Doing Business in the Netherlands

Amsterdam

2008

Doing Business in the Netherlands

This may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.

Editorial Contributions
Sylvia Arends Jeroen Bedaux Misha lutje Beerenbroek Mounia ben Abdallah Robert Boekhorst Koert Bruins Hélène de Bruijn-Jonker Ruben de Wit Herman Huidink Alim Jalloh Cees Kersten Eva Kraan Edwin Liem Elwin Makkus

Jean-Clement Meignen Maaike Muit Marie Louise Nuijen John Paans Wouter Paardekooper Danielle Pinedo Laura Rietveld Florian Ruijten Remke Scheepstra Alexandra Schreuder Jan Snel Judith Steenvoorden Fedor Tanke Martijn van Bemmel

Marc Rijkaart van Cappellen Christiaan van der Meer Judith van Gasteren Monique van Herksen Christiaan van Hogendorp Ella van Kranenburg Geert-Jan van Rijthoven Gooike van Slooten Sebastiaan van Triest Edwin van Wechem Wibren Veldhuizen Irene Vermeeren - Keijzers Reina Weening Ricardo Wolf

Cover photo: © L.J.A.D. Creyghton / Holland Album _ Sint Maartensbrug / www.creyghton.com

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Authorized Economic Operator . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Partnership. . . . . . 2. . . . . . . . . . . . . . Distribution and Production . . . . . . . . . . . . . 13 VAT and excises . . . . . . . . . . . . . . . . . . . . . . . . . 4. . . . . 3. . . . . . . . . . 10 Other International Customs Facilities. . . . . . . . . . . Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Culture and the Arts. . . . . . . . . . . . 3. . . . . . . . . . 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 Customs value and applicable customs rate. . . . . . . . . . . . . . . 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 IV. . . . . . . . . . Doing Business in the Netherlands Introduction . . . . V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . International Distribution Centres / Customs Facilities . . . . . . . . . . . . . . . . . . . . . . 24 Branch v. . . . . . . . . . . 4. . . . . . . . . . . . . . . . . . 23 Subsidiary. . . . . . . . 24 Societas Europaea (SE) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Cities and Infrastructure . . . . . . . . . . . . . . . . . . 3. . . . . . . . . . 27 i . . . . . . . . .1 The Country . . . . . . . . . . . . .Table of Contents 1. . . .V. . 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. . . . 8. . . Sales Support. 5 II. 14 General Advantages . . . . . . .23 1. . . . . . . . . . . . . . . 9 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Tax Ruling . . . . . . . . . . . . . . . . . 22 III. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Agents . . . . 27 Distributors . . . . . . . . . . . . . . . 18 Liaison Office . . . . . . . . . . . . . .21 Legal forms of doing business . . . . . . . . . . . . . Branch . . . . . . . . . . Regional Headquarters / Coordination Centers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. . 21 Sales Support. . . . . . . . . . . . . . . . . . . 5. . . 3. . 17 Group Financing and Group Licensing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. . . . . 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. . . . . . . . . . . . . . . . 26 Formal Foreign Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Customs Warehouses . .ix I The Netherlands . . . . . . 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Production . . . . . . . . 1. 3 The Economy . . . . . 2. . . . . . 2. . . . 2 The Government. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. . . . . . . . . . . . . . . .vii Baker & McKenzie Amsterdam N. . . . . 5. . . . . . . . . . . . . . . . . . . . . . . 16 Holding of Shares. . . . . . 3. . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . and Publication Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Director’s report. . . . . . . . . . . . 36 Exemption for group companies . . . . . . . . 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Reporting. . . . . . . . . .Baker & McKenzie VI. . 29 Incorporation cooperative . 45 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Income Tax Rates. . . . . . . . . . . . 3. . . . . . . . . . . . . . . . 38 Act on Formal Foreign Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. . . . . . . 41 Compliance and Enforcement. . . . . . . 8. . . . . . . . . . . . . . . . . . . . . . . . . 4. . . . . ii 1. . . . . . 3. . . 7. . . . . . . . . . . . . . . . . . . . . 30 Transfer of shares and membership interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Large Companies Regime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34 1. . . . . . . . . . . . . 44 Financial Reporting . . . 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. . . . . . . 32 Single-member companies . . . . . . . . . . . . . . 42 Shareholders and General Meeting of Shareholders . 37 Consolidated accounts . . . . 5. . . . . . . . . . . . . . . . . . . . . . . 4. . . . . . . . . . . . . . . . . . . 30 Shareholders’ register . . . . . . . . . . . 7. 41 Supervisory Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Income from Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Supervisory directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Incorporation of Dutch NV and BV . . 35 Other information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46 . . . 36 Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Accounting principles . . . . . . . . . 2. . . . . 8. . . . . . . . . . . . . . . . . . . Auditing. . . 10. . . . . 47 Income Tax Ruling . . . . 6. . . . . . . . . . . . . . . . . . . . . . . . . 48 Levy of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. . . . . 37 Auditing requirements . . . . . . . . . . . . . . . . . . . . . . . . . 9. . . . . . . . . . . . . . . . 40 Five Chapters . . . . The Subsidiary . . . . . . . . . . . . . . . . . . 6. . . . . . . . . . . . . . . . . . . . . . . . 5. . . . . . . . . . . . . . . 5. . . . . . . . . . . 39 Principles and Best Practice Provisions. . . . . . . . . . . . . . . . 41 Management Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. . . . . . . . . . . . . . . . . . . . . . . . 51 VIII. . . . . 29 Capitalization . . . . . . . . . . . . . . . . . . . . . . 31 Issuance of new shares. . . . . . . 46 2001 Personal Income Tax Act. 33 Financial statements . . . . . . . . . . . . . . . . . . . . . . . . . .40 IX. . . . . . . . . . . . . . . . 31 Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. . . . 2. . . . . . . . 6. . . . . . . . . . . . 8. . . . . . 7. . . . . . . 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. . . . . . . . . . . . Personal Income Tax . 36 Classification . . . . . . . . . . . . 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Substantial Interest . . .29 1. . . . VII. . . . . . . . . . . . . . . . . . . . . . 4. . . . . . . . . Corporate Governance Code (Code Tabaksblat) . . . . . . . . . 11. . . . . . . . . . 35 Language . . . . 44 Monitoring of the Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . 70 Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 EU Parent-Subsidiary Directive . . . . . . . . . . . . . . . . . . . . . . . 2. . . 3. . . . . 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 iii Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. . 21. . . . . 92 Regulated financial activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 Knowledge Migrant Workers. . 8. . . . . . . 2. . . . . . . . . . . . 90 Exchange Control Regulations . . Residence Permit. . . 67 Dividend Stripping . . .53 1. . . . . . . . . . . . . 2. . . . . . . . . . . . . . . . . . . . . . 58 Capital Gains . . . . . . . . . . . . . . . . . . . . . . . 68 Tax Incentives. . . 82 XII. . 81 EU Savings Directive . . . . . . . . . . 87 Real Estate Transfer Tax . . . . . . . . . 3. . . . . . . . . . . . . . . . . . . . Visa. . . . . Other Taxes . . . . . . . . . . . 56 Branch v. . . . . . . . . . . . . . 3. . . . . . . . .102 1. . . . . . . . . . . . . . 22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 Capital/Loans. . . . . . 10. . . 102 Visit to the Netherlands Exceeding Three Months . . . . . 103 Work permit . . . . . . . . . . . . . . . . . . . . 16. . . . . . . Corporate Income Tax . . . . . . . . . . . . . . . . . . . . . 17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .92 XIII. . . . . . . . . . . . . . . . . . . . . . . . . . . 1. . . . 69 Losses. . . . . . .Doing Business in the Netherlands X. . . . . . . . . . . . . . . 79 European Economic Interest Grouping and Societas Europaea . . . . . . . . . . . . . . . . 11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 EU Interest and Royalty Directive . . . . . . 71 Mergers and Demergers . . . . . . . . . . Subsidiary . . . . . . . . . . . . . . . . . 72 Fiscal Unity . . . . . . . . . . . . . . . . . . . . . . 102 Residence permit . . . . . . . . . . . . . . . . . . . . . . 12. . . . . . . . . . 53 Branches . . . . 90 Withholding Tax Dividends . . 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. 5. . . . . . . . . . . . . . . . . . . 6. . . . . . . . 64 Flow-Through Entities . . . . . . . . . . . . . . . 81 EU Merger Directive. . . . . . . . . . . . . . . . . . . .87 Value-added Tax (VAT) . . . . . . . . . . . . . . . . . . . . . . Financial Regulations . . . . . . . 18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 Visit to the Netherlands Not Exceeding . . . . . . . . 4. . . . . . . 75 Exempt Investment Fund (VBI) . . 82 Summary of the Netherlands’ Bilateral Tax Treaties . . . 2. . . . . . . . . . . . . . 4. 15. . . . . . . 63 Limitations on Deductions of Interest . . . . . . . . . . 3. . . . and Work Permit for Non-EU Nationals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. . . . . . . . 58 Participation Exemptions . . . . . . . . . . . . . . 77 Transfer pricing regime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . XI. . . . . . . . . . . . . . . . . . 74 Investment Companies (FBI). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14. . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . XV. . . . . . . Labor Law . . . . . . . . . . . . . . . . 142 IP Enforcement Directive 2004/48/EC . . . . . . . . . . . . . . 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 Advertising and freedom of expression . . . . . . . . . . . . . . . . . 146 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. . . . . . . . . 2. . . . . . . . . . . . . . . . . . . . . . . . . 5. . . . . . . . . . . . . . . . . . . . . . . . . . . 4. 117 Competition Rules . . 138 Designs and Models . . . . . . . . . 6. . . . . . . . . . . . . . . . . . . . . . . . . . 148 Registration . . . . . . . . . . 4. . . . . . . . . . . . . . . . . 11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. . . . . . . . . . . 135 Term . . . . . . . . . . . . . . . 149 Rights of Way . . . 137 Neighbouring Rights . . . . . . . . . . . . . . . . . 148 Numbers. . . . . . . . . . . . . . . . . . 147 Market Situation . . . . . . . . . . . . . . . . . . . . .105 1. . . . . . . . . . . . . . . . . . . . . . . . 105 Non-Competition Clause . . . . . . . . . . . . . . . . . . . . . . 2. . . . . . . . . . . . . . . 3. . . . . . . . 114 Sickness and Disability . . . . . . . . . . . . . . . . 1. . . . . . . . 3. . . . . . . 3. . . . . . .136 1. . . . . . . 147 Treaties and General European Legislation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Telecommunications . . . . 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 Import and Export: Free Movement of Goods . . and Pledge . . . . . . . . . . . 2. . . 2. . . . . . .148 Patents . Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 Dutch Competition Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 Protection of Databases . . . . . . . . . . . . . Social Security and Pensions . . . 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 Trade Names . 138 Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. .113 National Insurance . . . 4. . . . . . . . . . . . . . . 116 Dutch Pension System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12. . . . . . 142 Anti-counterfeit Measures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Competition Rules and Free Movement of Goods . . . . . . . . . . . . . . . . . . . . . . . . . 136 Copyright . . . . . . 145 Unfair Competition. . . . . . . . . . . . . . XVIII. . . 15. . . . . . . . . . . . . . . 151 iv . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. . . . 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14. . . . . . . . . . . . . . . . . . . . 148 Basic Legislation and Regulatory Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 Significant Market Power . . . . 142 Advertising . . . . . . . . 1. . . . 106 XVI. . . . . . . . . . . . 13. .124 XVII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Licensing. . . . . . . . . . . . . . . . . . . . 135 Standardization . 8. . . . . . . . . 113 Employees’ Insurance . . . . . . . . . . 146 Trade Secrets . . . . . . . . . . . . . . . . . . . . 6. . . . . . . . . . . . 134 The European Economic Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 Public Procurement Rules . 1. . . . . . . . . . . . . . . . . 3. .Baker & McKenzie XIV. . . . . . . . . 106 Termination . . . . . . . . . .

