Ranked just outside the top 10 of Bloomberg’s “Best Countries for Business”, the Netherlands is truly a world-class business destination. Benefits of investing in the Netherlands include macro-economic stability, a competitive fiscal climate, good infrastructure, quality of education, a high degree of innovation and entrepreneurship. Because of this many foreign investors and multinationals have chosen to invest in the Netherlands.
Legal benefits of investing in the Netherlands
The Dutch legal system is fair and transparent and well equipped to deal with business, trade, taxation, corporate governance and patent issues. Some key legal points to consider when investing in the Netherlands are the following.
- Dutch law offers various types of legal entities in which investments can take form, such as a private limited liability company ‘BV’ (In Dutch: besloten vennootschap) or a public limited liability company ‘NV’ (naamloze vennootschap). Also possible is to incorporate a foundation, association or cooperative and several partnerships. The most commonly used partnerships are the ‘VOF’ (vennootschap onder firma) and the ‘CV’ (commanditaire vennootschap). Please note these partnerships are not considered as taxable entities for Dutch corporate income tax.
- Foreign investments in the Netherlands are largely tax driven. Some of the more interesting tax benefits concern the Participation Exemption and Fiscal Unity:
- Participation Exemption: a tax exemption for dividends and capital gains from the sale of shares in subsidiaries. Liquidation losses from a subsidiary may, under certain circumstances, be written off. However, costs relating to the acquisition and alienation of subsidiaries do not qualify under the participation exemption. There are some exemptions to the participation exemption, most of which relate to potential abuse.
- Fiscal Unity: subject to certain conditions companies that are members of a fiscal unity may file a consolidated tax return. The main advantages of the fiscal unity regime are that profits and losses may be freely set off among members of the fiscal unity and members can avoid the realisation of income on transactions between them.
Tax Rulings (concerning specific tax rules and the interpretation of the Tax Authorities thereof) in principle can be obtained for each issue. Under the current policy, no rulings are issued for some very aggressive structures. To obtain a ruling, current Dutch policy requires the taxpayer to disclose its entire structure (i.e., including its beneficial owners). In the Netherlands, there is no governmental fee for issuing a tax ruling.
- Furthermore, as for Dutch corporate law, especially with regard to the BV, there have been some major legislative changes. Per October 2012 the Netherlands has enhanced the business climate for entrepreneurs and introduced a more simplified and flexible private limited liability company which is known as ‘the Flex BV’. The changes have simplified the statutory rules governing Dutch private limited liability companies and offer a large degree of flexibility in the governance structure of this type of company. In general the incorporation of a legal entity is a swift procedure and might require the involvement of a civil law notary, depending on the kind of entity.
- As for foreign investment restrictions and conditions, please note that there are no screening requirements regarding foreign direct investment and no regulatory restrictions in those sectors that allow foreign direct investment. Foreign companies may hold 100% of most Dutch enterprises, borrow locally and on international markets, freely repatriate capital, profits, royalties and fees, and make all types of trade-related payments.
Are you also interested in investing in the Netherlands?
If you are interested in investing in the Netherlands and you have any legal questions concerning incorporating companies or partnerships, mergers and acquisitions or need help with drafting shareholder agreements, please do not hesitate to contact us. Our team of experienced lawyers would be happy to help you.