shareholder Taxation 40
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8. INDIRECT TAXES (VAT)
8.1. Place of supply 8.2. Import duties
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9. PERSONAL INCOME TAX (PIT)
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10. OTHER
10.1. Real Estate Transfer tax 10.2. Advanced tax rulings (ATR) 10.3. Advanced pricing agreements (APA)
10.4. Flow Through Entities (doorstroom vennootschappen)
10.5. Bilateral Investment Treaties (BIT’s)
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ACCOUNTING, LEGAL AND TAX ENVIRONMENT The Netherlands
SECTION IV - SPECIAL VEHICLES IN THE NETHERLANDS
1. INVESTMENT COMPANIES (FISCALE BELEGGINGS INSTELLINGEN (FBI))
2. EXEMPT INVESTMENT FUND (VRIJGESTELDE BELEGGINGS INSTELLING (VBI))
3. INNOVATION BOX (PATENT BOX)
4. REGULATORY ASPECTS OF DOING BUSINESS IN THE NETHERLANDS
4.1. Anti money laundering (Wwft)
4.2. Financial Supervision Act (Wft)
4.3. Supervision on trust companies (Wtt)
4.4. Data protection
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THE KINGDOM
OF THE NETHERLANDS
The Kingdom of the Netherlands consists of the Netherlands itself and three islands Aruba, Curaçao and
Sint Maarten. After the dissolution of the Netherlands Antilles on October 10, 2010, the three islands
Bonaire, Saba and Sint Eustatius became special municipalities of the Netherlands.
Aruba, Curacao, Sint Maarten, Saba, Sint Eustatius and Bonaire are referred to as the Caribbean part
of the Kingdom. The three municipalities together are referred to as the Caribbean Netherlands.
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ACCOUNTING, LEGAL AND TAX ENVIRONMENT The Netherlands
INTRODUCTION
THE NETHERLANDS
GENERAL
The Netherlands is a constituent country of the Kingdom of the Netherlands, consisting of twelve
provinces in western Europe and three islands in the Caribbean. The European part of the Netherlands
borders the North Sea on the north and west, Belgium on the south, and Germany on the east and
shares maritime borders with Belgium, Germany and the United Kingdom. The country is a parliamentary
democracy organized as a unitary state. The capital city of the Netherlands is Amsterdam and the seat of
government is located in The Hague. The Netherlands in its entirety is often referred to as Holland, which
in strict usage, refers only to North and South Holland, two of its provinces; however the former usage is
generally accepted.
The Netherlands is a geographically low-lying country, with about 20% of its area and 21% of its population
located below sea level, and 50% of its land lying less than one meter above sea level. This distinct feature
contributes to the country’s name: in Dutch (Nederland), English, and in many other European languages,
its name literally means “Low Land” or “Low Countries.” Most of the areas below sea level are man-made,
caused by centuries of extensive and poorly controlled peat extraction, lowering the surface by several
meters. Even in flooded areas peat extraction continued through turf dredging. From the late 16th century
land reclamation started and large polder areas are now preserved through elaborate drainage systems
with dikes, canals and pumping stations. Most of the country is very flat, with the exception of foothills in
the far southeast and several low hill ranges in the central parts.
POLITICAL
ENVIRONMENT
The Netherlands is a constitutional monarchy,
with a two-tier parliament known in Dutch as the
‘Staten-Generaal’. The present head of state, King
Willem-Alexander, came to the throne on 30th
April 2013 and he enjoys political immunity.
The legislature consists of a democratically elected
parliament made up of two chambers (the ‘Eerste
Kamer’ - first chamber, and ‘Tweede Kamer’ second chamber). Beyond national politics,
The Netherlands has been a supporter
of European integration and international
cooperation for many years:
• 1949 - The Netherlands joins the Council
of Europe.
• 1957 - The Netherlands joins as one of the
founders the European Community.
• 1960 - The Netherlands joins the Benelux
Economic Union, which links the country
with Belgium and Luxembourg, and other
European organisations.
• 1992 – The EU Treaty of Maastricht (The
Netherlands) was signed by all EU Member
states incorporating the European Union as we
now know it.
• 2002 – Introduction of the EURO and
establishment of the permanent International
Court of Justice in The Hague.
The Netherlands is a charter member of the United
Nations and contributes funding to programmes
furthering the economic development of poor
countries. It is also a founding member of both
NATO, the Organisation for Economic Cooperation
and Development (OECD) and World Trade
Organization (WTO).
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BUSINESS
ENVIRONMENT
Some 90% of the people live in cities and almost
half of the population lives and works in one of
Europe’s largest agglomerations, The Randstad.
This heavily populated urban area has 7.1 million
inhabitants and includes the Netherlands’ four
largest cities. The Randstad includes:
• Amsterdam: population 834.110 - the country’s
capital city and principal economic and
cultural centre.
• Rotterdam: population 616.294 - the second city
of The Netherlands, situated on the Maas River in
the south west, in Zuid-Holland (South Holland)
Province. Rotterdam is Europe’s largest port and
is also home to the commodity exchange for
petroleum operators.
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LANGUAGE SKILLS
The official language is Dutch and in international
business the common language is English. In larger
businesses French, Italian, German or Spanish
speaking employees are commonly be found.
CURRENCY
The Netherlands was one of the original 12 EU
States to convert to the Euro. Euro-denominated
coins and bills went into circulation on 1 January
2002, and the guilder (“gulden”) - the country’s
former national currency (and historically one
of the most stable currencies in the world) simultaneously ceased to be legal tender.
ACCOUNTING, LEGAL AND TAX ENVIRONMENT The Netherlands
CROSS BORDER
INVESTMENTS
The Netherlands has a strong international focus;
as such it is one of the most dynamic centres of
trade within the EU. According to the 2015 World
Economic Forum the Netherlands is positioned on
the fifth place in the Global Competitiveness Index.
THE ADVANTAGE OF
DOING BUSINESS IN
THE NETHERLANDS
•E
xtensive double tax treaty network.
• Full exemption for corporate income tax pursuant
the participation exemption regime.
• No withholding tax on interest.
• No withholding tax on royalties.
• Extensive bilateral investment treaty network.
• Possibilities to get confirmation from the Dutch
tax authorities in advance (ATR’s and APA’s).
• Good accessibility via Schiphol airport (one of
the largest airports in the world), the port of
Rotterdam (largest port in Europe) and extensive
road-, rail- and water way network that gives
good access to other countries in Europe.
• Highly educated, flexible and motivated
(international) workforce.
For further detail see section III, basic principles of
taxation in the Netherlands, on page 36.
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ACCOUNTING, LEGAL AND TAX ENVIRONMENT The Netherlands
SECTION I
CORPORATE
LAW
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1. G ENERAL
FRAMEWORK
The Netherlands is often seen as gateway to
Europe by foreign investors who the Netherlands
as European headquarter hub, or as holdingfinance and or royalty location, as well as for
locating trading companies or a distribution
centre. The Dutch economy has been an open
very international oriented economy for centuries.
This is reflected in the legal system. The Dutch
legal system has very few specific structures
geared towards a single solution. It is often
a difficult task for foreign investors to select
and compare specific vehicles used by foreign
competitors to the more generic Dutch legal
entities. For example, the Dutch private limited
liability company (“besloten vennootschap” BV)
can be used as a holding company but also for
financing, interest and or royalty flows. Real estate
as well as a fully operational enterprise can also
be managed through such a BV. The same applies
to a public limited liability company (“naamloze
vennootschap” NV) or many other legal entities
used in the Netherlands.
Below we will list the most commonly used entities
by foreign investors. How to set up the entity,
how much capital is required, how profit can be
distributed, liabilities of the directors, reporting
requirements; all these questions will be addressed
per legal entity.
There are more possibilities to run a business in
the Netherlands, but those not mentioned in this
brochure are more or less only favoured by Dutch
residents (like the sole tradership “eenmanszaak”
or the partnership “maatschap” or general
partnership “vennootschap onder firma”).
Because of its open character, the Netherlands
recognizes foreign legal entities and does
not oblige them to be converted into a Dutch
equivalent. Testimony to this openness is the
Hague Trust Treaty whereby the Netherlands
recognizes the Anglo-Saxon Trust as a legal entity.
A common law entity is thereby legally recognized
in a civil law country.
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1.1. C IVIL LAW
Dutch law is based on civil law as is practiced
in continental Europe and many other countries
around the world. This law originated from Greek
philosophy and the Roman Code. The main
difference with English and US Common Law
mostly lies in the fact that common law is formed
when judges seek out what local customs are and
from the facts of each case comes the rule of law.
In a civil law system, civil lawyers and judges get
together to decide how to apply the codified law
to the facts.
1.2. E UROPEAN INFLUENCE
Many EU Directives hugely influence Dutch civil
law. From the liability of directors in bankruptcies,
to mergers, IP protection, insolvency and
competition rules and the free movement of
goods within the EU. All these regulations have
found their way in the Dutch civil code and have
influenced the way (Dutch) businesses operate
within the EU.