. . . . . . 8. . . . 168 Summary Proceedings . . . . . . 159 Data Protection . . . 12. . . . . . . . . . . 11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. . . . . . . . . . . . . . . 7. . . . . . . . . . 157 Encryption . . . . . . . . . . . . 5. . . . Jurisdiction . . . . . . . . . . . . . . . . . . . . .167 1. . . . . . . . . .161 XXI. . . . . . . . . . . . . . . . . . . 172 Collective action. . . . . . . . . . . . . 161 Noncontractual Liability (Wrongful Act) . . . . . . . . . . . . Information and Communication Technology (ICT) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170 Mediation . . . . . . . . . . 175 v . . . . . . . . . . . . . . . . . . . .154 1. . . . . . . . . . . . . . . . . . . . . 4. . . . . . . . 14. . . . . . . . . . . . . 9. . . . . . . . 4. . . . . . . . . . . . . . . . 7. . 13. . . . . . . . . . . . . . . . . . 8. . . . . 151 Universal Services . . . . . . . . . . . . 165 7. . . . . . . . . . . . . . . . . . . General. . . . . 1. . . 4. . . . . . . . . . 168 Prejudgment Attachment . . . . . . . . . . . . . 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. . . . . . . . . . . . . . . 169 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. . . . . . . 153 XX. . . . . 5. . . . . . . . . . . . . . . . . . 11. . . . Dispute Resolution . . . . . . . . . . . Interoperability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171 European enforcement order for uncontested claims . . . 163 Compensation of Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159 Online Gambling . . . . . . 6. . . . . . . 167 Course of the Proceedings . . . . . . 155 Technology Transfer. . . . . . 173 Class actions . . . . . . . . . . . . . . . . . 155 ICT Agreements and Standard Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. . . . . 157 The Internet and E-business. . . . . . . . . . . . . 156 Shrink-Wrap License Agreements . . . . . 159 Computer Crime. . . . . . . . . . . . . . 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. . . . . . . . . . . . . . . . . . . . . . 160 General . . . . . . . . . . 6. . . . . . . . . 157 Source Code Escrow . . . 152 Privacy and Legal Interception . . . . 173 Inspection or taking copies of certain identifiable documents instead of full discovery . . . . . . . . . . . . . . . . 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161 Contractual liability . . . . . . . . . 154 Computer Software . . . . . . . . . . . . . . . . . . . . . . . . . 9. . . . . . . . . . 155 Topographies of Semiconductors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171 International payment orders . . . . . . . . . . . . . 171 International Enforcement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161 Pre-contractual liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 Databases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. . . . . . . . . 159 Retention . 2. . . . . . .Doing Business in the Netherlands XIX. . . . . . . . . . . Liability . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . 190 Documentation . . . . Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Contact Information . . 7. . . a BV. . . . . . . . . . . . . . Real Estate . . . . . . . . . . 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 Construction and Renovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 Other Rights and Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 Leases . . . . . . . . . 2. . . . . . . . .176 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. . . . . . 195 Royalty column . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 Public Housing . . . 4. . . . . . . . . . . . . . . . . . . . . . . . . . .190 Appendix II . . . . . . . . . . . . . . . . . . . or a Cooperative . . . . . . . . .Baker & McKenzie XXII. . . . . . . . . .Procedure for Incorporating a Dutch NV. . . . . . . . . . . . . . . 195 Interest column . . .Overview of Tax Rates Inbound Income Under Dutch Tax Treaties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 Environmental Permits and Soil Pollution . . . .196 Procedure . . 195 vi . . . . . . . . 181 Appendix I . . . . . . . . .192 Appendix VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 Land Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 Modernization of regulation . . . 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190 Qualifying companies column . . . . . . . . . . . . . . . . . . .

Please contact our office if you have any questions or if you too would like help in doing business in the Netherlands. and it was the first with a fully integrated civil law. The Netherlands is an attractive country in which to do business. Mike Jansen Managing Partner vii . which is clearly visible in various activities. Baker & McKenzie Amsterdam sends its Doing Business guide to more than a thousand clients and business associates. They are sincere and intellectual professionals who understand and serve clients with a shared set of values and high quality standards. We hope this guide is helpful to you and your organization. Baker & McKenzie has spent more than 50 years assisting international companies looking for business opportunities in the Netherlands and advising Dutch and international companies doing business here. providing innovative solutions wherever our clients are and whatever their needs. Our more than 180 attorneys. including chambers of commerce. ministries and other governmental organizations. embassies. Our firm has had a presence in the Netherlands since 1945. It has an excellent logistics and technological infrastructure.Introduction Doing Business in the Netherlands Doing Business in the Netherlands – Your Legal and Fiscal Guide 2008 ‘Doing Business in The Netherlands’ is a highly popular guide published by Baker & McKenzie Amsterdam. It describes the legal and fiscal environment of the Netherlands and the rules and regulations that companies must consider when doing business here. participation in pro bono and community service is one of our core values. It has a favorable tax regime and has concluded more tax treaties with other countries around the globe than any other country. tax law and civil-law notary practice. Chapter one presents key facts and figures on these subjects. The Netherlands is also famous for its culture and arts. Also. tax consultants and civil-law notaries in Amsterdam all have the expertise and experience for a successful national and international legal practice. a highly skilled workforce and a stable economy.

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focusing on providing innovative legal services to clients in the business community. and world-class fluency in the way we think. tax law and civil-law notary practice.Baker & McKenzie Amsterdam N. Baker & McKenzie provides high-quality advice and legal services to a large number of the world’s most dynamic and successful organizations. Participation in pro bono and community service is one of Baker & McKenzie’s core values. We provide pro bono and community service including raising funds for the Ronald McDonald Centre Only Friends. tax consultants and civil-law notaries. The office was established in 1945 and joined the Baker & McKenzie global network in 1957. work and behave. Baker & McKenzie is known for having a deep understanding of the language and culture of business. providing innovative solutions wherever our clients are and whatever their needs. which stimulates the practice of sports by handicapped children.V. Doing Business in the Netherlands Baker & McKenzie Amsterdam is a leading Dutch law firm consisting of attorneys. an uncompromising commitment to excellence. Baker & McKenzie Amsterdam has the specialist expertise and experience required for the successful national and international legal practice we offer our clients. Our sincere and intellectual professionals understand and serve clients with a shared set of values and high quality standards. ix . Baker & McKenzie Amsterdam has more than 50 years of experience in international and national legal practice and was the first firm in the Netherlands to set up a fully integrated civil law. With more than 180 attorneys. In this respect we acknowledge the importance of cultural heritage by sponsoring and providing legal services to the Rijksmuseum in Amsterdam. tax consultants and civil-law notaries. We were the first law firm in the Netherlands to join a multinational network and are now regarded as one of the country’s leading providers of legal services.

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As the gateway to Western and Eastern Europe.I.500 km² 33. recognized as one of the major aviation hubs in Europe. This is why more than 400 of the 500 largest companies in the world have offices in the Netherlands. and Schiphol Airport.410. The Netherlands Doing Business in the Netherlands Why do companies prefer the Netherlands? One of the most important reasons is its highly educated. Overview Head of state Head of government System of government National language Currency Total population Capital city Seat of government Total area Land Water Land below sea level Queen Beatrix Prime Minister Jan Peter Balkenende Constitutional monarchy Dutch Euro (€) 16. the Netherlands enables companies to serve markets in the current and future Member States of the European Union. and a growing number of Asian companies have established their European head offices in the Netherlands. 1 . making it one of the best places in Europe to do business in from 2006 to 2010.800 km² 7. serving customers across the globe. The latest global business environment rankings published by the Economist Intelligence Unit (EIU) put the Netherlands among the top five. and Africa. and motivated workforce. the Port of Rotterdam. the Middle East. one of the world’s largest seaports. Dutch professionals are internationally oriented and are among the most multilingual in the world. Consider for example.700 km² 26% The country’s central geographical position.046 Amsterdam Den Haag 41. flexible. combined with its accessibility and excellent infrastructure and logistic services are other reasons why numerous European. enabling them to operate successfully in companies in any industry. American.

The Netherlands is thus one of the world’s most densely populated countries. The Netherlands is an important gateway to Europe because of Rotterdam. It owes its existence to feats of hydraulic engineering. taking part as a dynamic force in electronic commerce. Cities and Infrastructure 2 . officially known as the Kingdom of the Netherlands. That is why their European partners and the broader international community regard the Dutch as bridge builders and often ask them to serve as such. North and South Holland. Their struggle to keep the land dry has helped them develop a can-do attitude. They live.500 square kilometers. thanks to its close-knit network of trains and buses. little more than half the size of Scotland. but even to drain entire inland lakes. The Country The Netherlands is a kingdom. and Scheldt. The Amsterdam 2. the Netherlands is also classified as one of the most “wired” countries in the world. Due to its excellent logistics and technological infrastructure. It consists of the Netherlands itself and six islands in the Caribbean Sea: Aruba and the Netherlands Antilles. one of the largest airports in the continent. The Netherlands is also sometimes called “Holland”. flat stretches of land.Baker & McKenzie The Dutch themselves are a surprising people. The Dutch are proud of their management skills. The Netherlands has excellent infrastructure and logistics services. on 41. where the water table is controlled artificially. which have played a dominant role in the country’s history. And since controlling water requires many parties to meet and plan together. surrounded by dikes. and outsourcing. it has forced them to learn how to work as a team. windmills were used not just to keep the land dry. From the 16th century. all 16 million of them. A quarter of the Netherlands’ land area lies below sea level. The low-lying areas consist mainly of “polders”. the biggest seaport in Europe. with good roads and world-class public transport services. The word is featured in the names of the two western coastal provinces. Meuse. communications. The Netherlands lies on the delta of three major rivers—the Rhine. The Dutch themselves like to get around by bike. 1. and Amsterdam Schiphol Airport.

500 tonnes Rotterdam 377. Utrecht. After New York and London.The Hague. while Queen Beatrix is the Head of state. even though they are all close to each other. living together’ (samen werken.Doing Business in the Netherlands Internet Exchange is the largest internet hub in Europe. Traffic and Transport Main airport Number of passengers Freight tonnage Main seaport Freight tonnage Amsterdam Schiphol Airport 45.000 tonnes Main internet hub Capacity Amsterdam Internet Exchange Largest hub of the European continent.526. but Amsterdam is the capital.000. The current government is a coalition between the Christian democrats (CDA) and the socialists (PvdA) with the help of a small Christian socialist party (ChristenUnie). respect. The highlights of the 2008 Budget Memorandum focus on six cornerstones: (1) Encouraging an active and constructive role of the Netherlands in Europe 3 . Groningen. Amsterdam is the next most connected city in terms of broadband capacity. sustainability. samen leven) and builds on cornerstones such as economic growth. Amsterdam. 3. museums and a unique ring of canals.000 1. and solidarity. and Maastricht also have their share of historic sites. The Government The Netherlands is a constitutional monarchy with a parliamentary system. Rotterdam. Haarlem. The basic principle of the current coalition agreement is ‘working together. Amsterdam attracts many tourists. with its historic center. Each of its major cities has a distinctive character. traditions. Jan Peter Balkenende (CDA) is the Prime Minister. Delft. For historical reasons. and Utrecht all belong to the Randstad conurbation.The Hague is the seat of government. with a population of 7 million. museums. majestic buildings. in which the government consists of the queen and the ministers.987.The Hague. and attractions. However.

The Dutch economy has a strong international focus. Antilleans. stability and respect. 4 . and (6) Improving public services and strengthening the cultural sector. with a large diversity of ethnic groups. the Netherlands moved up to 9th position in the Global Competitiveness Index (GCI). Another distinctive fact is the attractive cultural climate. Moroccans. there are numerous compensating factors. (3) Reinforcement of a sustainable environment. (4) Reinforcement of social cohesion. rules to admitting knowledge workers to the Netherlands are becoming more relaxed. mainly Turks. Surinamese. These include the fact that employment contracts are becoming more flexible. 4. and is one of the biggest ports in the world. while the Amsterdam Schiphol international airport is one of the biggest airports in Europe. and. the government’s customized approach to tax facilities is a major advantage. high labour costs are not the decisive factor. The port of Rotterdam handles some 377 million tones of goods every year. last but not least. According to the 2006-2007 report recently released by the World Economic Forum (WEF). Although the strict legal protection against dismissal is an obstacle. and enterprising economy. (2) Encouraging an innovative. That is why the Netherlands is often called the “Gateway to Europe”. up from its 11th position in 2005. The Netherlands is a multicultural country. Nineteen percent of the habitants in the Netherlands are of foreign origin. innovative. and open-minded. Its global competitiveness position has strengthened. it plays an important role as a main port and distribution centre for companies operating worldwide. with a place in the top ten. the country being one of the European Union’s most dynamic centers of trade and industry. Dutch people are anti-authoritarian. The Economy Things are looking good in the Netherlands. and Indonesians.Baker & McKenzie and in the world. Due to its favourable location by the North Sea. In the decision on whether to locate in the Netherlands. of which 10% are of non-western origin. (5) Investing in safety. competitive.

000 museums. Outstanding collections of modern and contemporary art can be seen at the Stedelijk Museum in Amsterdam. flourish in a country that has outstanding museums and an impressive variety of classical and innovative music and theatre. and Het Loo Palace in Apeldoorn. The government is responsible for creating conditions that will enable them to fulfill their vital role in keeping the citizenry informed. Some of the most famous are the Rijksmuseum and the Vincent van Gogh Museum in Amsterdam.5% 1. Radio.5% YEAR 2007 2006 2007 2007 2007 2007 The Netherlands is a world leader in the field of art and culture. Freedom of expression is a cornerstone of the Dutch democratic system. Major international arts festivals are held annually. Television.000 4. in every form. the Museum Boijmans-Van Beuningen in Rotterdam. the Kröller-Müller Museum in Otterlo.6% 7. Culture and the Arts Macroeconomic figures Gross domestic product (GDP) GDP per capita GDP growth Inflation rate Total workforce Unemployment rate VALUE € 560 billion € 37.606. and the Bonnefanten Museum in Maastricht. and the Media There are many independent broadcasters and print media institutions in the Netherlands. 5 . Museums With almost 1. The arts. The Media Act expressly provides that broadcasting organizations may decide the nature and content of their program. the Netherlands has the highest museum density in the world.300 3. the Mauritshuis in The Hague.Doing Business in the Netherlands 5.