ACCOUNTING, LEGAL AND TAX ENVIRONMENT The Netherlands
2. OVERVIEW OF DIFFERENT
COMPANY STRUCTURES
MINIMUM CAPITAL
REQUIREMENT
PRIVATE LIMITED
LIABILITY
COMPANY
PUBLIC LIMITED
LIABILITY
COMPANY
COOPERATIVE
FOUNDATION
LIMITED
PARTNERSHIP
EUROPEAN
COMPANY
EUROPEAN
COOPERATIVE
BV
NV
COOP
Stichting
CV
SE
SCE
EUR 0,01
EUR 45,000
None
None
None
EUR 120,000
EUR 30,000
Membership
rights
None
None
Registered
or bearer
Registered only
None
None
None
None
None
Any freely
convertible
Not transferable
to third parties
Registered
Registered
or bearer
MINIMUM VALUE
PER SHARE / UNIT
None
None
CURRENCY OF
SHARE CAPITAL
Euro / other
currency
Euro
Not applicable
Not applicable
Not applicable
Any freely
convertible
TRANSFERABILITY
OF SHARES / UNITS
/ MEMBERSHIP
RIGHTS
Free, subject
to restriction
in articles of
association
Free, subject
to restriction
in articles of
association
Subject to
restriction
in articles of
association
Not applicable
Depends
on status of
partnership;
open or closed
Depends on
articles of
association and
if public listed
SHARES / UNITS
NOTARIAL DEED
Yes
Yes
Yes
Yes
Yes
Yes
Yes
PUBLIC SHARE
ISSUE
Possible
Not possible
Not applicable
Not applicable
Not applicable
Authorized
Not Authorised
PUBLIC BOND
ISSUE
Authorised
Authorised
Authorised
Not applicable
Not Authorised
Authorised
Not Authorised
Minimum one
founder
Minimum two
partners
Minimum 2
Minimum 5
SHAREHOLDER,
PARTNER,
MEMBER
Minimum One
shareholder
Minimum One
shareholder
Minimum two
members for
incorporation
MANAGER OR
DIRECTOR
Minimum one
Director
Minimum one
Director
Minimum one
Director
Minimum one
Director
At least one
general partner
Minimum
1 manager
Minimum
1 director
STATUTORY AUDIT
No, depending
on the size an
audit might be
required
Yes, independent
auditor required
depending on
company size
No (depending
on articles of
association)
No (depending
on articles of
association)
No
Yes
(same as NV)
Yes
(same as NV)
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3. P RIVATE LIMITED
LIABILITY COMPANY
(BESLOTEN
VENNOOTSCHAP
(BV))
For incorporation of a BV, a notarial deed
of incorporation is required. The deed of
incorporation contains the name of the
incorporator, nominal amount of the issued
capital, number of issued shares to each of the
shareholders, the articles of association, the
name(s) of the first director(s) and the end of
the first financial book year. The deed must be
drawn up in Dutch. The notary can provide for
certified translations.
The articles of association provide for:
• the corporate name;
• registered office (must be in The Netherlands and
is considered as domicile of the BV);
• objects clause of the BV;
• amount of nominal value per share;
• share transfer restrictions.
3.1. D ISCLOSURE
OF SHAREHOLDERS
After executing the notarial deed, the BV comes
into existence as a separate legal entity with
its own rights and obligations. To finalize the
procedure, the new company and the details of
the director(s) and shareholder must be registered
at the Dutch Trade Register of the Chamber
of Commerce. If the BV has more than one
shareholder, no detailed information about the
shareholders can or will be submitted into
the register.
3.2. LIMITED LIABILITY
OF SHAREHOLDERS
In case a BV is in the process of formation, the
abbreviation ” i.o.” (in oprichting in the process
of being incorporated) is annexed to the name.
A BV is allowed to conduct business during the
pre-incorporation period. The persons acting on
behalf of the BV i.o. are personally liable until the
BV is duly registered into the Trade Register of
the Chamber of Commerce and the BV has ratified
all acts performed on behalf of the BV prior to
incorporation. From that point on the BV itself is
liable for its obligations.
Liability of shareholders is limited to their capital
contribution. The shareholder is in principle not
liable for losses of the BV or for its acts.
3.3. S HARE CAPITAL
With incorporation, at least one share (with a
nominal value of at least EUR 0.01) should be kept
by someone else than the BV or its subsidiaries.
If the articles of association provide for an
authorized share capital, any increase of such
share capital requires an amendment of the articles
of association. A BV cannot issue bearer shares
only registered shares. Legal entities as well as
individuals may own shares in a BV.
Types of shares typically used are ordinary shares
and preference shares (may have cumulative
rights). Priority shares are sometimes issued as
well. Non-voting shares and shares without profit
rights may be introduced.
Directors of the BV should maintain a shareholders’
register, which should include information with
respect to the name of the BV, corporate seat
and issued share capital. The register maintains
the number of all registered shares, the names
and addresses of all shareholders, pledgors and
usufructuaries, the extent to which the par value
of the shares has been paid up as well as the
particulars of the incorporation, any amendment
to the Articles of Association and issuance, transfer,
pledge, attachment, or usufruct on the shares. Any
amendment or adjustments in the register require
the signature of one of the managing directors
for approval.
The register should be updated regularly and
should be kept at the office of the BV. The register
is a non-public register. The issuance of new
shares and transfer of ownership of existing shares
shall be recorded in the register and can only be
executed by notarial deed. The board is responsible
for maintaining the information in the register.
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ACCOUNTING, LEGAL AND TAX ENVIRONMENT The Netherlands
3.4. C APITAL CONTRIBUTION
3.7. C ORPORATE BODIES
Shares can be paid up in cash or in kind.
Contributions made in foreign currencies
are possible.
The constituent bodies are the board of directors
and if applicable a supervisory board, the general
meeting of shareholders, if applicable a general
meeting of priority shareholders and other bodies
mentioned in the articles of association of the BV.
3.5. D ISTRIBUTION OF PROFITS
The articles of association provide that the
disposition of profits is reserved to the general
meeting of shareholders subject to the prior
approval of the board of directors. The Board
will need to perform a ‘distribution test’
incorporating to the best of their knowledge data
for the coming 12 months and votes independently
on the distribution.
If, after a distribution, a BV is no longer able to
pay its due and payable debts, the management
board members are jointly and severally liable for
the deficit resulting from the distribution if they
knew this or should reasonably have foreseen this.
This also applies to the shareholders who received
the distribution (with a maximum of the amount
received by them).
The general meeting may decide to pay out
dividends or to add to the company’s reserve.
Share premium can be distributed as dividend or
under certain conditions repaid as share capital.
Interim dividend may be paid out if allowed for by
the articles of association and if appropriate.
3.6. T RANSFER OF SHARES
Registered shares issued by a BV may be freely
transferred, subject to any restrictions contained
in the BV’s Articles of Association. A notarial
deed is required for the transfer of shares and the
transfer is recorded in the shareholders’ register.
The registration with the Trade Register of the
Chamber of Commerce is updated accordingly in
case of a sole shareholder.
3.8. B OARD OF DIRECTORS
A BV is managed by a board of managing directors
consisting of one or more managing directors
appointed by the general meeting of shareholders.
The board represents the company towards third
parties. The articles of association can stipulate
individual or joint authorization by the board.
A BV can have a two-tier board system or a
one-tier board system. In the two-tier board
system, the board of directors and the supervisory
board are separate corporate bodies. Only a private
individual can be appointed as a supervisory
director. The supervisory board’s task is to
supervise the board of directors. Therefore, they
are less involved in the decision-making process
than in the one-tier board system.
In the one-tier board system (introduced as
of 1 January 2013) there are executive and nonexecutive directors. The executive directors are
responsible for the company’s daily management.
The non-executive directors are supervising
the executive directors. The non-executive
directors are not directly involved in the decisionmaking process but are equally subject to
director’s liability.
A managing director can be a private individual
or a legal entity, either foreign or Dutch.
Often a structure of A and B is used. The foreign
investors provide the A directors and the
Netherlands based corporate service provider
provides for the Netherlands resident directors. For
every foreign director there needs to be one Dutch
resident director (this does not imply a Dutch
director per se, it simply means a resident of The
Netherlands). The latter is recommended from a
substance perspective. Certain shareholders may
be given the authority to directly appoint members
of the Management Board.
The powers of representation, and more
importantly the limitations if applicable, can be filed
with the Chamber of Commerce. Non-directors can
also be granted representation powers by means
of proxies issued by the board. Third parties can
check the public register and base their business
decisions on the filed information. Mistakes,
omissions, etc. in the filed data cannot be held
against those third parties. The board is responsible
for the information.
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The liability of directors is not only at play in the
aforementioned situation. In a number of situations,
directors can be held liable if the company goes
bankrupt or in the event the annual accounts have
not been filed in time or not at all.
As part of the implementation of the new board
system, the Dutch statutory provision on conflict
of interest between a director and the company
is also changed for BV’s. As of 1 January 2013 a
director having a conflict of interest may no longer
participate in the decision-making process on such
matter. If the director does so anyway, the basic
principal is that the company shall nevertheless
be bound.
3.9. S UPERVISORY BOARD
(IN CASE OF A TWO-TIER
BOARD SYSTEM)
A supervisory board is generally not mandatory.
The articles of association however can provide
for a supervisory board. The supervisory board is
appointed by the general meeting of shareholders.
The articles of association can also provide for
another procedure. Only natural persons can
be appointed as supervisory directors. The
supervisory board represents the BV in case of
a conflict of interest with one of the managing
directors. There is no minimum number of meetings
per year. If a supervisory director acts as if he or
she was a managing director then he or she can be
held liable as a director.
3.10. S INGLE-SHAREHOLDER
COMPANY
A single-member company is a BV in which
all shares are held by a single legal entity or a
private individual. The sole shareholder must be
registered with the Trade Register of the Chamber
of Commerce, and all legal acts between the sole
shareholder and the company must be in writing
if they are beyond the scope of the company’s
day-to-day business.
3.11. G ENERAL MEETING
OF SHAREHOLDERS
In general most powers are vested in the general
meeting of shareholders. The most important
powers are:
a) Issuance of new shares.
b) Appointment, suspension and dismissal
of the directors.
c) Amendment of the articles of association.
d) Adopting the annual accounts of
the company.
e) Appointment of an auditor.
f) Decision to liquidate, convert, merge or
de-merge the BV.
g) Certain approval on board decisions when taken
up in the Articles of Association.