No less than 50. dialogue. architects. and artists who come especially to Amsterdam to work in a climate of artistic freedom. and innovation. 6 . The government protects them and helps pay for their maintenance. The minimalist. economical approach that characterizes Dutch design attracts many young designers.000 buildings are listed as monuments. The Netherlands is also renowned for its architecture and exceptional urban development.Baker & McKenzie Dutch Creative Climate and Dutch Design Dutch design is famous around the world.

000 traditional working windmills? the Dutch are the tallest people in Europe? the Netherlands has at least 15. South Africa. Suriname. the Netherlands Antilles.008% of the world’s area.Doing Business in the Netherlands Typical Dutch • • • • • • • • • • • • • • Did you know that… the International Court of Justice is at the Peace Palace in The Hague? with only 0. the Netherlands is the world’s third largest agricultural exporter? Frisian is the second official language of the Netherlands? the Netherlands is a founding member of the European Union? the Netherlands has approximately 480 inhabitants per square kilometre? Dutch is also spoken in Belgium. because about 75% of the population speak English? people from almost 200 nationalities live in Amsterdam? 7 . and Aruba? the Netherlands still has about 1.000 kilometres of cycle tracks? almost every Dutch person has a bicycle and there are twice as many bikes as cars? most Dutch people speak at least one foreign language? the Netherlands has the highest number of part-time workers in the EU (four in ten people)? language is rarely a problem for businessmen from Britain and America.

different arrangements are in place to process goods with a deferral or refund of import duties provided that the goods are being exported from the EU (Inward processing relief . Using the Outward processing relief (OPR). In the Netherlands. but the processed goods on the other are generally subject to a zero rate. This arrangement can. The applicable tariff rate depends on the customs classification and the (preferential) origin of the goods. in order to process imported goods. Also.IPR). if applicable. excise duties) in principle become due. This could mean payment of import duties. several customs warehousing arrangements are available by means of which the levying of import duties can be deferred. import duties are in principle non-refundable and thus become a cost. it is possible to use the arrangement where the imported goods are subject to the tariff rate of the processed goods (Processing under customs control . Also. Using the customs transits procedure. import duties and import VAT (and.Baker & McKenzie II. Once paid. for instance.PCC). One of these customs procedures is the storing of goods in a customs bonded warehouse. These customs warehouse facilities can be useful when goods are to be re-exported (in which case import duty and /or VAT may not be payable at all). International Distribution Centres / Customs Facilities In principle. Upon importation of goods into the free circulation of the European Union. these goods would first have to be brought into free circulation. it is possible to have products from free circulation of the EU undergo processing or treatment in third countries and re-import these processed goods in the EU with a full or partial relief of import duties. these import duties paid cannot be refunded. In order to prevent the processing of goods shifting to countries outside the EU. 8 . Therefore. be beneficial for the pharmaceutical industry. where base materials on the one hand are subject to a relative high import duty rate. it may be beneficial to either postpone or avoid the levy of import duties for goods that are entering the Netherlands. it is possible to transport goods under deferral of import duties between two places in the EU. or when there are difficulties applying certain import licensing requirements. Import duties are calculated based on the customs value of the goods multiplied with the applicable tariff rate. postponement of the levying of import duties using the applicable customs procedures may present the possibility of a cash flow advantage. If no measures are taken.

The applicable tariff rate depends on the customs classification and the (preferential) origin of the goods. Failure to correctly classify imported articles can result in fines or penalties. which have to be applied in sequential order. In this respect. the rules related to country of origin are diverse and often complex.g. For valuation purposes. building. whether the good is eligible for special duty privileges and whether the good is subject to import restrictions (e. quotas. etc. or specific licenses). This means that one is only allowed to use a subsequent customs valuation method if the previous method cannot be applied. valid throughout the EU.VAT.). which ruling is only valid in The Netherlands.. 2. The most common valuation method is the transaction value of the goods. Only upon removal of the goods from the customs warehouse will the applicable import duties.g. Certainty regarding the customs classification as well as the origin can be obtained by means of a “Binding Information”.. a ruling can be obtained from the Dutch Customs authorities. and excise 9 . While this may appear to be a simple concept. or produced. In order to determine the customs value of goods imported into free circulation. manufactured. Establishing the origin of the products is relevant because it determines whether goods are eligible for customs duty preferences and if they are subject to import restrictions (e. Customs Warehouses A customs warehouse may either be a specific location (such as a tank. anti-dumping or countervailing duties. The country of origin may be defined as the country in which the imported product was grown. embargoes. anti-dumping or countervailing duties. Customs value and applicable customs rate Doing Business in the Netherlands Import duties are calculated based on the customs value of the goods multiplied with the applicable tariff rate.1. or silo) or an inventory system authorized by and subject to the control of the customs authorities for the storage of non-Community goods. It is noted that certain additions or deductions to the customs value used may have to be made depending on the circumstances of the case at hand. quota. several methods can be used. The tariff classification number determines the customs duty rate assessed on the importation. the transaction value is defined as the price actually paid or payable for the goods when sold for export to the customs territory of the EU.

it is allowed to perform certain usual activities to the goods. In The Netherlands. to actively process or alter the goods while stored in under the customs warehouse arrangements. The warehouse keeper does not necessarily need to own the goods. If approved by the customs authorities. 10 . payment of customs duties on a monthly basis rather than at the moment of importation).Baker & McKenzie duties become due. A private warehouse is for the storage of goods deposited by an individual trader authorized to be a warehouse keeper. These usual activities include actions to ensure reasonable conditions of the goods during storage and actions that prepare the goods for further distribution (e.g. the records. It is not allowed. and the goods stored. Authorization In order to set up and operate a customs warehouse. Customs warehousing arrangements in principle only allow the storage of goods. The warehouse is intended primarily for the storage of goods. A customs warehouse can be a public or a private warehouse. it is necessary to obtain authorization from the Customs authorities. b. different types of customs warehouses exist. but must be the depositor. 3. repackaging). d. There is a genuine economic need for the facility. c. The applicant is established in the European Community. A public warehouse is authorized for use by warehouse keepers whose main business is the storage of goods deposited by other traders (depositors). Each of the different types of warehouses is subject to administrative regulations and has its individual advantages. The Customs authorities may only authorize a customs warehouse under the following conditions: a. The applicant is able to comply with the conditions of authorization and has sufficient resources to oversee the setting up of the customs warehouse and to carry out the necessary checks on the control systems.g. however. Some customs warehousing arrangements also provide for a cash flow advantage for the payment of customs duties (e.

e. As the other Member States included on the application need to be consulted. the applicant should apply at least two months before the intended start date of the customs warehouse authorization. Administrative records may be kept centrally (i. This upfront verification provides for certainty with respect to the application of the customs warehousing arrangements.Doing Business in the Netherlands Unlike Customs authorities in other countries. The prior agreement of the authorities concerned must be obtained in order to apply for a single authorization. a single authorization is only granted if the applicant is already authorized to operate a customs warehouse within its own Member State and the applicant has a proven/satisfactory record of operation. the application may be rejected. The requirements/conditions for domestic authorization as described above. the customs legislation applicable in the Netherlands has also other customs facilities under which the levy of customs duties can be postponed 11 . EU customs regulations provide for a special “single authorization”. The application should be submitted to the Customs authorities designated for the place where the applicant’s main accounts are held and where at least part of the storage to be covered by the authorization is conducted. has to be dealt with. the Dutch Customs authorities will verify in advance whether or not the abovementioned conditions are met. If other Customs administrations submit objections within that period and no agreement is reached. Once approved. Single (European) authorization Where entrepreneurs are established in several countries. this “single authorization” allows for the storage of goods in various EU Member States while only one warehouse authorization is needed. The other Member States are given one month to reply and provide their input. 4. Other International Customs Facilities As outlined above. In respect of customs warehousing. These Customs authorities will communicate the application and the draft authorization to the Customs authorities in the other EU Member States concerned. at one location) and only one Customs administration. the authorization will be issued and a copy of the agreed authorization will be sent to all the Customs authorities concerned. In general. apply accordingly.

Baker & McKenzie or avoided. 12 . As mentioned. Strict (administrative) requirements have to be met in order for the relief to be granted. outside EU). Again several (administrative) requirements have to be met in order for an Outward Processing Relief to be granted. the storage of goods under a customs warehousing arrangements in principle only allows the storage of goods. Below we have briefly addressed some of these customs facilities that can be of relevance when involved in international operations.g. The disadvantage of this method is that there are some economic conditions that have to be met. Further. Upon return of the processed goods into EU. Inward Processing Relief Under the so-called Inward Processing Relief. a bank guarantee is required and interest must be compensated for refined goods which are released into “free circulation”.e. goods are imported into the Netherlands in order to be processed while the goods are under Customs control. There are two types of Inward Processing Relief: one allows the duty to be suspended. The advantage is that no or less import duties will have to be paid on the import of the treated goods. raw materials or semimanufactured goods) can be imported into the EU to be processed for re-export without import duties and VAT on the importation of the goods. while the other alternative provides for the duties to be initially paid then refunded at a later stage. In case of processing under Customs control. a full or partial exemption for customs duties will be granted. the goods may be processed into products which are subject to a lower duty rate before they are put into free circulation. The Netherlands has several other customs facilities that prevent the levy of import duties in the event an entrepreneur wishes to actively process goods in or outside the EU. goods (e. goods which are already imported into free circulation in the EU can be exported for processing in a third country (i. Processing under Customs Control In some cases. Outward Processing Relief Under the Outward Processing Relief.The administrative conditions are minor and cause a light compliance burden.

although being recognized as such may constitute an added value for the operator. however. Authorized Economic Operator In order to facilitate international trade and to enhance security.Doing Business in the Netherlands Customs Bonded Transport It is also possible for goods to be transported through the EU under a customs bond. This will provide a competitive advantage to participating companies. Secure AEO traders may further be informed that their consignment has been selected for controls and will get priority treatment for these controls. It should be proven. that all goods that are transported under the customs bond are also declared to Customs upon arrival of the transport. Reliable and compliant traders may benefit from simplifications in the customs procedures and from facilitation with regard to customs controls relating to safety and security. As a result of the transport under customs bond. 5. customs duties may become due as a result of irregularities during transportation. There is no legal obligation to become recognized as an AEO. EU regulations now provide for the so called “Authorized Economic Operator” (AEO) concept. If not. no customs duties and import VAT have to be paid when the goods physically cross a border. An AEO trader may benefit from more lenient administrative requirements in respect of the import and export of goods into and from the EU. Authorized AEO traders may also be allowed to submit less data with the Customs authorities. 13 . a trader has to demonstrate compliance with solid security criteria and controls as set by the EU regulations. as it demonstrates compliance with solid security criteria and controls. In order to qualify as an AEO. and will likely be subject to fewer controls as they would be considered as secure partners by Customs and as their compliance and reliability would have been thoroughly checked when the AEO Certificate was given.

the excise goods remain under Customs supervision using special excise bonded arrangements. Provided that certain conditions are met. At the same time. excise goods can also be brought into free circulation for excise purposes. the supply of goods which are placed under customs bond is subject to a zero rate for VAT purposes. shipped to another EU Member State. after importation. VAT on importation in principle becomes due at the actual moment of import of the goods. Under certain circumstances. are in principle subject to Dutch excises upon importation into the Netherlands. rather than actual payment upon physical importation. In principle. VAT and excises On importation of the goods.Baker & McKenzie 6. the deferral of import duties may also result in the deferral of excise duties and VAT on importation being levied. In that case. which are not transferred using a deferral arrangement. and mineral oils. In the Netherlands. Excise goods. the earlier-paid Dutch excise duties can be refunded after payment of excise duties in the Member State of arrival (and after showing proof of that payment to the Dutch authorities). not only import duties are levied. but also VAT on importation and (if applicable) excises. In the event the excise goods are. the levying of excise goods can also be deferred. The taxable base for VAT is the customs value to which certain amounts are added. an import license can be obtained as a result of which the import VAT can be reported through the periodical VAT return. This license can thus create a cash-flow advantage. On importation. the levying of excises takes place in the EU Member State where the goods are used or consumed. as a result of which excise duties become due as well. tobacco products. 14 . however. which are levied with respect to the (deemed) consumption of alcoholic beverages.

III. Regional Headquarters / Coordination Centers

Doing Business in the Netherlands

Regional Headquarters or coordination centers are generally established to supervise the operations of European and/or Middle Eastern subsidiaries. Sales coordination, administration and accounting, cash management, central billing, re-invoicing, advertising and public relations, as well as group financing and licensing, are typical activities of a regional headquarters. The Netherlands offers a central location in Europe, excellent airport facilities, a sophisticated banking system, availability of adequate office spaces, as well as several tax advantages, both for companies and for expatriates.

1. General Advantages

The Netherlands has the most extensive tax treaty network of all the EU Member States. Regional headquarters can apply the treaties in collecting interest and royalties from subsidiaries. The favorable tax treatment of these activities is described below. Expatriates who are temporarily assigned to a Dutch office may qualify for a special tax regime known as the 30% Ruling. As a general rule, Dutch companies should report taxable income in the national currency, i.e., the Euro. They may also report taxable income in their functional currency, the US dollar for instance, if certain requirements are met in order to avoid exchange gains and losses due to currency fluctuations. The main requirement is that the company must file its financial statements in the functional currency.