At least one shareholders meeting needs to be held
per year, unless the articles of association state
differently. Minutes should be held at the office of
the BV for shareholders to inspect them.
3.12. P ERIODIC REPORTING AND
ANNUAL ACCOUNTS
The annual accounts of a BV are made up of
the balance sheet, profit and loss accounts,
and explanatory notes. The board of directors
sometimes prepare a director’s report. The annual
account should give a true and fair view of the
position on the data of the balance sheet, the
developments during the financial year and the
results of the BV (in some cases events after the
financial year need to be included in the report
as well).
Before the adoption of the annual account and
the director’s report (if applicable) by the general
meeting of shareholders, all managing directors
and the supervisory board (if applicable) should
sign off on the statements.
The board of directors must prepare the annual
account and submit it to the shareholders for
adoption within five months of the end of the
financial year. This period can be extended by
a maximum of six months by the shareholders.
This extension should be granted in the initial
five-month period.
The annual accounts are then filed at the
Chamber of Commerce within eight days after
they have been adopted by the general meeting
of shareholders. In any event, the accounts must
be filed within thirteen months of the end of
the financial year, regardless of adoption by the
general meeting of shareholders.
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ACCOUNTING, LEGAL AND TAX ENVIRONMENT The Netherlands
4. P UBLIC LIMITED
LIABILITY COMPANY
(NAAMLOZE
VENNOOTSCHAP
(NV))
The regulations applicable to NV’s are more or
less identical to those mentioned for the BV. The
special features of a NV are:
a) The minimum paid up capital is EUR 45,000.-.
b) A NV may have registered shares or bearer
shares (bearer shares are only possible if they
have been paid up in full).
c) Registered shares must be recorded in the
shareholders’ register.
d) All transfers of shares must be recorded in the
shareholders’ register.
e) The register provides for titles of ownership.
f) Certificates can be issued.
g) Title of ownership for bearer shares is evidenced
by possession of the bearer share certificates.
h) Fully paid up shares are freely transferable.
i) Registered shares must be transferred by a
notarial deed.
j) Bearer shares are transferred by delivery.
5. COOPERATIVE
(COÖPERATIEF)
For incorporation of a Cooperative, a notarial
deed of incorporation is required. The deed
of incorporation contains the name of the
incorporators, the articles of association, the
name(s) of the first director(s) and the end of the
first financial book year. The deed must be drawn
up in Dutch. The notary can provide for certified
translations. The Cooperative is registered at the
trade register of the Dutch Chamber of Commerce.
A cooperative is defined as an association
established as a cooperative by notarial deed.
The cooperative does not have shareholders,
but members. At incorporation, the cooperative
must have at least two members. The objects of
the cooperative must be to fulfil material needs
of its members based upon agreements that the
cooperative has entered into for the benefit of
the members. A cooperative may distribute profit
among its members. Members hold a “member
account” with the cooperative
The reasons for using a cooperative in international
tax planning structures, is mainly due to the fact
that under certain conditions the Coop is not
subject to Dutch divident withholding tax.
5.1. L IABILITY OF THE
COOPERATIVE AND
ITS MEMBERS
The name of the cooperative must contain the
word “coöperatief” followed by the liability it has
chosen; WA means statutory liability, BA means
limited liability and UA means exclusion of liability.
The members of the cooperative are not liable for
the obligations of the cooperative during
its existence.
19
5.2. C APITAL REQUIREMENTS
5.6. C ORPORATE BODIES
There is no minimum capital requirement for
the cooperative.
The constituent bodies are the board of directors
and the general meeting of members.
5.3. C APITAL CONTRIBUTION
5.7. B OARD OF DIRECTORS
The cooperative enters into contribution
agreements with its members, pursuant to which
the members contribute capital (e.g., cash or other
assets) to the cooperative.
A cooperative is managed by a board of managing
directors consisting of one or more managing
directors appointed by the general meeting of
members. The board represents the company
towards third parties. The articles of association
can stipulate individual or joint authorization
by the board.
5.4. D ISTRIBUTION OF PROFITS
In exchange for the contribution of the members,
the profits of a cooperative will be allocated
to the members’ capital accounts or may be
distributed to the members directly. Although the
cooperative can also choose to allocate it to the
reserve account. The members’ entitlement to the
cooperative’s profits is usually directly related to
their respective contributions.
5.5. T ERMINATION OF
MEMBERSHIP
A member is allowed to terminate its membership.
However, if all members do so, this could lead
to the end or bankruptcy of the cooperative.
Therefore, it is often settled in the articles of
association of the cooperative under which
conditions a membership may be terminated.
It is also possible to transfer a membership.
20
5.8. PERIODIC REPORTING AND
ANNUAL ACCOUNTS
The annual report and accounts should be
prepared by the board of directors within six
months of the end of the financial year. This period
may be extended by a maximum of four months.
The cooperative must comply with reporting
regulations, which also apply to BV’s.
ACCOUNTING, LEGAL AND TAX ENVIRONMENT The Netherlands
6. F OUNDATION
(STICHTING)
The formation of a foundation requires a notarial
deed. Execution of the deed is in the Dutch
language. The articles of association of the
foundation include the name of the foundation
(with the word ‘Stichting’ as part of its name),
the objects of the foundation, the manner of
appointing and dismissing of the director(s), the
registered office and the allocation of the surplus
after liquidation of the foundation. The foundation
is registered at the trade register of the Dutch
Chamber of Commerce.
6.3. D ISTRIBUTION OF PROFITS
Distributions are only allowed to others than the
founders and have to be used for the charitable or
social cause of the foundation or for payments to
holders of depository receipts connected to the
shares held by a STAK.
6.4. C ORPORATE BODIES
The Board of Directors is the only statutory body
of the foundation.
6.5. B OARD OF DIRECTORS
The foundation is a legal entity, which has no
members and which is created for a specific
purpose as stated in the articles of association.
The objects of the foundation may not include
distributions to any founder or to those
participating in its constituent bodies. A foundation
can be used for the issuance of depository receipts
for shares of a BV or NV. This is called a “Stichting
Administratiekantoor” or a “STAK”. The object
of a STAK is to acquire shares of a company for
the issue of exchangeable depository receipts.
The STAK will hold the shares it its own name for
the purpose of administration and to exercise the
rights attached to the shares such as voting rights.
The holders of the depository receipts are only
entitled to the dividend.
The foundation is often used in stand-alone
structures (off-balance) for structured finance
deals. In domestic situations it is mostly used for
charitable and other non-profit purposes.
6.1. L IABILITY OF THE
FOUNDATION
A foundation is a legal entity. This means that
directors are in principle not accountable for any
debts. However, there are exceptions to this rule.
Directors can be held liable for mismanagement,
or failing to comply with administrative rules, such
as registration in the trade register of the Dutch
Chamber of Commerce.
A foundation is managed by a board of managing
directors consisting of one or more managing
directors. The board represents the foundation
towards third parties. The articles of association
define any limitation on representation by the
board, otherwise the representation is unlimited.
6.6. P ERIODIC REPORTING AND
ANNUAL ACCOUNTS AND
TAX ISSUES
Annual accounts must be prepared within six
months of the end of the financial year.
A foundation can maintain a business, generate
profit and as such can be taxed by corporate
income tax just like the BV. If a foundation is not
commercially active the annual accounts do not
reflect those of a BV. Furthermore Dutch GAAP is
not applicable.
If the foundation is commercially active it can
only be taxed to the extent of that commercial
activity. It is the only legal entity in the Netherlands
that can be exempt and partially
taxed at the same time.
6.2. C APITAL REQUIREMENTS
A foundation is a legal entity. This means that
directors are in principle not accountable for any
debts. However, there are exceptions to this rule.
Directors can be held liable for mismanagement,
or failing to comply with administrative rules, such
as registration in the trade register of the Dutch
Chamber of Commerce.
21
7. L IMITED
PARTNERSHIP
(COMMANDITAIRE
VENNOOTSCHAP
(CV))
A limited partnership (“commanditaire
vennootschap”) is an agreement whereby two
or more parties jointly contribute assets and / or
labour for the purpose of sharing benefits. Natural
persons, legal entities and other partnerships can
enter into such an agreement. At least one of the
partners will have to act as general partner and
the other will act as limited (“silent”) partner. The
limited partner’s name cannot be used in the name
of the limited partnership. The limited partnership
uses a common name with the objective to operate
a business.
The partnership must be registered at the Chamber
of Commerce. Name and address of the general
partner(s) and their personal data will be disclosed
with the Chamber of Commerce. The name of the
limited partner is not disclosed.
7.1. L IABILITY
General partners are liable for all obligations of
the limited partnership. The limited partner is
limited in its liability to the value of the assets
contributed to the partnership. Although, if the
limited partner externally behaves like a general
partner the liability of the general partner applies
to this limited partner.
7.2. C APITAL REQUIREMENTS
There is no minimum capital requirement for the
limited partnership.
7.3. C APITAL CONTRIBUTION
Contributions need to be made by all partners and
can be in cash, legal ownership of goods or labour
in the case of a general partner.
22
7.4. D ISTRIBUTION OF PROFITS
Legal title as to the ownership of the assets of the
partnership lies not with the partnership, as it is not
a legal entity.
7.5. C ORPORATE BODIES
General partners are exclusively charged with the
management of the partnership.