In August 2004, the Dutch State Secretary for Finance announced in a decree that headquarters in the Netherlands are allowed to provide intra-group services on a full-cost basis instead of applying a markup or arm’s-length price. A list of activities regarded as shareholders’ costs and which are deductible in the Netherlands, has been published. The Dutch corporate income tax rate is 25.5% as of 1 January 2008. However, profits up to EUR 40,000 are subject to 20% corporate income tax as of 1 January 2008. Profits between EUR 40,000 and EUR 200,000 are subject to 23%. The tax rate of 25.5% is applicable to the excess profits.

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2. Tax Ruling

The new ruling practice consists of an APA practice and an Advance Tax Ruling (ATR) practice. The APA practice is devoted to agreements on transfer pricing methods, arm’s-length results, and operating in conformity with the OECD Transfer Pricing Guidelines. The ATR practice concentrates on providing advance certainty as to the fiscal qualification of transactions and international structures. Final APAs and ATRs are issued in the form of determination agreements governed by Title 15 of Book 7 of the Dutch Civil Code. The agreement automatically includes approval of an exchange of information clause allowing the Dutch tax authorities to share information with treaty parties. It is the intention to publish issued APAs and ATRs in order to guarantee transparency as required by the EU Code of Conduct. The format in which publication will take place will be made anonymous or summarized if the identity of the taxpayer could be derived from an anonymous publication. APAs and ATRs are granted for periods of four to five years unless the facts merit a longer or shorter term. Renewals are envisaged, absent changes in law or facts. In order to obtain an APA, it is possible to arrange a pre-filing meeting with the Dutch tax authorities. A pre-filing meeting is generally recommended in order to determine whether an APA request is useful. In recent years, 80% of all APA and ATR requests have been granted and the time it takes to obtain APAs and ATRs has decreased. The Dutch State Secretary of Finance has in various occasions, emphasized that the APA and ATR practice has his full attention and is important in safeguarding the Netherlands as a place of business for enterprises operating internationally. It is also possible to reach an agreement with the Dutch tax authorities to provide favorable tax treatment of central invoicing, leasing, and foreign exchange clearing within the group.
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As in the case of service companies and branches discussed in Chapter III, the Dutch tax authorities may approve an Advance Pricing Agreement (APA) determining the arm’s-length return for activities performed and services rendered. A new tax ruling practice was introduced on 1 April 2001. This change was primarily aimed at making the ruling process more transparent and bringing it in line with the OECD Transfer Pricing Guidelines. The Ministry of Finance also intended the new ruling system to contribute to the improvement of the business climate for genuine economic activities in the Netherlands, through a more precise and customized approach.

3. Holding of Shares

Doing Business in the Netherlands

Holding companies have no special tax status under the laws of the Netherlands. Tax benefits are available to all companies holding shares in Dutch or foreign subsidiaries. Dutch holding companies are, therefore, quite different from holding companies in a number of other countries, which are excluded from treaty protection. The Dutch tax authorities are willing to issue ATRs on the applicability of the participation exemption for intermediate holding companies in international situations and for ultimate holding companies. Dividends received by a Dutch company from nonresident subsidiaries are fully exempt from Dutch income tax under certain conditions (see application participation exemption as described in Chapter XI). The exemption also applies to capital gains upon the disposal of shares in subsidiaries. With respect to capital losses and costs related to the subsidiary, reference is made in Chapter XI, Section 4.

Furthermore, dividend distributions by a qualifying Dutch company to most of its qualifying EU parent companies are exempt from Dutch withholding tax (see Chapter XI, Section 17).

As of 1 January 2004, thin capitalization rules have been introduced in the Netherlands (reference is made to Chapter XI, Section 7.) Tax treaties concluded by the Netherlands generally provide that withholding tax on dividends distributed to a Dutch company holding at least 25% of the shares in the distributing company is reduced to a substantially lower percentage, or even to zero. Appendix II contains a chart indicating the reduction of foreign dividend withholding tax rates under the tax treaties concluded by the Netherlands. Those treaties also reduce Dutch dividend withholding tax on dividends distributed by the Dutch company to its foreign parent to a substantially lower percentage, or even to zero (Appendix V). Pursuant to the implementation of the EU Parent-Subsidiary Directive on 1 January 1992, dividend distributions from most qualifying subsidiaries situated in the EU to a qualifying Dutch company are exempt from (foreign) withholding tax.

The Dutch dividend withholding tax on dividends to a foreign parent may, under certain circumstances, be reduced by a 3% credit for foreign dividend withholding tax paid on qualifying dividends received by the Dutch company.

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4. Group Financing and Group Licensing

The Netherlands is particularly attractive to group financing activities. The tax treaties concluded by the Netherlands generally reduce the foreign withholding tax on interest paid to a Dutch company to a substantially lower percentage, or even to zero. Appendix III contains a chart with the available reductions. Moreover, the Netherlands does not impose any withholding tax at source on interest or any stamp duty on the issuance of bonds.

As of 1 January 2007, Dutch tax law has been providing for a special regime for qualifying group financing activities. The new regime may create interesting planning opportunities for cross-border finance transactions. Upon request, the balance of interest received from group companies, and the interest paid to group companies will be effectively taxed at a rate of 5%. The introduction of the box is currently being cleared with the European Commission. Although the group interest box is part of the revision of the corporate income tax regime, effective as of 2007, the actual date of entering into force of the group interest box depends upon the outcome of the discussions with the European Commission. Dutch subsidiaries of foreign companies engaged in licensing (i.e., as a licensee of patents, trademarks, or technology with the right to sublicense those intangibles) qualify for special income tax treatment. Moreover, the tax treaties entered into by the Netherlands provide for a reduction of foreign withholding tax on royalties to a substantially lower percentage, or even to zero, if they are paid to a resident of the Netherlands. Appendix IV contains the available reductions. The Netherlands does not levy withholding tax on outgoing royalties. As a result, royalties can flow through a Dutch company at nominal tax cost. Pursuant to the implementation of the EU Interest and Royalties Directive as of 1 January 2004, interest and royalties payments from most qualifying subsidiaries situated in the EU to a qualifying Dutch company are exempt from (foreign) withholding tax.

The Dutch tax authorities are willing to issue APAs to determine the arm’s-length income for Dutch finance companies and Dutch licensing companies. A Dutch BV engaged in financial services can obtain a ruling regarding its Dutch tax position only if it meets the following requirements:

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At least 50% of all authorized directors are tax residents of the Netherlands. h. and remuneration. Please note that this equity should be at risk for the financing activities. f. BV’s (main) bank account is maintained in the Netherlands. BV should have an appropriate level of equity that enables it to conduct its business. it is in principle. In order to determine an arm’s-length remuneration..Doing Business in the Netherlands 1. In order to determine the taxable spread to be reported. functions. The Dutch tax authorities will not issue a ruling if BV does not incur any risk on the functions it conducts based on the ruling. c. The directors residing in the Netherlands have the relevant professional knowledge and skills to be able to execute their obligations as directors. A BV is deemed to have sufficient substance if the following conditions are met: a.e. no risk) is the only one that cannot be met. According to the Dutch State Secretary for Finance. The (main) directorial decisions are taken in the Netherlands. e. If the second requirement (i. BV is a tax resident of the Netherlands and is not deemed a resident of any other country. but there is sufficient substance. g. a functional analysis must be made 19 . At the time conditions a to g above are verified. BV’s accounts are kept in the Netherlands. the information that is spontaneously exchanged concerns structure. Conduit financing entities meet this condition if their equity is at least the lower of 1% of the total outstanding loans or EUR 2 million. no longer possible to rely on the minimum spread of 1/8% for intercompany loans. and 2. the BV must have met all the requirements for the proper filing of various tax returns. the safe harbor provision must be prorated. BV must have sufficient substance in the Netherlands. d. risks. This safe harbor provision applies for each entity to which the company provides loans. a ruling can be obtained if the company gives the Dutch tax authorities the liberty to provide information spontaneously to the countries from which the interest or royalty will be received. If more than one loan is provided to an entity. b.

Currently. The Dutch entity receives and pays interest or royalties to and from an entity within the same group. This margin could also be lower than the 1/8% of the “old” ruling policy. Dutch entities that do not incur a genuine risk in respect of intra-group loans or royalty transactions are no longer permitted to credit the foreign withholding taxes related to interest or royalty income. and A flow-through company is deemed to incur a genuine risk in respect of a loan if the equity is at least 1% of the outstanding loans or EUR 2 million and the taxpayer can prove that the equity capital will be affected if a risk arises. Under the situation previous to 1 April 2001. The interest and royalties received and paid are excluded from the taxable income in the Netherlands provided that: 1. A grandfather rule was in effect until 1 January 2006 for flow-through entities performing transactions before 31 March 2001.Baker & McKenzie based on the OECD Transfer Pricing Guidelines. if desired. The interest and royalties received and paid relate directly or indirectly to financing or royalty transactions that are closely connected. The Dutch tax authorities can conclude an agreement with a flow-through entity regarding the substance and risk requirements of a Dutch finance company and/or a Dutch licensing company only if certainty in advance is also requested for the arm’s-length nature of its remuneration. the flow-through entity should still report arm’s-length remuneration with regard to the services relating to the loan or royalty transaction. The flow-through company does not incur a genuine risk that could affect its equity. but there is no requirement to do so in order to start conduit financing and licensing activities in the Netherlands. it was not necessary to build up a file to defend the intercompany pricing. Even though the interest and royalty income as well as the expenses are excluded from the taxable income. 2. 3. an APA can be applied for. 20 .

IV. Sales Support, Distribution and Production
A foreign company considering establishing production and/or sales operations in the Netherlands or in Europe is likely to carry out the project in phases.

Doing Business in the Netherlands

1. Liaison Office

In the initial phase, a liaison office may be opened in order to explore the market and to establish contacts with prospective customers. The office may provide information about the company’s products and maintain a supply of goods or merchandise for display. Activities may include delivery, advertising, the collection of information for the benefit of the foreign headquarters. In more general terms, it may also carry out preparatory or supporting activities exclusively for the benefit of the foreign headquarters. These activities are generally non-taxable under Dutch tax treaties if conducted in such manner that the entity is not deemed to be a permanent establishment for tax purposes.

2. Sales Support

If the start-up phase proves to be successful, the company may decide to expand the activities of the liaison office to include sales support and distribution activities, such as processing, packing or re-packing, (central) distribution, shipping, invoicing, repair, marketing, promotion, etc. The Dutch tax authorities may be requested to issue an Advance Pricing Agreement setting the arm’s length return on the services rendered by the Dutch company (in general, companies are required to submit an indication of an arm’s length return on services rendered on the basis of a transfer pricing study that is in line with the OECD Transfer Pricing Guidelines). As long as the company performs few functions and bears little risk, the arm’s length return required may be moderate.

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3. Production

If the company enters into a third and final stage by organizing a full-fledged production and sales operation (with the customary business risks for bad debts, etc.), the company will be required to report an arm’s length return that allows for remuneration for the risks being incurred. However, it will then also qualify for the tax benefits available to Dutch companies, such as an investment allowance for business assets, accelerated depreciation of certain assets and generous loss compensation privileges. These facilities are described in Chapter X.

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V.

A company can engage in business in the Netherlands through a subsidiary or a branch. Compared with other EU countries, Dutch corporate law provides a very flexible and liberal corporate framework for the organization of branches and subsidiaries by nonresident companies or individuals. There are no special restrictions on foreign-owned companies planning to start a business in the Netherlands.

Legal forms of doing business

Doing Business in the Netherlands

1. Branch

The organization of a branch of a foreign company in the Netherlands does not require prior government approval. The foreign head office should simply file certain documents and data with the Trade Register of the Chamber of Commerce, which are as follows: For the branch: • • the trade name, a brief description of its activities, number of employees, amount of invested funds, and full address of the branch. For the branch manager (who need not be a Dutch resident):

For the foreign company: •

surname, first name, full address, date and place of birth, nationality, and the extent of his or her power and authority to represent the branch; his or her signature and certified copy of an identification card or passport which must be deposited.

• •

the company’s name and legal form, the (foreign) trade register with which it is registered, the number under which it is registered, as well as personal details and representative authority of its managing directors and supervisory directors; legalized copies of the Deed of Incorporation, Articles of Association, and bylaws (if there are any) of the company (which may be submitted in Dutch, English, German, or French); the annual accounts of the company as drawn up, audited, and disclosed pursuant to the law of the country of origin (which may be submitted in Dutch, English, German, or French); and

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2. Subsidiary

an original extract from the foreign trade register or document of registration, which should not be older than one month prior to registration of the branch.

Dutch law distinguishes two types of limited liability companies: the public limited liability company (Naamloze Vennootschap or NV) and the private limited liability company (Besloten Vennootschap or BV). The main differences between these two entities are as follows: 1. BVs (as opposed to NVs) cannot issue bearer shares as well as share certificates evidencing the shares; 2. The transfer of shares in BVs (as opposed to NVs) is always subject to the blocking provisions as set forth in the Articles of Association, which may contain prior approval of the general meeting of shareholders or another corporate body as designated under the company’s Articles of Association, or a right of first refusal of the other shareholders; and

3. BVs can be formed with a minimum issued and paid-in capital of EUR 18,000, while NVs must have a minimum issued and paid-in capital of EUR 45,000. A Dutch subsidiary may be established and owned by one or more shareholders, who may either be individuals or legal entities, regardless of their nationalities. BVs are generally the preferred vehicle for a foreign company in establishing a wholly-owned Dutch subsidiary.

The issuance and transfer of registered shares, or the transfer of a restricted right to the shares (for instance, a right of pledge) requires the execution of a notarial deed before a Dutch civil law notary. This obligation does not apply to NVs whose shares or share certificates are in bearer form or are officially listed in a regulated stock exchange.

3. Societas Europaea (SE)

As of 8 October 2004, it is also possible to incorporate a European company or Societas Europaea (SE), which has a legal personality and is in many respects, comparable to a Dutch NV.There are four ways to incorporate an SE:

1. through a legal merger between two companies based in different EU Member States;
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Manufacturing. since SEs can opt for a one-tier or two-tier board system. on the other hand. an SE. As a result.Doing Business in the Netherlands 2. and rendering of services may be carried out by both types of operations. In addition. and licensing operations. a. Branch v. Holding. 25 . a group that has companies throughout the EU can now create a uniform management structure by forming an SE. natural persons can become a shareholder of the SE after its incorporation. the (foreign) company of which the branch forms part is fully liable for all the obligations of the latter. a shareholder in principle. two companies based in two different EU Member States. thus. A branch is not a separate legal entity. 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.g. An SE can transfer its registered office from one EU Member State to another. or 4. since it is able to benefit from tax treaties. The circumstances and relevant factors must be considered each time before a final decision is made. through incorporation of an SE as a subsidiary of: b. warehousing. are better conducted by a subsidiary. an NV) to an SE. Another relevant practical aspect is that the formation of SEs makes international legal mergers possible between companies incorporated under the laws of EU Member States. Only legal entities can form an SE. finance. A subsidiary has limited liability. Subsidiary The most important difference between a branch and a subsidiary is as to exposure to liability. 4.. through a change of corporation form from an eligible company (e. 3. is liable only to the extent of its capital contribution.

the number under which the company is registered. The EEIG is a legal form based on a European Statute. Under the FFCA. According to the Formal Foreign Companies Act (“FFCA”). who may either be individuals or legal entities. is considered a Formal Foreign Company. It is suitable for joint venture activities as well as specific intra-group purposes. 26 6. The partners in a general partnership (VOF) are jointly and severally liable for all obligations of the same. Pursuant to a limited partnership (CV).000.Baker & McKenzie 5. Furthermore. however. are exempted from most provisions of the FFCA. The parties conclude a partnership agreement and the partnership (not the contract) must be registered with the Trade Register of the Chamber of Commerce. A special partnership form is the European Economic Interest Grouping or EEIG (Europees Economisch Samenwerkingsverband or EESV) for the cooperation between entrepreneurs in Europe. a company incorporated under any laws other than Dutch and which conducts its business entirely or almost entirely in the Netherlands without having any further real ties with the state under whose law it was incorporated. the management of such company is obliged to register with the Trade Register of the Chamber of Commerce in the Netherlands the company. can be formed by at least two partners. Formal Foreign Companies must file their annual accounts with the Trade Register of the Chamber of Commerce as well as an audit statement confirming that their issued and paid-up share capital. There are no restrictions on foreign nationals entering into a partnership with Dutch residents. its deed of incorporation. whether general (Vennootschap Onder Firma or VOF) or limited (Commanditaire Vennootschap or CV). An EEIG formed under the Dutch law has a legal personality and enjoys fiscal transparency throughout the European Economic Area. the limited or “silent” partner is liable only up to the amount of his capital contribution. which may comprise partnerships. Companies which are subject to the laws of an EU Member State or an EEA party. Partnership A partnership. The formation of an EEIG requires at least two partners. however. and the details of the sole shareholder (if applicable). The limited partner is not registered with the Trade Register. as well the company’s equity is at least equal to EUR 18. resident within the European Economic Area. Formal Foreign Companies . provided that he does not in any way take part in the management of the partnership vis-à-vis third parties. its Articles of Association.

a choice for foreign law will not set aside the so-called Dutch “overriding mandatory rules”. For example. These principles are rather liberal and allow for substantial freedom for the contracting parties.The parties are thus in principle bound by their agreement.7. mandatory notice periods apply and an agent is in principle entitled to receive a goodwill compensation upon termination. set aside a contractual provision if such a provision is deemed unacceptable in view of the principles of reasonableness and fairness. an individual who acts as agent for not more than two principals and who does not employ more than two assistants). Agents Doing Business in the Netherlands A commercial agent is a person or company that mediates against payment with respect to the conclusion of contracts and.This subject is thoroughly elaborated in Chapter XVI. particularly those provisions that aim at protecting the agent. A Dutch court may. However. concludes those contracts in the name and for the account of the principal.e. however. Dutch law does not provide for specific provisions on distribution agreements. Finally. including the termination provisions thereof. Parties are free to determine the governing law of their agreement. Consequently.To date. It is also important to note that prior approval of the Dutch Centre of Work and Income may be required before notice of termination can be given to a so-called “small” agent (i. distribution agreements are governed by the general principles of Dutch contract law. the rules regarding goodwill compensation and the special termination protection applying to “small” agents have been considered as such overriding mandatory rules. 27 . Distributors A distribution agreement differs from an agency agreement in that the distributor purchases products or services from the supplier and resells them to third parties in its own name and for its own account. possibly. Dutch agency law is based on EC Directive 86/653/EC and is substantially mandatory in nature. it should be noted that EU and Dutch competition rules may also have an effect on agency agreements. 8.

Depending on the circumstances. 28 . such agreement may be terminated by giving reasonable notice if such infers from the principles of reasonableness and fairness. Finally. a distributor may be entitled to compensation on the basis of the principles of “reasonableness and fairness” despite the fact that a reasonable notice period has been granted. be the case if the manufacturer has given the impression that the contract would be continued.g. it should be noted that EU and Dutch competition rules have a significant effect on distribution agreements. the duration of the relationship.Baker & McKenzie When a distribution agreement is silent on termination. a distributor shall not be entitled to compensation if a reasonable notice period has been granted. investments recently made etc. notice periods may vary from one month to more than one year. and the distributor has made investments that cannot be earned back. As a general rule. for example.). As an exception to this rule. the dependence of the distributor.This may.This subject is thoroughly elaborated in Chapter XVI. All relevant factual circumstances need to be taken into account in order to determine the reasonableness of a notice period (e.

o.” (“in oprichting.o. confirms that the incorporation capital has been transferred to a bank account in the name of the NV or the BV in incorporation. Incorporation cooperative A Cooperative is incorporated by the execution of a notarial deed in the Dutch Language by a Dutch notary in the Netherlands. a statement of no objection from the Ministry of Justice as well as a bank statement must be obtained. or the BV i.o. 2. managing directors. The Subsidiary Doing Business in the Netherlands 1. The statement of no objection is a declaration of the Ministry of Justice that is issued after verification of data of the parties involved either as incorporators. Incorporation of Dutch NV and BV A Dutch NV (Naamloze Vennootschap met beperkte aansprakelijkheid or public limited liability company) and a BV (Besloten Vennootschap met beperkte aansprakelijkheid or private limited liability company) are incorporated by one or more incorporators pursuant to the execution of a notarial deed of incorporation which includes the company’s Articles of Association. The bank statement.o. The persons acting on behalf of the NV i. No Ministry of Justice approval 29 . Prior to incorporation. are personally liable until the NV or the BV has ratified the actions performed on its behalf during the pre-incorporation period. or the BV i.o.” in the process of being incorporated) is added after the name. can be registered with the Trade Register of the Chamber of Commerce. The name of the company is followed by ‘NV’ or ‘BV’ and in case an NV or a BV is in the process of formation the abbreviation “i. An NV or a BV is allowed to do business during the pre-incorporation period and the NV i. to be issued by a bank which is a credit institution referred to in Section 1:1 of the Dutch Financial Supervision Act (Wet op het Financieel Toezicht) and is registered as a credit institution pursuant to that Act or whose business operations are subject to governmental supervision in another Member State of the European Communities or in another state which is a party to the Agreement on the European Economic Area. or ultimate beneficial owners.VI. The notarial deed of incorporation must be executed in the Dutch language before a Dutch civil law notary in the Netherlands.

Registered shares issued by an NV may be freely transferred. A Dutch NV and a BV must have an authorized and issued capital.The Articles of Association or the separate members’ agreement can oblige a member to contribute funds or assets to acquire a membership interest in the Cooperative. Transfer of shares and membership interest An NV can issue bearer or registered shares and a BV can only issue registered shares. Unless the deed of incorporation explicitly states otherwise. or U. 3.A. Upon incorporation. Bearer shares are freely transferable upon delivery of the related share certificates. Dutch law requires that the Cooperative is incorporated by at least two incorporators. Capitalization The identity of shareholders who have not fully paid their shares must be listed with the Trade Register of the Chamber of Commerce.A. preferred. 4. The Articles of Association of a BV must stipulate limitations on their transferability. Such restrictions require the transferor to either offer the shares to the other shareholders (“right of first refusal”) or to obtain prior approval for the transfer from the general meeting of shareholders or any other corporate body of the company as specified in the Articles of Association. 30 .000 for an NV and EUR 18. The word ‘coöperatie’ or ‘coöperatief’ must be included in the name of the Cooperative as well as the reference W. divided into a number of shares with a par value expressed in euros.A. at least 20% of the authorized capital must be issued and at least 25% of the par value of each share issued must be paid in. which indicates the level of liability of members.There is no statutory requirement for a Cooperative to maintain a minimum amount of capital. B.The minimum issued share capital is EUR 45. the incorporators become automatically members of the Cooperative upon incorporation.000 for a BV. subject to any restrictions that may be contained in the company’s Articles of Association. Shares without a par value are not permitted.. the Cooperative is registered with the Trade Register of the Chamber of Commerce. Upon the formation. Managing or supervisory directors are required to hold shares in the NV or the BV. Registered shares can be either ordinary.Baker & McKenzie and bank statement are required. or priority shares.

confirming that the value of the contribution in kind is equal to or exceeds the total par value of the issued shares. Any amendment or adjustment of the shareholders’ register requires the signature of one of the managing directors. and partnerships. and usufructuary. authorized and issued share capital the numbers of all registered shares. Shareholders’ register Each shareholder. and usufructuary of shares has the right to inspect the shareholders’ register and receive a certified excerpt. The registration with the Trade Register of the Chamber of Commerce is updated accordingly in case of a sole shareholder. 31 . The amount exceeding the total value is considered as non-stipulated share premium. Shares may also be paid in kind. The managing directors of an NV and BV with registered shares must keep a shareholders’ register at the registered office of the company. or usufruct on the shares. the general meeting of members. at least 25% must be paid up. attachment. the names and (electronic) addresses of the shareholder. (foreign) legal entities. or the meeting of a certain class of membership interests. NV or BV number. 6. The transfer of shares is recorded in the shareholders’ register. such as prior consent of the management board. provided that a Dutch registered accountant’s statement is obtained. The Articles of Association may provide that the membership interests are freely transferable or make transfers subject to certain restrictions. pledge.Doing Business in the Netherlands The transfer of registered shares in an NV and a BV requires a notarial deed of transfer to be executed before a Dutch civil law notary in the Netherlands. Membership interests in the Cooperative can be held by (foreign) private individuals. The register contains the company name. pledgor. Bearer shares must be paid in full upon issuance. pledgor. Issuance of new shares Upon issuance of registered shares. 5. the extent to which the par value of the shares has been paid up as well as the particulars of any transfer.