7.6. P ERIODIC REPORTING
AND ANNUAL ACCOUNTS
A limited partnership is not obliged to prepare
or publish annual accounts unless it qualifies as
a Formal Foreign Company (“FFC”). A limited
partnership with all general partners qualifying
as capital companies under foreign law will be
treated as FFC’s and all formal rules associated
with FFC’s apply.
For tax purposes a limited partnership can be
closed or open. An open partnership is taxed with
corporate income tax.
ACCOUNTING, LEGAL AND TAX ENVIRONMENT The Netherlands
8. E UROPEAN
COMPANY (SOCIETAS
EUROPAEA (SE))
The European company, also known as SE is a
supranational European legal entity. It is governed
by EU regulations and by national implementation
laws. It is a public limited liability company and has
legal personality and share capital. It is domiciled
within the EU. The head office must be in the
same Member state as its registered office. Head
office defines as central place of management and
administration. Transfer of its registered office
to another Member state is possible and the SE
maintains its legal personality at all times.
If the SE chooses to be incorporated in the
Netherlands a notarial deed is required as well
as a certificate of the Ministry of Justice stating
there are no objections. Registration of an SE is
published in the EU’s official Journal.
The initiative to create an SE by the EU was based
on the idea to make it easier for companies to
expand and manage cross border operations.
8.1. I NCORPORATION
Only legal entities may form an SE. There are four
ways to incorporate an SE:
• Through a legal merger between two companies
based in different EU member states;
• Through incorporation of an SE as a holding
company for two companies based in two
different EU member states or with subsidiaries in
two different EU member states;
• Through incorporation of an SE as a subsidiary
of two companies based in two different EU
member states or an SE;
• Through a legal conversion from a NV
into a SE.
8.3. C APITAL REQUIREMENTS
The capital of an SE is divided into shares.
The issued share capital may not be less than
EUR 120,000.-.
8.4. C APITAL CONTRIBUTION
If the SE has its office in the Netherlands the
regulations concerning a NV apply.
8.5. T ERMINATION OF
MEMBERSHIP
If the SE has its office in the Netherlands the
regulations concerning a NV apply.
8.6. C ORPORATE BODIES
An SE can have a two-tier board structure; general
meeting of shareholders and a management board
or supervisory board, or an administrative board
only (one-tier system).
8.7. P ERIODIC REPORTING
AND ANNUAL ACCOUNTS
With respect to reporting requirements the rules
for public limited liability companies (NV) apply
The SE can benefit from the same tax regime
that is applicable for NV’s and BV’s once an SE is
organized under the laws of the Netherlands.
8.2. L IABILITY
If the SE has its office in the Netherlands the
regulations concerning a NV apply.
23
9. E UROPEAN
COOPERATIVE
(SOCIETAS
COOPERATIVA
EUROPAEA (SCE))
The SCE is a supranational European legal entity
much like the SE. It is also governed by EU
regulations and by national implementation laws.
The objective of the SCE must be the satisfaction
of its members’ needs and / or the development
of their economic and social activities, through the
conclusion of agreements with its members. Nonmembers cannot participate in its business unless
the articles of association state so.
If the SCE is set up in the Netherlands a notarial
deed is required and a declaration of the Ministry
of Justice stating that there is no objection.
Registration with the trade register of the Dutch
Chamber of Commerce is mandatory and the
articles of association need to be drawn up
according to the laws of the Member state where
the SCE has its registered office.
9.2. CAPITAL REQUIREMENTS
The subscribed capital of an SCE may not be less
than EUR 30,000.- and is divided into shares.
9.3. D ISTRIBUTION OF PROFITS
The articles of association contain rules for the
allocation of profits for each financial year. A legal
reserve is mandatory before any other allocation.
Based on EU regulations dividend payments can
be made to members.
9.4. C ORPORATE BODIES
An SCE consists of a general meeting of members
and either a supervisory board and a management
board (two-tier) or an administrative board
(one-tier). The number of members can vary. The
management board decides upon admission of
members. Members of the SCE bodies cannot be
appointed for a period extending six years. They
can be re-appointed more than once.
9.5. B OARD OF DIRECTORS
9.1. I NCORPORATION
There are three ways to incorporate an SCE:
• by merging between cooperatives incorporated
anywhere within the EU, provided that at least
two of them are governed by the laws of different
Member states.
• by converting a cooperative set up under the
laws of one of the Member states, provided that it
has had an establishment or subsidiary governed
by another Member state for at least two years.
• Individuals, companies and or other legal bodies
resident in at least two of the Member states can
also incorporate an SCE. When individuals are
involved at least five need to participate in
the incorporation.
24
The management board represents the SCE when
entering into contracts with third parties.
9.6. P ERIODIC REPORTING
AND ANNUAL ACCOUNTS
National rules for the NV apply regarding
preparation, approval, adoption and publication of
the annual accounts for the SCE.
ACCOUNTING, LEGAL AND TAX ENVIRONMENT The Netherlands
10. B RANCH
Any foreign company is allowed to perform
business activities in the Netherlands without
having to adopt a specific Dutch legal form or
incorporate a Dutch entity for this purpose. A
branch (“nevenvestiging”) has no legal entity
status and is therefore regarded as an integral
part of the foreign company. The foreign company
is liable for any debt deriving from the branch’s
activities as well as all other obligations deriving
from the Dutch activities.
10.1. L EGAL FORMALITIES
OF A BRANCH
Since it has no legal form in the Netherlands, the
formalities only relate to registration at the trade
register of the Dutch Chambers of Commerce.
The following information has to be filed:
• For the branch: The name, principal place
of business of the foreign company, a short
description of the actual business activities,
number of employees and full address of the
branch. A (local equivalent of a) trade registry
extract as well as the Articles of Association
of the foreign company are to be submitted;
• For the directors of the foreign company: the
full name, address, date and place of birth,
nationality, extent of power and authority to
represent the branch, signature and certified
copy of an identity card;
• For the branch manager (non Dutch resident is
possible): the full name, address, date and place
of birth, nationality, extent of power and authority
to represent the branch, signature and certified
copy of an identity card;
• The latest annual accounts in Dutch, German,
French or English in local GAAP.
10.2. F ORMAL FOREIGN
COMPANY REGIME
In principle any non-EU foreign company
conducting business through a branch in the
Netherlands is deemed a Formal Foreign Company
(”formeel buitenlandse vennootschap”) and as
such is faced with stricter formalities:
• The company is registered as a FFC at the Dutch
Chamber of Commerce;
• An authentic copy of the deed of incorporation
of the company in Dutch, French, German or
English, certified by a director needs to be filed
as well;
• In addition the director(s) of the FFC must
register an extract of the national register
in which the company is registered, the date of
the first registration of the FFC and the name and
address of the sole shareholder (if applicable).
The directors of these FFC’s are jointly and
severally liable together with the company for
legal acts carried out during their directorship until
the requirement of registration has been fulfilled.
This liability of the directors lasts as long as the
company qualifies as a FFC.
The FFC needs to file annual accounts within five
months of the end of the financial year.
25
26
ACCOUNTING, LEGAL AND TAX ENVIRONMENT The Netherlands
SECTION II
ACCOUNTING
LAW
27
1. A NNUAL ACCOUNTS
In general companies in the Netherlands are
required to prepare annual accounts which are
submitted to the obligations as defined by law
(Book 2, Title 9, Dutch Civil Code). The Dutch
Accounting Standard Board. Legal entities are
classified into one of four categories based
on (consolidated) size: micro, small, medium
and large. A legal entity falls into a particular
category if it satisfies at least two of the following
requirements in two consecutive years:
AMOUNTS IN EUR
OR FTE
MICRO
SMALL
MEDIUM
LARGE
VALUE OF
ASSETS
ACCORDING TO
BALANCE SHEET
< €350.000
€350.000 6 mln
€6 - 20 mln
> €20 mln
NET
TURNOVER
< €700.000
€700.000 12 mln
€12 - 40
mln
> €40 mln
AVERAGE
NUMBER OF
EMPLOYEES
< 10
10 - 50
50 - 250
> 250
Requirements for financial statements of legal
entities may differ depending on the size of the
company. Certain exemptions with respect to the
compilation and filing of the annual accounts apply
to micro, small and medium-sized companies.
Dutch Companies are allowed to prepare their
statements according to one of the following:
Dutch Accepted Accounting Principles (‘Dutch
GAAP’), certain European Generally Accepted
Accounting Principles, or International Financial
Reporting Standards (‘IFRS’). As a general rule, all
medium-sized and large companies are obliged to
have their accounts audited.
The scope and content of the financial statements
that have to be published can be summarized as in
the table below:
LARGE
COMPANY
MEDIUMSIZED
COMPANY
SMALL
COMPANY
MICRO
COMPANY
BALANCE SHEET
Standard
Simplified
Simplified
Simplified
PROFIT & LOSS
ACCOUNT
Standard
Simplified
Simplified
n.a.
NOTES
Standard
Simplified
Simplified
n.a.
DIRECTOR’S
REPORT
Standard
Simplified
n.a.
n.a.
OTHER
INFORMATION
Standard
Simplified
n.a.
n.a.
AUDIT
REQUIRED
Yes
Yes
No
No
CONSOLIDATION
Yes
Yes
No
No
28
2. T IMELINE FOR
FINANCIAL
REPORTING
Each year within five months after the end of the
financial year of the BV, NV or SE (six months
for the cooperative and foundation) the annual
accounts need to be prepared by the board of
managing directors. This annual accounts shall be
signed by all managing directors (and Supervisory
directors if any). If one or more of these signatures
are missing, the reason therefore shall be stated.