Management The Articles of Association state the number of managing directors and whether a managing director is solely or jointly authorized to fully represent and bind the company. 8. the BV. consisting of one or more managing directors who are appointed and dismissed by the shareholders. 7. the board of supervisory directors. Large Companies Regime • An NV and a BV are subjected to the Large Companies Regime if the company. meets the following criteria: The issued capital of the company. Only a (foreign) private individual can be appointed as a supervisory director. or another corporate body. A provision to this effect can be invoked against third parties. A managing director can be a (foreign) private individual or a (foreign) legal entity. together with reserves as reflected in the balance sheet. amounts to at least EUR 16 million. but do not participate in the management. unless they are aware of this provision and have not acted in good faith. From a Dutch corporate law point of view. Supervisory directors An NV. 32 . No person may serve as managing director and supervisory director at the same time. The NV. in three consecutive years. a BV. They are appointed and dismissed from their position through the general meeting of shareholders and general meeting of members respectively. The Articles of Association may provide that a number of specified acts of the board of managing directors require prior approval of the shareholders. These cannot be invoked against third parties. and a Cooperative may institute a supervisory board to advise and supervise the managing directors. The registration with the Trade Register of the Chamber of Commerce is updated accordingly.Baker & McKenzie The issuance of registered shares requires a notarial deed executed before a Dutch civil law notary in the Netherlands and is recorded in the shareholders’ register. none of the managing directors needs to be a Dutch resident. 9. and the Cooperative are managed by a board of managing directors.

the NV or the BV should institute a supervisory board and the board of managing directors is to be appointed by the supervisory board. 10. As a consequence hereof. Single-member companies A single-member company is an NV or a BV in which all its shares are held by a single legal entity or a private individual. provided that the majority of their employees. and Together.e. An international holding company that restricts its activity exclusively or almost exclusively to the management and financing of group companies and of its and their participations in other legal persons can be exempted from the Large Companies Regime. 33 . work outside the Netherlands. Provided certain conditions are met.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 and the company is represented by the sole shareholder. A company may voluntarily apply to be subjected to the Large Companies Regime. who is also the company’s managing director. an enterprise of which the company owns at least 50% of the shares) has installed a Works Council..Doing Business in the Netherlands • • The company and/or an affiliated company (i. the company and its affiliate(s) employ an average of at least 100 employees in the Netherlands. a mitigated Large Companies Regime is available. employed by the company and by the legal persons with which it forms one group.

annual accounts are prepared by the board of managing directors. The adoption should take place within two months after the preparation. Reporting. Each year within five months after the end of the financial year of the company. In case the NV or the BV is subjected to the Large Companies Regime. Auditing. In the event that the annual accounts are not adopted within two months after the period permitted by law. the board of managing directors should file forthwith the draft annual accounts with the Trade Register of the Chamber of Commerce with a reference to their draft status. none of whom can be a managing director. the general meeting of shareholders or members may provide for an extension of six months. or a Cooperative consist of the balance sheet. within 13 months (5 months + extension of 6 months + 2 months) after the financial year.Baker & McKenzie VII. 34 . i. The board of managing directors must file the adopted annual accounts within eight days with the Trade Register of the Chamber of Commerce. the annual accounts are also to be submitted to the company’s Works Council. this shall be stated giving the reason therefor. a BV. If a Cooperative has not installed a supervisory board and no auditor’s report is submitted to the general meeting an audit committee consisting of at least two persons. In certain circumstances the annual accounts must be accompanied by a director’s report an auditor’s report. which will report on the annual financial documents provided by the board of managing directors. Financial statements The annual accounts of a Dutch NV. If one or more of their signatures are missing. has to be appointed annually by the general meeting. the profit and loss account.e. and Publication Requirements 1. The annual accounts are submitted to the shareholders’ meeting or general meeting for adoption within five months following the end of the financial year. In special circumstances. The annual accounts shall be signed by all managing directors and supervisory directors. and explanatory notes and the consolidated annual accounts if applicable. Cooperatives shall substitute the profit and loss account for a statement of operating income and expenses..

personnel. Director’s report Doing Business in the Netherlands The board of managing directors must draw up the director’s report (small companies are exempt from this obligation). Other information . The director’s report contains information on expected future business. an explanation of those circumstances must be provided. a summary of profit-sharing certificates or comparable securities. If extraordinary circumstances that would not normally need to be addressed in the annual accounts influenced the expectations of future business. the annual accounts may be prepared in accordance with generally accepted accounting principles in one of the member states of the European Communities. The annual accounts prepared by the board of managing directors may include a proposed allocation of profits including the determination of amounts available for dividends or the treatment of losses for the financial year. important events that occurred after the balance sheet date and a list of branches. The director’s report may not conflict with the annual accounts. If so justified by the international structure of its group. it shall make a statement in the explanatory notes of its annual accounts. particularly (unless this conflicts with legitimate interests) on investments.2. 3. and the countries where those branches 35 4. The report gives a true and fair view of the state of affairs as that in the balance sheet and of the course of the business during the previous financial year. Pursuant to the Dutch Corporate Governance Code. financing. If the company makes use of the aforementioned possibility. of its solvency and liquidity. to the compliance with the corporate governance code. Accounting principles The annual accounts prepared in accordance with generally-accepted accounting principles shall provide such a view as enables a sound judgment to be formed on the assets and liabilities and results of the company and. insofar as the nature of annual accounts permit. and the development of turnover and profitability as well as information about research and development activities. Dutch NV’s that are listed on a European Stock Exchange are expected to devote a chapter in the annual report to the broad outline of their corporate governance structure. as well as to the non-application of any best practice provisions.

A small company does not need to publish its profit and loss accounts and other information.5 M < EUR 35 M < 250 Large > EUR 17.Baker & McKenzie are located. The minimum reporting. Small. as well as the profit and loss statement and the explanatory notes. unless the shareholders have resolved to use another language. medium-sized. 5. unless it is exempt from group consolidation requirements.5 M > EUR 35 M > 250 . and publication requirements depend on the size of the company. and determination of the results. the valuation principles.4 M < EUR 8. Language The annual accounts and the director’s report must be written in Dutch.8 M < 50 Medium-sized < EUR 17. Financial information on subsidiaries is used to determine the size of a company as if the company were required to consolidate. Dutch law contains detailed requirements for the composition of the balance sheet. If justified by the activity of the company or the international structure of its group. A company qualifies as small. or large if it meets certain criteria. Currency The sums quoted in the annual accounts must be expressed in euros. or English prior to the filing with the Trade Register of the Chamber of Commerce. A company will not be reclassified unless and until it meets the criteria of another category for two consecutive years: Total assets Net turnover Employees 36 7.The annual accounts and director’s report must be translated into Dutch. French. Classification Small < EUR 4. its annual accounts may be prepared in a foreign currency. medium-sized companies must publish an abridged version of their profit and loss account. However. and publication requirements. mediumsized. and group companies whose accounts are included in the consolidated accounts of another company are subjected to less stringent reporting. auditing. 6. German. It may suffice for small and medium-sized companies to publish an abridged balance sheet and explanatory notes. auditing. Furthermore.

nor does it have to comply with certain auditing and publication requirements. The consolidated accounts. a group company may be exempt from its reporting. German or English. group companies.8. the director’s report. The consolidating company has declared in writing that it assumes joint and several liability for any obligations arising from legal acts by the exempted company. consisting solely of its individual annual accounts. The obligation to consolidate is not required for information concerning: • • group companies. and the auditor’s report have been drawn up in or translated into Dutch. In order to make use of the exemption. and The declarations and documents are to be filed for deposit with the Chamber of Commerce. it does not need to prepare a director’s report. French. Consolidated accounts The company solely or jointly with another company as the holding company of a group. The exempt group company has the right to prepare an abridged version. auditing. The shareholders have declared in writing their agreement to derogate from the statutory requirements after the commencement of the financial year and before the adoption of the annual accounts. 37 . is required to include consolidated annual accounts in the explanatory notes to its annual accounts. or as part of a group. 9. and publication requirements. Exemption for group companies Doing Business in the Netherlands Subject to strict requirements. the following requirements must be fulfilled: • • • • • The exempt company’s financial information has been consolidated by another company whose accounts have been drawn up. the combined significance of which is not material to the group. the required information of which can only be obtained or estimated at disproportionate expense or with great delay. showing its own financial information and of its subsidiaries in the group and other group companies.

No company to be involved in the consolidation has securities in issue officially listed on an exchange. and the auditor’s reports are drawn up in or translated into Dutch. A part of a group may be excluded from the consolidation. French. If the shareholders fail to do so. and other information comply with the statutory requirements. provided: • • • • 10. the interest in which is only held for disposal. or English and submitted with the Trade Register of the Chamber of Commerce. and The company has not been notified in writing by at least 1/10 of its members or by at least 1/10 of its issued capital of an objection thereto within six months from the commencement of its financial year.Baker & McKenzie • • • • Consolidation may be omitted if: group companies. the director’s report. and The financial information which the company should consolidate has been included in the consolidated annual accounts of a larger entity. The auditor must be a certified Dutch accountant or a foreign auditor licensed to practise in the Netherlands and is to be appointed by the shareholders. Annual accounts of group companies that do not need to be drawn up in accordance with the legal requirements do not need to be audited. The consolidated accounts and the director’s report are prepared in accordance with the Seventh EC Directive or similar principles. the company qualifies as a small company. other respective corporate bodies may be authorized to appoint the accountant. Auditing requirements The consolidated accounts. the director’s report. Medium-sized and large companies are required to have their annual accounts audited. German. 38 . The company has not been notified in writing by at least 1/10 of its members or by at least 1/10 of its issued capital of an objection thereto within six months from the commencement of its financial year. The external auditor must examine whether the annual accounts provide the requisite legal disclosures and whether the annual accounts. It should also be verified that the director’s report does not conflict with the annual accounts. On consolidation.

The managing directors of the foreign companies are to be registered the company with the Trade Register of the Chamber of Commerce. The purpose of this Act is to prevent abuse in respect of certain foreign companies (i. Act on Formal Foreign Companies Doing Business in the Netherlands The Act on Formal Foreign Companies (Wet op de formeel buitenlandse vennootschappen) entered into force on 1 January 1998. the regulation in respect of the protection of capital is more flexible. companies that are formally incorporated under domestic law but that have their actual management in the Netherlands). 39 .. Since the last amendment. the Act contains substantial exemptions for foreign companies that are governed by the laws of the European Union or the Agreement regarding the European Economic Space of 2 May 1992. The normal reporting and publication requirements described above apply to all formal foreign companies.e.11. These exemptions merely relate to the minimum capital requirements. must include an auditor’s statement stating that the issued capital and the stockholders’ equity amounts to at least the statutory minimum share capital required for a Dutch BV. in particular. The advantage for the incorporators of such companies is that the preventative supervision is avoided and. For companies not formally governed by the laws of the European Union or the European Economical Space. and was amended on 1 June 2005.

40 . Detailed recommendations are given in relation to the content of the auditor’s report and direct obligation to answer questions posed by the Supervisory Board members and the General Meeting of Shareholders. The external auditor shall attend meetings of the Supervisory Board and the audit committee at which the annual accounts are to be approved or adopted. an explanation must be given in the annual report. Considerable attention is given to the companies’ financial reporting. applies to Dutch NV companies with an official listing in the Netherlands and/or abroad. VIII. However. in case a company fails to comply with the principles or best practice provisions.Baker & McKenzie The Dutch Corporate Governance Code (the “Code”). Corporate Governance Code (Code Tabaksblat) 1. or does not intend to comply therewith during the current or subsequent financial year. composed of individual Supervisory Board members. Principles and Best Practice Provisions The Code sets forth general principles. each of which are followed by specific best practice provisions. It is up to the General Meeting of Shareholders whether the explanation of the company is satisfactory or not. The Code also proposes to legally formalize the position of the Company Secretary. they are not required to provide details in relation to each provision of the Code. will play an active role in supervising the functioning of the internal accounting department and the risk management and control systems in general. These companies must devote a chapter in their annual report providing for a general description of their corporate governance structure and compliance with the Code. In principle. The audit committee. or alternatively disclose in writing (in a separate chapter in the annual report) why and to what extent it does not apply them (“comply or explain”). The Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten) will check whether the company has included such chapter and if such chapter is consistent with other information included in the annual report. Listed companies are to comply with each principle and provision. who will be appointed by the Supervisory Board and whose duty will be to assist the same. also known as the Code Tabaksblat named after the Chairman of the Dutch Corporate Governance Committee.

and approved during the General Meeting of Shareholders. the audit of the financial reporting and the position of the internal auditor function and of the external auditor.commissiecorporategovernance. including significant changes and planned improvements in that respect. 41 . Five Chapters • • • • • Doing Business in the Netherlands The Code is subdivided into several chapters. renewable for a maximum of four years at a time. The Management Board is responsible for managing the company’s business risks and drafting a risk control policy.2. discussed. Management Board • • • A Management Board member is appointed for a maximum term of four years. Any major changes in the compliance with the Code in the years thereafter should again be disclosed to and discussed in the shareholders’ meeting following the years in which they are implemented. Any deviations from the principles and best practice provisions should be specifically disclosed. containing recommendations in relation to: the compliance with and enforcement of the Code itself. 4. Compliance and Enforcement The Management Board and the Supervisory Board are responsible for the company’s corporate governance structure and its compliance with the Code. the shareholders and General Meeting of Shareholders. The Management Board reports annually on the functioning of the internal risk management and control systems.nl. and Below are the main recommendations from each of the chapters. the Management Board. The full text and further information (though limited in English) can be found on the Committee’s website: www. 3. the Supervisory Board and its committees.

and must have the specific expertise required to fulfill tasks that form part of the role assigned to him or her within the framework of the Board’s profile. operational.Baker & McKenzie • • The Management Board must ensure that there is a way for employees to report alleged company irregularities of a general. Options granted to the Management Board members have a minimum term of service of three years and become unconditional only if they have fulfilled predetermined performance criteria. Membership of the Supervisory Board of other companies within the group to which the company belongs does not count for this purpose. Each Supervisory Board member must be capable of assessing the company’s general policy. . • 42 All Supervisory Board members must actively seek to obtain sufficient information in order to form a sound and well-informed opinion. and financial nature to the chairperson of said board or to a designated official (“whistleblower protection”). Supervisory Board • The most important elements of the remuneration package. The compensation upon dismissal of Management Board members should normally not exceed their salary for one year (based on the “fixed” remuneration component). unless this would be manifestly unreasonable. A Management Board member shall give periodic notice of changes in his holding of securities in Dutch listed companies to the compliance officer. • • • A Management Board member may have no more than two Supervisory Board seats with listed companies and may not serve as chairman of said board of another listed company. • • 5. or at least until termination of employment with the company. unless said Management Board member has transferred the discretionary management of his securities portfolio to an independent third party. including the level of prearranged compensation upon dismissal (“golden parachutes” and severance packages). must be disclosed. Shares granted to the Management Board members without consideration must be retained for a period of at least five years.