Under certain circumstances, the general meeting
of shareholders or members may provide for an
extension of five (for cooperative four) months for
filing of the annual accounts. The adoption of the
accounts by the general meeting of shareholders or
members should take place within two months (or
one month for a cooperative) after the preparation.
The board of managing directors must file the
adopted annual accounts with the Trade Register
of the Chamber of Commerce within eight days
after the adoption by the general meeting of
shareholders or members.
ACCOUNTING, LEGAL AND TAX ENVIRONMENT The Netherlands
3. E U INITIATIVE
4. C URRENCY AND
EXEMPTION ANNUAL
LANGUAGE
ACCOUNTS
The numbers quoted in the annual accounts must
MICRO ENTITIES
be expressed in Euros. However, if justified by
In March 2010 the EU parliament approved of
an exemption for drafting annual accounts for
so-called micro entities. If the balance sheet total
amounts to less than 350,000.- Euro and the net
total turnover is less than 700,000.- Euro / or the
company has less than 10 full time employees no
annual accounts need to be prepared. However,
all individual Member States can adopt this
legislation with additional rules to safeguard from
non-transparency and third parties having access
to public information regarding the micro entity.
Keeping the books remains obligatory.
the activity of the company or the international
structure of its group, its annual accounts may be
prepared in foreign currency.
The annual accounts and the director’s report must
be written in Dutch, unless the general meeting has
resolved to use another language.
29
5. CONSOLIDATION
EXEMPTIONS
The main exemptions in financial reporting relate
to reduced contents of the financial statements
for small and medium sized companies and audit
requirements, and consolidated exemptions for
small companies. Furthermore there are two
exemptions for group and holding companies.
5.1. 403 EXEMPTION
If the figures of subsidiary companies are included
in the financial statements of the parent company
and the parent issues a “joint and several liability
statement” assuming responsibility for all debts of
the subsidiary companies, then the intermediate
company can refrain from consolidation.
Furthermore an audit is not required. A declaration
in writing with the shareholders’ resolution on the
joint and severable liability, and the consolidated
parent financial statements prepared in accordance
with the 7th EU Directive are required to be filed
with the Chamber of Commerce.
5.2. 4
08 EXEMPTION
Intermediary holding companies in the Netherlands
can be exempt from consolidation based on the
408 provision. In short, the intermediary holding
company is exempt from consolidation if the
parent company already prepares consolidated
accounts including the intermediary holding
company and its subsidiaries. A statement
regarding the application of the 408 exemption
needs to be contained in the company’s
annual accounts.
30
ACCOUNTING, LEGAL AND TAX ENVIRONMENT The Netherlands
6. IFRS
The IFRS rules are mandatory for stock listed
companies. The IFRS rules are optional for all
other companies and some countries have
already implemented a special (mandatory) IFRS
regime for SME’s (small and midsize entities). The
Netherlands have not followed suit in this global
attempt to switch to IFRS for SME’s (yet).
A number of differences between NL GAAP and
IFRS are (not exhaustive):
TOPIC
IFRS
NL GAAP
General approach
Less principle based standards
More principle based standards
Accounting method
Pooling of interests method prohibited
Pooling of interests method required for
combinations classified as uniting of interests
Deferred tax assets and liabilities
Discounting is not allowed
Acquired tax assets and liabilities
can be discounted
Goodwill
Capitalised and not amortised
Capitalised and amortised annually
Application of US GAAP
Not allowed
Entities that also prepare a profit & loss account
and balance sheet according to US GAAP are
allowed to apply US GAAP relating to pensions
subject to the condition that these standards are
applied integrally
Topic
IFRS
NL GAAP
Subsidiary as portfolio investment
Consolidation required
Consolidation not required
Consolidation exemption for
small sized companies
No exemption
Consolidation is not required
Consolidation exemption for
intermediate holdings
No consolidation if parent of the holding
produces consolidated accounts according
to IFRS for public use
No consolidation if any intermediate parent
produces consolidated accounts in accordance
with EU regulations
Categories of financial assets
Classification in one of four asset classes
Classification in one of five asset classes
Effective interest method
Application of effective interest method
is required
Linear amortisation is allowed if that does
not lead to major differences with application of
effective interest method
31
7. ERROR CORRECTION
8. US GAAP
If a company finds out that the previously filed
financial statements are incorrect the following
legal steps need to be followed:
1) Determine whether the error is fundamental
or material.
2) If the error is fundamental then the shareholders
need to be informed and a statement of the local
director(s) needs to be filed with the Chamber
of Commerce explaining the error.
3) The error (fundamental and material) should be
corrected in the first financial statement that has
yet to be adopted.
Many US companies need to prepare consolidated
accounts according to US GAAP including their
subsidiaries in The Netherlands. The NL GAAP
accounts will have to be converted into US GAAP.
It is therefore important for Dutch accounting
specialist to have knowledge of US accounting
rules. US GAAP accounts cannot be filed at the
Dutch Chamber of Commerce. Only NL GAAP and
IFRS accounts may be filed at the Dutch Chamber
of Commerce.
32
ACCOUNTING, LEGAL AND TAX ENVIRONMENT The Netherlands
33
34
ACCOUNTING, LEGAL AND TAX ENVIRONMENT The Netherlands
SECTION III
BASIC PRINCIPLES
OF TAXATION IN
THE NEDERLANDS
35
1. INTRODUCTION
2. DIRECT TAXES
The Netherlands is recognised globally as one of
the best locations for international business
2.1. C ORPORATE INCOME TAX
operations. An important factor that contributes to
this reputation is the favourable taxation climate
of the Netherlands. The main attractive features of
the Dutch tax climate include:
• No statutory withholding tax on outgoing interest
and royalty payments;
• Favourable participation exemption rule to avoid
double taxation;
• Fiscal unity regime to freely set off profits and
losses among group members;
• Wide tax treaty network to avoid double taxation
• Loss compensation with the possibility of
carrying back losses for one year and carrying
forward losses for nine years;
• Relatively low statutory corporate income tax
rate of 25% (20% over the first EUR 200,000)
• Innovation box resulting in an effective corporate
tax of 5%;
• Possibility of obtaining advance tax rulings
and advance pricing agreements from the Dutch
Tax Authorities, giving certainty on future
tax position;
• VAT deferment upon import
The Dutch Corporate Income Tax Act 1969
(Wet op de vennootschapsbelasting 1969),
makes a distinguishment between resident and
non-resident tax payers. Corporate income tax
(hereinafter referred to as “CITA”), is levied from
Dutch corporate tax residents, which are, among
others, BV’s NV’s, Cooperatives and open limited
partnerships. An entity incorporated under the
laws of the Netherlands is deemed a resident of the
Netherlands for CIT purposes. Dutch subsidiaries
of foreign companies are regarded as resident
taxpayers. Dutch branches of foreign companies
are regarded as non-resident taxpayers. In general
Dutch companies are subject to corporate income
tax on their worldwide income.
A closed limited partnership is transparent for CIT
purposes. A limited partnership is considered to
be ‘closed’ if explicit, unanimous and conditional
prior consent is required from all partners at
admission and / or replacement of a new limited
partner. This consent is not required for open
limited partnerships.
CIT is levied over the taxable profits reduced
by the deductible losses. Losses may be carried
back one year and forward nine years. Specific
restrictions apply for the compensation of losses
incurred by ‘pure’ holding and financing companies.
CIT is levied at a corporate income tax rate of 20%
and taxable profits exceeding EUR 200,000 are
taxed at a rate of 25%.
2.2. D EDUCTIBLE EXPENSES
Determining profits takes place according to
the principle of ‘sound business practice’. This
principle is very general and has been widely
developed in case law. According to this principle,
unrealized losses may be taken into account in
a certain year, whereas unrealized profits may
be disregarded. Deductible costs for corporate
income tax purposes included interest on loans and
annual depreciation on assets used in the business
enterprise of the taxpayer.
36
ACCOUNTING, LEGAL AND TAX ENVIRONMENT The Netherlands
2.3. I NTEREST DEDUCTION
LIMITATION
Some types of interest are non-deductible.
These types include interest on loans that are
considered equity for the taxpayer, and interest
paid in the form of shares or options on shares
in the company or a related party. Interest on
intercompany loans that are taken up for certain
specific defined transactions is deductible only if
the taxpayer either demonstrates sound business
reasons for the transactions and the related
company loan, or demonstrates that the interest
is subject to an effective rate of at least 10% over
a taxable profit calculated in accordance with
Dutch standards. In the latter case, deduction
of interest is still denied if the tax authorities
can demonstrate the absence of sufficient
business reasons.
2.4. T HIN CAPITALIZATION
2.5. D EPRECIATION
Various systems of depreciations are allowed
provided that they are used consequently and
in accordance with sound business practice. The
annual amount of depreciation depends on the
historic cost price, the service live of the asset,
and the residual value. For goodwill, the annual
depreciation cannot exceed 10% of the acquisition
price. Goodwill paid for the acquisition of shares
in a subsidiary that qualifies for the participation
exemption cannot be depreciated. Depreciation of
real estate is restricted. Real estate made available
to non-affiliated parties cannot be depreciated to
a value below the market value of the property as
regularly assessed by municipal authorities. For
real estate outside of this category the limit for
depreciation is set at 50% of the market value
thus assessed.
2.6. C APITAL TAX
No capital is applicable in the Netherlands.