The same applies to the remuneration committee. The chairmanship of the audit committee may not be fulfilled by the Chairman of the Supervisory Board or by a former member of the Management Board.Doing Business in the Netherlands • • • • • • • • • • • Upon their appointment. a remuneration committee. and a selection and appointment committee. The Supervisory Board is assisted by the company secretary. This report is submitted for approval to the shareholders’ meeting. The Code contains detailed provisions regarding the activities of the various Supervisory Board committees. The Board conducts an annual review to identify aspects in relation to which the Supervisory Board members require further training or education during their period of appointment. 43 . A Supervisory Board member may be appointed for a maximum of three successive four-year terms. The company secretary is appointed and dismissed by the Management Board. In the event of (suspected) accounting irregularities. after approval of the Supervisory Board has been obtained. Each Supervisory Board with four or more members must have an audit committee. the audit committee must be the external auditor’s primary contact. each of which has specific detailed responsibilities. At least one member of the board must be a financial expert in the sense that he or she has relevant knowledge and experience in financial administration and accounting. specific aspects that are unique to the company in question and their responsibilities. No one may simultaneously serve on more than five boards of listed companies (being the Chairman of a board counts as double). The Supervisory Board must prepare an annual remuneration report containing extensive information on the Management Board remuneration policy. Supervisory Board members follow an introduction program which deals with general financial and legal affairs. with the additional exclusion of any Supervisory Board member who is a Management Board member of another listed company.

how they have voted on specific cases.Baker & McKenzie 6. issue proxies to such holders who so request. Shareholders and General Meeting of Shareholders • • • • • The trust office holding shares on behalf of depositary receipt holders shall. Decisions on important acquisitions or divestitures are subject to the approval of the shareholders meeting. The Code lays down instructions on the content of the external auditor’s report to the Management Board and the Supervisory Board. The profit retention/dividend policy will be placed on the agenda of the annual meeting and changes in this policy are submitted thereto. 7. on request. The external auditor attends the meetings of the audit committee and the Supervisory Board in which decisions are made on the periodic external financial reporting. 44 . Institutional investors must annually publish their policy on the exercise of voting rights ensuing from shares held in listed companies and disclose. without limitation and in all circumstances. Shareholders must have access to the shareholders’ meeting by webcast or telephone. The external auditor can be asked questions at the shareholders’ meeting in relation to his statement on the fairness of the annual accounts. Financial Reporting • • • • • The Management Board is responsible for the quality and completeness of publicly-disclosed financial reports. The Supervisory Board supervises the monitoring of the internal procedures for the preparation and publication of all financial reports.

the Committee will make recommendations on possible amendments to the Code. In this report. has monitored the Code. The Committee particularly focused on: • • • the application of and compliance with the Code. Monitoring of the Code Doing Business in the Netherlands Starting from 2005. and the remuneration of Management Board members.8. a special committee. the attendance rate of shareholders at General Meetings of Shareholders. the Corporate Governance Code Monitoring Committee. 45 . The Committee will publish its final report mid-2008.

e.” • • • Box I income includes profits. a resident) is subject to taxation on his or her worldwide income. directors’ fees. Personal Income Tax 1.” “Box II. 2001 Personal Income Tax Act The 2001 Personal Income Tax Act distinguishes three types of income that are subject to personal income tax and classifies them under “Box I. Each box has its own rules for determining the tax base and its own tax rate. and income deemed from residential home ownership. The Dutch tax authorities (Belastingdienst) may wish to tax recipients of Dutch source income. Box III income includes income from savings and investments.. A tax treaty will be applicable only if the recipient of Dutch source income is a resident of one of the treaty countries. 2. However. Every individual who lives in the Netherlands (i. Box II income includes income from shares in case of substantial interest of 5% or more. income from other activities. as stipulated by law. a non-resident may opt to be treated as a resident taxpayer for personal income tax purposes. employment income.. Income from Box I is taxed at a progressive rate with a maximum of 52%. General In the Netherlands.Baker & McKenzie IX. a non-resident) is subject to taxation only on certain income from a Dutch source. provided that the individual is a resident of the European Union or of a country that has signed a double taxation treaty with the Netherlands containing a provision on the exchange of information. 46 . income from employment in the Netherlands. Examples include income obtained from a Dutch business operated by a branch in the Netherlands. but whether the tax authorities can actually do so depends on the provisions set out in a treaty for the avoidance of double taxation in many cases. An individual who does not live in the Netherlands (i. income obtained from Dutch real estate.e. Please note that some articles are excluded by law for non-resident who have obtained resident status.” and “Box III. private individuals are subject to personal income tax. and benefits from a substantial interest (aanmerkelijk belang) in a company located in the Netherlands.

2% (4% of income x 30% tax rate). minus the amount of his or her outstanding debts and minus a basic allowance of EUR 20. The remuneration is not charged to a branch of the employer in that working country. but who work in the Netherlands are also subject to Dutch tax. There are impermeable “walls” between the three Boxes: losses that the taxpayer incurs in Box I can be set off. and the same applies to losses in Box II. Box III income is set at a fixed notional yield of 4% of the taxpayer’s average equity. Other Employees Employment income earned by Dutch resident employees is fully subject to personal income tax. The company paying the remuneration must withhold wage tax (as a pre-levy on income tax) on payments made to the directors.315. remuneration received by managing directors and supervisory directors of companies located in the Netherlands is subject to income tax. However. Employees who are residents of a treaty country. In general – based on international tax treaties (if applicable) employment income is taxed in the country where the work is performed.Doing Business in the Netherlands Income from Box II is taxed at a flat rate of 25% and income from Box III is taxed at a flat rate of 30%. Income from Employment Managing and Supervisory Directors In general. minus debts and the basic allowance. carried backward or forward.. The taxable income in Box III is calculated at 4% of the fair market value of the taxpayer’s property. the tax burden on savings and investments that fall within the scope of Box III. Employees who are residents of a non-treaty country are subject to Dutch income tax on their employment income to the extent that the employment is deemed to be performed within the Netherlands.e. it is possible for employees to be taxed in the country of residence if: • • • The remuneration is not paid by an employer in that working country. 47 . against Box I income only. is 1. In other words. and The employee spends fewer than 183 days per calendar year in the working country. even if they are nonresidents and perform their duties outside the Netherlands. i. 3.

Income Tax Ruling The Dutch tax authorities grant special tax benefits to foreign employees who are temporarily assigned to a Dutch subsidiary or branch from abroad. employees who are resident in the Netherlands. The specific expertise requirement should be understood in a broad sense. Please note that in general. This may be particularly relevant with respect to directors’ fees. an addendum to the employment contract should be drafted to apply the 30% ruling in respect of the agreed-on wages. 30% of the employee’s salary may be paid out as tax-free compensation for costs. 2. at his or her request. b. As a rule. Status of the Employer. An employee assigned to the Netherlands (or hired from abroad by a Dutch company or branch) must have specific expertise. provided such income is taxable in the Netherlands on the basis of Dutch tax law or under a tax treaty. Under the so-called 30% ruling. teachers at international schools. The Employee’s Professional Position. and personnel assigned in a job-rotation plan can be deemed to comply with this requirement (provided that in the case of the last category. they have more than 2. the 30% ruling also applies to income earned in relation to employment performed outside the Netherlands.5 years of experience in the company).Baker & McKenzie 4. The specific expertise must be scarce or unavailable on the Dutch labor market.e. and The Employee’s Professional Position There are two conditions with regard to the employee’s professional position: 1. i. top-level managers of international groups. 48 . Consequently. he or she will not be taxed on passive income such as interest.. The main conditions attached to the 30% ruling pertain to: a. and the employee may. benefit from treatment as a nonresident for tax purposes. The Employee’s Prior Employment or Stay in the Netherlands. c. scientists. The employment contract does not necessarily have to be performed in the Netherlands.

Status of the Employer In order to be able to apply the 30% ruling. this may result in a refund or a payment of personal income tax. However. Labor costs are deductible by means of a “Labor tax credit” for both resident and non-resident taxpayers. the application will have retroactive effect to the date on which employment in the Netherlands commenced only if filed within four months after that commencing date. it must be filed before April 1 of the following calendar year. In principle.Doing Business in the Netherlands The Employee’s Prior Employment or Stay in the Netherlands The period during which the 30% ruling can apply is reduced by the amount of time the employee has spent working or living in the Netherlands in the last 15 years.g. Standard application forms are available for this purpose. there is no time frame in which the request for the 30% ruling should be filed. 5. Levy of Taxes 49 . On balance. the employer and employee should file a joint application request with the Tax Inspector in Heerlen (the Netherlands). this is not the case if the employee left the Netherlands more than 10 years prior to returning and has not worked in the Netherlands in the last 10 years. However. will be set off against the personal income tax due. it is possible to file an objection to the tax inspector’s decision within six weeks.. If that period has expired. for alimony payments or losses incurred on venture capital investments. the employer is obliged to withhold wage tax in the Netherlands.Wage tax. Taxpayers usually receive a tax return automatically. If the 30% ruling is not granted. In order to apply for the 30% ruling. The 30% ruling is granted for a maximum period of 10 years. Non-residents are not eligible for personal deductions. e. The only exception is the deduction for mortgage interest paid on a house located in the Netherlands. The 10-year period commences on the first day of employment or prior to arrival in the Netherlands. Dutch dividend tax. An extension of this period can be obtained by request. the 30% ruling will take effect starting on the first day of the month following the month in which the application form is filed. or foreign withholding taxes already paid on personal income for the taxable year. Dutch personal income tax is levied by a personal income tax assessment based on a tax return submitted to the Dutch tax authorities.

45% for income tax and 13. some personal obligations or exceptional expenses are deducted by means of a reduction in Boxes I.85%) consists of 10.60% 41. II. Income Tax Rates General tax credit The general tax credit is not specifically related to one of the Boxes and is credited against the combined amount of tax due in Boxes I. The rate in the second bracket (41.15% for social security contributions. The rates in the third and fourth brackets consist only of income tax. Some specific expenses that are not related to one of the boxes.579 up to EUR 31. The rate in the first bracket (33.85% 42% 52% Taxable Income up to EUR 17.60%) consists of 2. Rate 33.g.70% for income tax and 13.. 50 . Tax Rates (i) The following four tax rates apply in 2008 for individuals up to the age of 65 and who are residents in the Netherlands. or III income.860 in excess of EUR 53.70%) consists of 2.25% for social security contributions.25% for social security contributions.70% for income tax and 31.45% for income tax and 31. II.95%) consists of 10.589 EUR 31.15% for social security contributions. The general tax credit is EUR 2. The rate in the second bracket (23. e. and III income.860 (ii) The following four tax rates apply in 2008 for individuals aged 65 or older and who are residents of the Netherlands. The rates in the third and fourth brackets consist only of income tax.074 for individuals up to the age of 65 and EUR 970 for individuals aged 65 or older.589 up to EUR 53. The rate in the first bracket (15.579 EUR 17.Baker & McKenzie 6.

claims.95% 42% 52% Taxable Income up to EUR 17. her. and/or If an individual holds less than 5% of the subscribed capital of a company. and other forms of profit participation will qualify as substantial interest and will be taxed as such in Box II. An individual who owns a substantial interest is taxed on all the benefits derived from that holding. including stock options. 51 . A capital loss from a subscribed capital can be deducted only from income from substantial interests in Box II. directly or indirectly: owns 5% or more of the nominal paid-in capital of a company. he or she may nevertheless have a substantial interest if certain relatives also hold a substantial interest in that capital.70% 23. has the right to acquire 5% or more of the nominal paid-in capital of a company.589 up to EUR 53. 7. including regular periodic benefits. an individual has a substantial interest if he or she. such as dividends and capital gains received upon the disposal of shares in the company at the rate 25%.589 EUR 31. Notwithstanding the above. the income has a profit-sharing note entitling him. alone or together with his or her partner (spouse or registered partner). or them to 5% or more of the annual profits or liquidation revenue.Doing Business in the Netherlands Special Rates Rate 15. A capital gain or loss consists of the transfer price minus the acquisition price. If an individual holds a substantial interest.860 There are no special tax rates in the 2001 Personal Income Tax Act.579 EUR 17.579 up to EUR 31. Substantial Interest • • • Generally. all of his or her other holdings in the company. if the individual places an asset at a company’s disposal while that individual has a substantial interest in that same company.860 in excess of EUR 53.

Baker & McKenzie

from the asset will be subject to personal income tax at the progressive rates of Box I. Similarly, assets placed at a partnership’s disposal will be subject to personal income tax at the progressive rates. The net income from option rights on the company in which the individual holds a substantial interest will also be taxed at the progressive rates of Box I.

Fictitious Salary

An employee or manager who works in a company in which he or she has a substantial interest has to take a fictitious salary into account, which will be taxed in Box I. The salary earned in a calendar year is, in principle, at least EUR 40,000 per employment contract. As a result, an employee with a substantial interest has to earn at least the fixed amount of EUR 40,000, which is treated as taxable income. However, the fictitious salary can be higher or lower, depending on the specific circumstances of employment. The company has to pay wage tax over this fictitious salary. The wage tax is a deductible salary cost item for corporate income tax purposes.