Furthermore, restrictions apply to the deductibility
of interest if a taxpayer who is part of a group, is
in excess debt (thin capitalization rule). A taxpayer
will be in excess debt if the average balance of
the (interest bearing) loans payable less the loans
receivable exceed three times the average tax
equity (excluding tax reserves) and that excess
is more than EUR 500,000. This test is made on
the basis of the tax accounts. At the option of the
taxpayer, the excess can be also be determined on
the basis of the commercial accounts. In that case
the taxpayer has excess debt if its debt-to-equity
ratio exceeds that of the group as a whole. If and
to the extent a taxpayer has excess indebtedness,
no deduction will be allowed for an amount of
interest (including costs of indebtedness) which
is equal to the proportion of excess indebtedness
over the average indebtedness. The amount
of non-deductible interest pursuant to the thin
capitalization rule is maximized at the balance
of interest expenses and interest income due to
affiliated entities.
2.7. C ONTROLLED FOREIGN
COMPANY (“CFC”)
REGULATIONS
There are no CFC regulations in place in
the Netherlands.
37
3. D IVIDEND INCOME
AND CAPITAL
GAIN INCOME
3.1. P ARTICIPATION EXEMPTION
The Dutch participation exemption provides for an
exemption from corporate income tax of any profit
derived from a qualifying equity investment in
another company, whether domestic or foreign. As
a consequence, dividends and capital gains arising
from such shareholdings are tax exempt, while
capital losses, and acquisition and deposal costs,
are not deductible. A Dutch entity can benefit from
the participation exemption if:
• The paid-up share capital of the participation is
wholly or partly divided into shares
• The taxpayer owns a shareholding of at least 5%
of the par value of the nominal paid-up share
capital (or under circumstances the voting rights)
of a subsidiary company; and
• The participation fulfils at least one of the
following three tests.
1. Motive Test:
The participation is not held as a passive
investment (the investment is considered passive
if it is held with the objective to obtain a result that
may be expected from normal asset management).
Generally a participation is considered not to be
held as a passive investment if the participation is
engaged in the same line of business as
the taxpayer.
A participation is considered to be held as a
passive investment if more than half of the
participation’s consolidated assets consist
of shareholdings of less than 5%, or the main
function of the participation is to act as a
group financing company.
Should a participation be considered a portfolio
investment, the participation exemption may still
be applies if the Subject-to-tax Test or the Asset
Test is met.
38
2. Subject-to-tax Test:
The participation is subject to profit based tax with
an effective tax rate of at least 10% determined
according to Dutch tax standards. To review
whether the subject-to-tax Test is met, the
foreign tax regime should be compared with the
Dutch corporate income tax regime, whereby the
statutory rate, tax base and other relevant aspect
should be taken into account.
3. Asset Test:
Less than 50% of the direct and indirect assets
of the participation should consist of free
passive investments. This Test should be applied
continuously. Generally assets are considered
free passive investments if they do not have a
function within the business enterprise of the entity
holding the assets. Assets used for financing the
taxpayer or any affiliated entities will, in principle,
qualify as free passive investments, unless they are
considered short term receivables, are financed
for 90% or more from third party debt, or the
company is considered an active group
financing company.
ACCOUNTING, LEGAL AND TAX ENVIRONMENT The Netherlands
4. D OUBLE TAX RELIEF
During 2015, tax treaties were signed with Kenya
and Malawi. As per 1 January 2016, these are not
yet ratified.
The Netherlands has signed many tax treaties to
avoid double taxation or limited to reduced rates
over the years. The aim has always been to assist
Dutch operating companies with international
business activities by eliminating or partially
eliminating double taxation on the various forms
of income. These treaties are also used in tax
planning structures for flow through entities and
as such the tax treaties are not limited to
operational activities only.
5. T AX INFORMATION
EXCHANGE
AGREEMENTS
Overview of Dutch tax treaties as per
1 January 2016:
Albania
Hungary
Qatar
Argentina
Iceland
Romania
Armenia
India
Russia
Aruba
Indonesia
Saint Martin
Australia
Ireland
Saudi Arabia
Austria
Israel
Singapore
Azerbaijan
Italy
Slovak Republic
Bahrain
Japan
Slovenia
Bangladesh
Jordan
South Africa
Barbados
Kazakhstan
Spain
Belarus
Korea
Sri Lanka
Belgium
Kuwait
Suriname
Bermuda
Kyrgyzstan
Sweden
Brazil
Latvia
Switzerland
Bulgaria
Lithuania
Taiwan
Canada
Luxembourg
Tajikistan
Since the start of the financial crisis, pressure on
tax havens and countries with bank secrecy laws
have mounted and a black- grey and white list
were presented by the OECD. Any country on the
black and grey list could only remove themselves
by signing tax information exchange treaties
with white listed countries like The Netherlands.
Remaining on a black list is not a viable option for
any country or island and therefore, within a very
short timeframe, The Netherlands has concluded
many of such TIEA’s with tax havens and bank
secrecy nations. As the title suggests, the aim
of these agreements is to exchange information
between tax authorities on a voluntary basis.
Overview of TIEA’s signed by the Netherlands:
Andorra
Dominica
Montserrat
Anguilla
Gibraltar
Saint Kitts and Nevis
Antigua & Barbuda
Grenada
Samoa
Bahamas
Guernsey
San Marino
Belize
Isle of Man
Seychelles
Bermuda
Jersey
Saint Lucia
China
Macedonia
Thailand
Croatia
Malaysia
Tunisia
British Virgin Islands
Liberia
Saint Vincent and
Grenadines
Curacao
Malta
Turkey
Cayman Islands
Liechtenstein
Turks & Caicos Islands
Czech Republic
Mexico
Turkmenistan
Cook Islands
Marshall Islands
Denmark
Moldova
Uganda
Costa Rica
Monaco
Egypt
Morocco
Ukraine
Estonia
New Zealand
United Arabic Emirates
Ethiopia
Nigeria
United Kingdom
Finland
Norway
United States
France
Oman
Uzbekistan
Georgia
Pakistan
Venezuela
Germany
Panama
Vietnam
Ghana
Philippines
Yugoslavia
Greece
Poland
Zambia
Hong Kong
Portugal
Zimbabwe
A TIEA with Uruguay has been ratified by the
Netherlands, but has not yet entered into force.
If no tax treaty is signed or the treaty does
not cover a certain type of income, then the
Netherlands has a unilateral provision for situations
of double taxation. It is called the 2001 Double
Taxation Decree (“Besluit voorkoming dubbele
belasting 2001”). This 2001 DTC is only open to
residents of the Netherlands.
39
6. W ITHOLDING TAXES
7. F ISCAL UNITY
6.1. D IVIDEND TAX
The corporate income tax act provides for a
fiscal unity regime that permits companies
to file a consolidated tax return. Upon their
request companies that are tax residents of
the Netherlands may form a fiscal unity with
subsidiaries in which a participation of at least 95%
is held. The main advantages of the fiscal unity are
that profits and losses can be freely set off among
members of the fiscal unity in the same financial
year and members can avoid the realization of
income on intra-group transactions. Assets of the
fiscal unity can be transferred within the group
without corporate income tax being levied. After
the formation of the fiscal unity only the parent
company is in fact recognized as a taxpayer for
CIT purposes. Any income or expense at the level
of the subsidiary company is aggregated at the
level of the parent company. However, only Dutch
resident entities of a group are entitled to form a
fiscal unity.
Dividend payments made by companies that
are incorporated under Dutch law (and have
a capital divided into shares) are generally
subject to Dutch dividend withholding tax at a
15% rate. The implementation of the EU ParentSubsidiary Directive in Dutch tax law provides
for an exemption of withholding tax on dividend
distributions paid to a qualifying EU parent
company. The Dutch dividend withholding tax
rate can also often be reduced based on double
tax treaties.
The EU Parent-Subsidiary Directive is generally
applicable if the following requirements are met:
• Both parent and subsidiary take one of the
forms listed in the Directive.
• The parent company holds a 5% or more
participation in the subsidiary for at least
one year.
• The subsidiary is a resident of another EU
Member State and is, without the option of
being exempt, subject to tax in that
Member State.
• The subsidiary is not, under the terms of a
double taxation agreement concluded with a
third state, resident for tax purposes outside
the European Union.
• The double taxation agreement between
the Netherlands and the resident State of the
parent company should not contain an anti-abuse
provision, which disqualifies the parent from any
favourable treatment with respect to dividend
withholding tax.
6.2. I NTEREST AND ROYALTIES
There is no Dutch withholding tax on interest and
royalties paid by companies that are resident in
the Netherlands. Interest paid on certain loans
that function as equity may for tax purposes be
regarded as dividend and therefore subject to
dividend withholding tax.
40
Characteristics of the fiscal unity:
• A parent company must directly / indirectly
own at least 95% of the shares of the subsidiary.
• Under certain conditions, qualifying subsidiaries
may enter into the fiscal unity during the fiscal
year.
• Fiscal unities may be ended during the course
of the fiscal year (as of the disposal date of
the subsidiary).
• A company leaving the fiscal unity may retain
losses that have not been set off and were
incurred during the fiscal unity period, provided
these losses can be attributed to that company.
• Dutch permanent establishments of foreign
companies may enter into a fiscal unity with
a Dutch resident company, provided that there is
a shareholding of at least 95% between
the companies.
A fiscal unity for VAT purposes is also possible.
This is dealt with in a separate request that is not
linked with a CIT fiscal unity.
ACCOUNTING, LEGAL AND TAX ENVIRONMENT The Netherlands
7.1. D IVIDEND TAX
A non-resident entity or individual which owns
5% or more of the issued share capital in a Dutch
entity (defined as “substantial shareholding”) may
be subject to a 25% Dutch Corporate income tax
in relation to profit distributions, capital gains
and loans in connection with the substantial
shareholding as a non-resident taxpayer. The
substantial shareholding tax, however, does not
apply if the shares can be attributed to a business
enterprise of the non-resident shareholder.
8. I NDIRECT TAXES
(VAT)
VAT is levied at each stage in the production
and distribution chain of services and goods.
The tax base is the total amount charged for the
transactions excluding VAT. Due to deductions
in previous stages, VAT is not cumulative. Every
taxable person is liable for VAT on the turnover
generated (output tax) minus VAT charged on
expenses and investments (input tax). If the
balance is positive, tax has to be paid to the tax
authority and if the balance is negative, a tax
refund is received. The chain of deducting VAT
ends with the end consumer (for him or her it is
not deductible).
VAT is based on EU directives and is implemented
across the entire EU. Rates however differ per
EU Member state within a predetermined range.
The general rate in the Netherlands is 21% and the
reduced rate is 6%. There is also a 0% rate and
applies to goods not cleared through customs,
supplies of goods that are exported from EU
countries, intra-Community supplies and services
connected to such supplies.
8.1. D IVIDEND TAX
If goods or services are supplied to another
country, the place of supply rule determines
where VAT is due.
As of 2010 the general rule for business-tobusiness supplies of services is that services are
deemed to take place in the country where the
(VAT-taxed) recipient of the service is established.
In cross border situations the liability to pay VAT is
shifted to the (VAT-taxed) recipient.
In the case of supplies of goods, the place of
supply will be in the country where the goods
are located.
The general rule for business-to-consumer services
has not changed. VAT is still due in the country of
the service provider.
Many exceptions to these general rules apply
and you absolutely do need expert advice prior
to starting a business to comply with the VAT
rules and avoid penalties from the tax authority.
Personal liability can arise when dealing with
VAT issues.
41
There are also many exemptions and these can
actually add to the overall cost and negatively
influence the profit and loss of the company when
VAT cannot be set off.
9. P ERSONAL INCOME
TAX (PIT)
Since VAT revenues are the biggest tax generator
for the Dutch government strict administrative
requirements are in place (also based on EU rules).
VAT returns are filed either monthly, quarterly or
annually. The VAT due needs to be paid within one
month after the filing period. VAT filing for Dutch
taxpayers is done electronically. Taxable persons
performing intra-Community supplies must also
periodically file EU sales listings, stating name and
VAT identification numbers of their customers
in the other EU countries. In addition reporting
requirements towards the Dutch Central Statistics
Bureau (CBS) are mandatory in some cases.
Private individuals in the Netherlands are subject
to personal income tax. Anyone living (resident) in
The Netherlands is taxed on his or her worldwide
income. The PIT Act has three classes or boxes.
• Box I income includes profits, employment
income and income deemed from residential
home ownership.
• Box II income includes income from shares in
case of a substantial interest of 5% or more.
• Box III income includes income from savings
and investments.
As of January 1, 2014 the VAT-regime for deemed
self-supply (Interne levering / integratieheffing)
is abolished. Under this VAT-regime a levy of
VAT occurs when real estate or other assets
constructed for (partially) exempt use. Upon first
use, a self-supply is presumed and VAT is due on
all construction costs, including costs incurred
without any VAT.
8.2. I MPORT DUTIES
Import duties are calculated based on the customs
value of the goods multiplied with a tariff rate.
Goods entering the EU face import duties. The
Netherlands is famous for being a transit nation
when it comes down to shipping and transporting
goods from all over the world. Special customs
procedures are in to accommodate this transport
hub function. Storing goods in customs-bonded
warehouses can be used to defer the levy of
import duties. It is possible to transport goods
between two places within the EU using this transit
procedure and deferring import duties.
If you are considering setting up a company in the
Netherlands and importing goods out of non-EU
Member states, you will need expert advice to
avoid unnecessary import duties and VAT charges.
42
For foreign investors box II income is of significant
interest as a foreigner can be liable for PIT in the
Netherlands on this basis. Although tax treaties
will most likely favour the foreign taxpayer. If you
hold a direct interest of at least 5% in a BV, NV
or cooperative (as a member) or an open limited
partnership (as a partner), and any foreign entity
with shares for that matter, you are in principle
liable to a flat tax rate of 25%.
If a foreigner is employed in the Netherlands and
therefore taxed in box I at a progressive rate, he or
she can be eligible for a special income tax ruling.
Under this ruling, 30% of the employee’s salary
may be paid out as tax-free compensation for
costs. There are certain conditions to be fulfilled in
order to qualify for this 30% ruling.
ACCOUNTING, LEGAL AND TAX ENVIRONMENT The Netherlands
10.O THER
10.1. R EAL ESTATE TRANSFER TAX
The acquisition of Dutch real estate, including the
acquisition of beneficial ownership, is subject to
a real estate transfer tax of 6%. The tax is based
on the real estate value or the purchase price,
whichever is higher.
Acquisitions by a company within the scope of
a reorganization qualify for an exemption under
certain conditions.
10.2. I NTEREST AND ROYALTIES
Until 2001, the Dutch tax authority issued standard
rulings to companies engaged in intermediary
financing arrangements, confirming the arm’s
length character of earnings along the way. The
rulings were based on reporting a predetermined
(marginal) spread on their profits.
As per 1 January 2014, a new Decree entered into
force which codifies the existing administrative
guidance on substance requirements for
companies engaged in inter-company financing
and / or licensing activities.
Dutch companies that claim the benefits of a
tax treaty or EU Directive should now declare in
their annual Dutch corporate income tax return
whether or not the tax payer meets a defined set
of substance requirements. In case one or more of
these requirements are not met and the company
has claimed the benefits of a tax treaty, the Dutch
tax authorities will notify the foreign tax authorities.
The substance requirements, which should
be met by these companies, are similar to the
substance requirements already applicable since
2001 for Dutch companies which would like to
obtain certainty in advance from the Dutch tax
authorities in the form of an APA or an Advance
Tax Ruling (ATR). The new rules will be applicable
for fiscal years starting as of 1 January 2014 and
the substance requirements should be met on a
continuous basis.
After 2001 intermediary financing companies must
now obtain an advanced pricing agreement to
confirm the ‘at arm’s length’ character of income
earned by them. Rulings are no longer standardised
and are granted on a case-by-case basis only.
Certain substance, risk and equity requirements are
no part of the APA-ATR process.
10.3. A DVANCED PRICING
AGREEMENTS (APA)
The Dutch transfer pricing regime is governed by
article 8b of the CIT-act and subsequent transfer
pricing decrees that address advance certainty
(APA’s) regarding research & development,
the appropriate cost base and allocation of
competencies at the Dutch tax authority.
The Dutch transfer pricing regime is pragmatic.
The tax authority applies the OECD guidelines
with a flexible view. Pan-European comparables
can be used as well as profit based methods.
For flow through entities a flexible view can
be expected from the tax authority. However
if multinationals with group entities in low tax
jurisdictions use the Netherlands to allocate cost
and no profit, expect greater scrutiny by the tax
authority. Advanced pricing agreements can settle
any doubts on the ‘at arm’s length’ pricing used
and the Dutch tax authority is keen on mutual
agreements with the taxpayer.
43
44
ACCOUNTING, LEGAL AND TAX ENVIRONMENT The Netherlands
10.4. F LOW THROUGH
ENTITIES (DOORSTROOM
VENNOOTSCHAPPEN)
Under Dutch tax law an intra-group financing
company (and intra-group royalty licensing
companies) would be deemed to run sufficient
economic risk if it has a sufficient equity at risk
from its financing activities. This equity at risk
should be at least the lowest of the following
amounts:
• 1 percent of the amount of outstanding loans
(or 50% of the expected gross royalty income)
• EUR 2,000,000
If a Dutch company would meet these minimum
risk requirements, the interest income and interest
expenses would be included in the taxable base
and it will have to report an arm’s length spread.
A spread is a remuneration that the Dutch
company must receive for its financing activities
and will consist of a fee for the equity at-risk and
a handling fee. The amount of the spread will also
depend on the amount borrowed and on-lent.
The interest rate on the loans have to be at arm’s
length, but generally the Dutch tax authorities
are more interested in the taxable spread that is
reported in the Netherlands.
If a financing company does not meet the minimum
equity risk requirements the interest income and
interest expenses are excluded from the Dutch tax
base. Instead the company would be regarded as
an agent in the structure and would need to report
a small fee (usually calculated on a cost-plus basis)
as arm’s length (what third parties would agree
upon) income. Furthermore, the company would
not be able to credit any foreign withholding tax.
10.5. B ILATERAL INVESTMENT
TREATIES (BIT’S)
The Netherlands has also entered into many
investment protection agreements with nations
that were and or are economically still developing
or politically unstable. In order to encourage Dutch
businesses to invest in these countries, the Dutch
government and the contracting state guarantee
that any investment in that state is protected
from government expropriation or receiving
compensation for such expropriation based on fair
market value of the investment (depending on the
specifics of the mutual agreement).
Overview of Dutch tax treaties as per
1 January 2014:
Albania
Georgia
Oman
Pakistan
Algeria
Ghana
Argentina
Guatemala
Panama
Armenia
Honduras
Paraguay
Bahrain
Hong Kong
Peru
Bangladesh
Hungary
Philippines
Belarus
India
Poland
Belarus
India
Poland
Belize
Indonesia
Romania
Benin
Jamaica
Russian Federation
Bolivia
Jordan
Senegal
Bosnia and
Herzegovina
Kazakhstan
Serbia
Brazil
Kenya
Singapore
Bulgaria
Korea, Republic of
Slovak Republic
Burkina Faso
Kuwait
Slovenia
Burundi
Laos
South Africa
Cambodia
Latvia
Sri Lanka
Cameroon
Lebanon
Sudan
Cape Verde
Lithuania
Suriname
Chile
Macao
Tajikistan
China
Macedonia, Former
Yugoslav Republic of
Tanzania
Costa Rica
Malawi
Thailand
Côte d'Ivoire
Malaysia
Tunisia
Croatia
Mali
Turkey
Cuba
Malta
Uganda
Czech Republic
Mexico
Ukraine
Dominican Republic
Moldova
Uruguay
Dominican Republic
Moldova
Uruguay
Ecuador
Mongolia
Uzbekistan
Ecuador
Mongolia
Uzbekistan
El Salvador
Morocco
Vietnam
Yemen, Republic of
Eritrea
Mozambique
Estonia
Namibia
Zambia
Ethiopia
Nicaragua
Zimbabwe
Gambia
Nigeria
45
46
ACCOUNTING, LEGAL AND TAX ENVIRONMENT The Netherlands
SECTION IV
SPECIAL
VEHICLES IN THE
NEDERLANDS
47
1. I NVESTMENT
COMPANIES
(FISCALE
BELEGGINGS
INSTELLINGEN (FBI))
Investment Companies (FBI) enjoy a beneficial tax
regime. Profits are not subject to taxation, pursuant
to the obligation to distribute the net investment
income within eight months of the following
financial year. Capital gains can be transferred to a
tax-free re-investment reserve. Profit distributions
are hit by a 15% dividend withholding tax that can
be reduced by an applicable tax treaty or the EU
Parent-Subsidiary Directive.
In order to qualify for the FBI regime the following
criteria (cumulative) need to be met throughout
the entire tax year:
• The FBI must be set up as an NV, BV, fund for
joint account or any other Dutch resident entity
established under the laws of EU Member states,
the law of The Netherlands Antilles or any other
state with which The Netherlands has entered
into a double tax treaty provided that the legal
form resembles that of the NV, BV or fund for
joint account.
• The statutory and actual activities of the FBI are
collective passive investments.
• Debt is maximized at 60% of the tax book value
of real property investments and 20% of the tax
book value of other investments.
• The net investment income must be distributed
within eight months following the financial year.
• The net investment income must be distributed
pro rata to all participants.
• Individuals may not have an interest in the
investment company of more than 25% and
entities may not have an interest holding more
than 45% and who are subject to a profit tax, if
that investment company is quoted on a financial
market as defined by the Financial Supervision
Act (Wft) or the vehicle or its trust has a
Wft license.
• The interest in the vehicle is not held for 25% or
more by Dutch resident companies via a nonresident corporate shareholder.
• If the FBI is not quoted on a financial market or
it does not have a Wft license or has not been
exempt from being licensed; at least 75% of the
interest must be directly or indirectly held by
individuals or exempt investors or by investment
institutions quoted on a financial market, and
individuals may not hold an interest of 5%
or more.
• A director cannot be director of an entity, which
holds 25% or more of the shares in the FBI, unless
this entity is quoted on a financial market.
48
Real estate developments are now allowed by the
FBI or by 100% subsidiaries of that FBI under the
following limitations:
• The FBI is allowed to hold shares in a subsidiary
that conducts real estate development activities.
This subsidiary is taxed at the normal CIT rate.
• If the FBI wants to develop its own real estate
investments, the subsidiary can develop the real
estate at an arm’s length remuneration.
• The renovation of real estate by the FBI is
allowed as long as the cost related to the
renovation stays within 30% of fair market value
of the real estate.
As of January 1, 2014, FBI’s are allowed, under
certain conditions, to carry out auxiliary activities
which are linked to real estate, provided that these
activities can be directly linked with the investment
in the real estate held by the FBI. The subsidiary
entity of the FBI, however, is subject to the normal
corporate income tax regime.
Since 2008, Dutch dividend withholding tax to be
paid by the FBI to the tax authority can be reduced
by Dutch and foreign withholding tax levied on the
investment income of the FBI.
ACCOUNTING, LEGAL AND TAX ENVIRONMENT The Netherlands
2. E XEMPT
INVESTMENT FUND
(VRIJGESTELDE
BELEGGINGS
INSTELLING (VBI))
In 2007 a more favourable investment vehicle was
introduced, the VBI. Requirements in order for
taxpayers to qualify for this regime are:
• The VBI is set up as a NV, fund for joint account
or any other Dutch resident entity established
under the laws of EU Member states, the law of
the Netherlands Antilles or any other state with
which The Netherlands has entered into a double
tax treaty provided that the legal form resembles
that of the NV, BV or fund for joint account.
• The VBI is set up as an open-end
investment fund.
• The VBI may invest in financial instruments such
as shares, bonds, options, futures, swaps.
• The VBI can invest in Dutch and foreign real
estate indirectly (via a non-transparent Dutch or
foreign entity or REIT).
• The VBI may invest in foreign real estate through
a transparent entity or partnership.
• Interest bearing investments are most interesting
since few countries levy withholding tax and since
the VBI is exempt from taxation, the VBI has no
treaty protection.
• The VBI has no specific shareholder requirements;
individuals, corporations and institutional
investors can invest via a VBI.
• The VBI requires more than one shareholder.
• The VBI should diversify risk; it cannot invest in
one asset class only (except feeder funds).
• There are no distribution obligations. For Dutch
shareholders an annual revaluation is mandatory
and can lead to taxation at the level of the
Dutch shareholder.
• The participation exemption does not apply to
a shareholding in a VBI.
• Income of the VBI is not taxed in
The Netherlands.
• Dividend distributions to its shareholders are
also not taxed in the Netherlands.
3. INNOVATION BOX
(PATENT BOX)
In order to stimulate innovation in the Netherlands
and attract foreign investors at the same time, the
Dutch government created a special tax regime
called “the innovation box”. The effective tax rate
is 5% (corporate income tax). The ‘net earnings’
derived from self-developed intangible assets may
be taxed at the decreased CIT rate. The Dutch tax
authorities will assist taxpayers in guiding them to
qualify for the innovation box.
49
4. R EGULATORY
ASPECTS OF
DOING BUSINESS IN
THE NETHERLANDS
The following regulatory regulations are the most
likely regulations a (professional) foreign investor
will run into. There are of course many more rules
and regulations and we have not seen the end of
newer and stricter supervision rules due to the
financial crisis. When dealing with DNB (the Dutch
Central Bank) or its counterpart the AFM, you will
need expert guidance.
4.1. A NTI MONEY LAUNDERING
(WWFT)
To prevent money laundering and financing of
terrorism (‘Wet ter voorkoming van witwassen
en financiering van terrorisme’) the Wwft (in
short) was introduced. Under this act, Netherlands
based institutions (banks, brokers, etc.) and
certain service providers (trust offices, lawyers,
notaries, tax advisors, etc.) must report unusual
transactions. These parties must also establish and
verify the identity of the ultimate beneficial owner
(client) prior to the establishment of the business
relation with a certain client. Monitoring of the
business relation is required by law on an ongoing
basis. The client investigation is principle based
and the service provider has a certain margin of
appreciation as to how the investigation is to
be performed.
4.2. I NTEREST AND ROYALTIES
In 2007 the Financial Supervision Act came into
force (Wft). Foreign investors might run into
either one of the two supervisory authorities, the
Dutch Central Bank (DNB) or the Financial Market
watchdog (AFM).
Establishing a business whereby repayable funds
are obtained, can qualify as a bank under the Wft.
In most instances, finance companies operating
exclusively within a group of companies do
not qualify as banks and are exempt from the
requirements of the Wft.
Terms like ‘restricted circle’ and ‘professional
market parties’ play a vital role in establishing the
boundaries for businesses to operate in without
the extensive requirements set forth in the Wft.
In general the rule with supervision acts is that
a license is required in order to conduct certain
activities except where a general exemption can
be applied.
50
If a ‘European passport’ is applicable, banks
and financial institutions established and licensed
in another EU country do not need to obtain a
Dutch license in order to provide services in
the Netherlands.
Offering securities to the public is forbidden in
the Netherlands unless a prospectus is drafted
according to the Wft rules. This prospectus should
be approved by the AFM. In case of bond issues
certain information needs to be filed at the AFM
even if the bond issue was aimed at professional
market parties.
The AFM is also responsible for enforcing
the relevant provisions of the Market Abuse
Directive, which has been fully implemented
in the Netherlands.
4.3. S UPERVISION ON TRUST
COMPANIES (WTT)
DNB is also the supervisor for the Dutch trust
companies. A special law regulates the trust
service industry (Wtt). Trust offices can only
perform services with a license obtained from
DNB. It is illegal to perform management tasks for
client entities, provide for company addresses in
combination with legal and accounting services,
buy and sell shelf companies and perform
services as a trustee without a license. The client
investigation is much like the Wwft,
principle based.
On the basis of the 2003 Reporting Provisions
so called special finance companies (‘bijzondere
financiële instellingen’) are subject to proactive notification within three weeks after
their establishment in The Netherlands (or
incorporation). International payment volume
and frequency then determine whether regular
reporting towards DNB is put in place. Failing to
report within three weeks is an economic offence
and can be penalised. Reporting to DNB is typically
done by trust service providers.
4.4. DATA PROTECTION
When the company records the personal
information of shareholders, employees, suppliers
or customers, the law concerning the protection
of personal data applies. Company management
must notify the national commission for protection
of personal data with regard to the nature of the
data stored and related security measures. The law
on protection of personal data foresees certain
exemptions to the principle of notification.
ACCOUNTING, LEGAL AND TAX ENVIRONMENT The Netherlands
IT’S PEOPLE
WHO MAKE
THE DIFFERENCE
Disclaimer
This brochure should be regarded as general information and not as advice. Alter Domus Nederland B.V.
does not accept any liability for the consequences of using this information.
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