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The Corporate Income Tax Act of 1969 (Wet op de vennootschapsbelasting 1969) distinguishes between resident taxpayers and nonresident taxpayers. Dutch subsidiaries of foreign companies are regarded as resident taxpayers, while Dutch branches of foreign companies are regarded as nonresident taxpayers. Please note that, as of 1 January 2007 a tax reform (known as “Werken aan Winst”) has been approved in the Netherlands with reference to the corporate income tax (“2007 CIT Reform”) whose aim is to make the Dutch corporate tax system more competitive and efficient in the EU region. Among other things, the 2007 CIT Reform has amended the corporate income tax rate, the participation exemption regime, the domestic dividend withholding tax rates, certain rules on the interest and cost deductions, as well as the availability of losses. It has also introduced optional separate tax regime for intra-group financing income as well as for the exploitation of Dutch registered patents (i.e., Group Interest Box and Patent Box).

X.

Corporate Income Tax

Doing Business in the Netherlands

1. Subsidiaries
Tax Rate

Subsidiaries are subject to corporate income tax on their entire worldwide income. Certain statutory exemptions do however exist. As of 1 January 2008, subsidiaries are taxed at a flat corporate income tax rate of 25.5% for profits that exceed EUR 200,000. However, profits up to EUR 40,000 are subject to 20% corporate income tax and profits between EUR 40,000 and EUR 200,000 are subject to 23%. The tax rate of 25.5% applies to the excess.

Residency

A company incorporated under the laws of the Netherlands is deemed to be a resident of the Netherlands for corporate income tax purposes. However, for certain corporate income tax facilities, the residency of a company is not determined by its incorporation under laws of the Netherlands. These facilities include the merger and the demerger facilities, and the application of the fiscal unity regime. For these particular tax facilities and in the case of a company incorporated under foreign

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law, the place of residence for Dutch corporate income tax purposes will be determined by factual circumstances, whereby the seat of central management of the company is of crucial importance.

Computation of Taxable Profits

The Dutch Corporate Income Tax Act of 1969 (Wet op de vennootschapsbelasting 1969) does not prescribe a specific method for computing annual taxable profits. It only requires that the annual profits be determined in accordance with sound business practices and in a consistent manner from year to year, regardless of the probable outcome. A modification of the method used is allowed only if it is justified by sound business practice.

“Sound business practice” is not defined by law. The Supreme Court has held that a system of computation is in compliance with sound business practice if it is based on generally accepted accounting principles concerning the proper method of determining profits. A system of computation is only deemed not to be in compliance with sound business practice, if its application is found to be incompatible with explicit statutory provisions.

Since the Corporate Income Tax Act of 1969 does not contain any schedules relating to depreciation of capital assets, valuation of inventory, capitalization, amortization of cost, and the like, there is considerable freedom in adopting a suitable system, as long as it is in accordance with sound business practice. Dividend distributions by a Dutch company are subject to a 15% withholding tax rate. That rate may be reduced to a lower percentage, or even to zero, by virtue of a tax treaty or EU regulations. See Section 20 and Appendix V.

As of 1 January 1997, Dutch companies may, upon prior request and subject to certain conditions, calculate their taxable income in the functional currency of the group of which they are a part. In this way, currency exchange risks may be eliminated.

The Arm’s Length Principle

The arm’s length principle is codified in the Corporate Income Tax Act of 1969. The arm’s length requirement will be deemed not to have been met if the terms and conditions of transactions between associated entities are such that unrelated parties would not have agreed to them. In retroactively determining the income realized by an entity, the Dutch tax authorities have the option of ignoring terms
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Doing Business in the Netherlands

and conditions that would not have been agreed to by unrelated parties.With the codification of the arm’s length principle, entities must document the information based on which the transfer prices between the associated enterprises have been agreed upon. The Dutch tax authorities will provide the taxpayer with a reasonable term in which to collect the required information and incorporate it in its administration. The 2007 CIT Reform has introduced an optional separate tax regime for income derived from group finance activities The mechanism of the Group Interest Box provides that the balance of taxable interest received and interest paid in respect of loans to and from related companies will be taxed (separately from the general taxable base) at the effective rate of 5%. In order to apply the regime, a Dutch corporate taxpayer and all related companies that are subject to Dutch corporate income tax must make a joint election. For purposes of the Group Interest Box regime, “related companies” are defined as companies that are ultimately related through majority (more than 50%) interests.The amount of income that is taxed at the 5% effective tax rate is obtained by multiplying a percentage over the average fiscal net equity of the tax payer during a fiscal year. Such a percentage is equal to the periodically-published interest rate that is applied to liabilities owed to or by the tax authorities. The Group Interest Box will not enter into force until a “no-state aid” declaration has been obtained from the European Commission.The European Commission is currently scrutinizing the compatibility of the Group Interest Box with the EU rules on state aid. If the Commission approves these measures, the introduction will be retroactive to January 1 of the year in which the approval is granted.

Group Interest Box

Patent Box

The 2007 CIT Reform has introduced an optional separate tax regime for income deriving from the exploitation of Dutch registered patents, in order to create a more attractive environment in the Netherlands to perform R&D activities. This regime is referred to as the “Patent Box.” The income from a patent for purposes of the Patent Box is defined as benefits minus related R&D expenses, other charges, and amortization of the IP.

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it is effective starting 1 January 2007. dividend withholding tax is refunded to companies residing in the European Union and which are exempt from corporate income tax (such as pension funds). Dividend withholding tax The Dutch domestic dividend withholding tax rate is 15%. the main domestic sources of income are: profits derived from any business carried out in the Netherlands by means of a Branch or a Permanent Representative. to the extent that the EU shareholder meets the additional conditions required for the application of EU Parent/Subsidiary Directive. Domestic Source Income • • • 56 Nonresident taxpayers are subject to corporate income tax only on their domestic source income. . For practical purposes.Baker & McKenzie Through elimination of part of the income from patents from the taxable base. and net income from immovable property located in the Netherlands. provided that the shares are not considered business assets. if the exemption is also allowed under Dutch domestic rules. such income will effectively be taxed at a rate of 10%. Finally. As the Patent Box has already received the “no-state aid” declaration from the European Commission. The application of the Patent Box regime is fully optional and applies only to patents that were first registered on or after 1 January 2007. at least 5%). Branches Dutch branches of nonresident companies are regarded as nonresident taxpayers for corporate income tax purposes. no dividend withholding tax is levied on dividend distributions to companies residing in the European Union that have a minimum shareholding of 5% in the nominal contributed share capital of the Dutch entity. Such a percentage may be lowered by means of the application of tax treaties and the EU Parent/Subsidiary Directive. Furthermore.. income from a substantial shareholding as defined in Chapter 4 of the Individual Income Tax Law of 2001 in a resident company (i. 2.e.

The tax rate of 25.e. In practice. profits up to EUR 40. based on arm’s-length allocation of income. and Intercompany transactions must be carried out on an arm’s-length basis. future profits are. regardless what the rate might be.Doing Business in the Netherlands Domestic sources do not include royalties paid by domestic licensees. are exempt from Dutch corporate income tax if the branch is subject to foreign tax. neither do domestic sources include interest payments paid by Dutch branches.5% is applicable on the excess profits.000 are subject to 23%. Branch Profit Remittances Branch profit remittances are not subject to withholding tax. the Dutch tax authorities are generally willing to enter into agreements with taxpayers on the determination of the taxable profits of the branch (an “Advance Pricing Agreement”).. Profits earned by foreign branches of a Dutch resident company. the following principles govern the attribution: • • The branch is considered an independent entity for corporate income tax purposes.000 are subject to a 20% corporate income tax as of 1 January 2008. Since the allocation of profits is difficult. 25. i. Foreign losses are deductible from domestic taxable profits. Computation of Taxable Profits The Corporate Income Tax Act of 1969 does not contain any provisions on how taxable profits should be attributed to a Dutch branch of a nonresident company. These agreements are confirmed in writing in the form of APAs and are strictly observed by the Dutch tax authorities. Method of Taxation and Tax Rate The determination of domestic source income is basically the same for branches and subsidiaries. However. in principle. Foreign Branch Profits 57 .5% (this is according to the rules that apply effective 1 January 2008).000 and EUR 200. set off by such losses for the purpose of applying the foreign corporate income tax exemption. The branch is also subject to corporate income tax at the same rate as the subsidiary. The nonresident company is regarded to be the taxpayer and not the Dutch branch of the company. Profits between EUR 40. However.

Interest paid by a subsidiary on loans and royalties is. the participation exemption includes changes in the value of a right to installments of the sale or acquisition price of a participating interest. the participation exemption regime resulted in the establishment of thousands of holding companies in the Netherlands. Participation Exemptions Basic Rule 3. Branch v. Subsidiary As indicated above. or even to zero. provided a ruling is obtained in advance from the Dutch tax authorities. Under the participation exemption regime. The main differences are described below: 1. This exception does not apply to Dutch subsidiaries.Baker & McKenzie 3. The participation exemption includes amendments to the sale or acquisition price of a qualifying participating interest. 2. The participation exemption may also apply to results on financial instruments (including loans) covering currency exchange risks with respect to foreign participating interests. dividends received from a qualifying Subsidiary and capital gains realized on the disposal of shares in such a subsidiary are exempt from Dutch corporate income tax. subject to Dutch dividend withholding tax at the ordinary rate of 15% (reduced to a lower percentage. In addition. Most tax treaties provide that certain auxiliary activities carried out in the Netherlands do not constitute a branch for corporate income tax purposes and. tax deductible if it is at arm’s length (however. Internal interest and royalty payments are not taken into account between a branch and its headquarters. however. by virtue of a tax treaty or EU regulations). branches and subsidiaries are taxed virtually on the same basis. The profit from a Dutch branch may be transferred to its headquarters free from any withholding tax. the participation exemption was applicable if the Dutch parent company held at least 5% of the nominal paid-up share capital of a subsidiary and the shares were not 58 . see Section 6). 4. Historically. as a result. the number and the amount of which installments were not fixed in the year of sale or acquisition. Dividends paid to a foreign parent company are. in general. do not incur Dutch taxation. Up to 31 December 2006.

The reform is aimed. or group reliefs). directly or indirectly.Doing Business in the Netherlands held as inventory. pursuant to which the participation exemption which will apply to any participation of at least 5% in domestic and/or foreign subsidiaries or entities. and (ii) Passive Investments that are subject to an effective tax rate of 10% or more.This definition includes intra-group financing. among other things. and b. The subsidiary is not subject to tax on profits which results in a tax levy of at least 10% on profits. double tax.e. the 2007 CIT Reform has amended the participation exemption regime. The 2007 CIT Reform replaces the former requirements with a simple rule. income derived from Passive Investments that are subject to an effective tax rate of less than 10% is taxed at the standard corporate income tax ____________________ 1 “Free portfolio investments” are defined as portfolio those not reasonably necessary for the business activities of the company holding the portfolio investments. and licensing activities. The assets of the subsidiary/entity. 2007 CIT Reform: amendments to the requirements As of 1 January 2007. recalculated according to Dutch tax standards (and without taking into account loss carryforward. at simplifying the regulations applicable to the participation exemption and making this regime more “competitive” and fully compatible with EU rules. With regard to foreign participations. an investment qualifies as Passive Investment subject to less than 10% taxation if: a. Pursuant to the new rules. there were two additional requirements. On the other hand. In sum. consist of more than 50% of “free” portfolio investments1. that the subsidiary is subject to tax and that the subsidiary is not merely held as a portfolio investment.. the revised participation exemption applies to any shareholding of at least 5% in both (i) active companies (regardless of the level of taxation). 59 . as briefly indicated in item 5 below. i. unless such activities qualify as ‘active’ pursuant to detailed safe-harbor rules. leasing. unless such an investment is considered both a Passive Investment (pursuant to an asset test on a consolidated basis) and subject to less than 10% taxation on a stand-alone basis. This extends the possible application of the participation exemption regime to a number of new and very interesting scenarios.

Generally. no credit is granted.Baker & McKenzie rate of 25. as a general rule. as of 31 December 2006. as of 1 January 2007..5%. However. profit participation rights and hybrid instruments as described in Section 6 under letter b can benefit from the participation exemption regime if the creditor has a qualifying investment in the debtor. the taxpayer can opt for a credit matching of the actual underlying tax paid. capital gains/losses and dividends). the participation exemption remains available for three more years on this participation. Expenses incurred in connection with the disposal of a qualifying subsidiary are. a tax credit applies to such income. no exemption is available in cases where the minimum shareholding requirement of 5% is not met. all expenses incurred in connection with a subsidiary qualifying for the participation exemption are deductible. Pursuant to the EU Parent-Subsidiary Directive. If the passive investment itself is not taxed at all. when the Passive Investment is located within the EU and certain other conditions are met. the following additional features have been implemented. the participation exemption will be applicable if another group company (whether resident in the Netherlands or elsewhere) has a shareholding of 5% or more in the same subsidiary. In addition to the foregoing. An important change for real estate investment subsidiaries is that the participation exemption will always apply to these subsidiaries. This credit is set at 5% of the gross benefits derived from the Passive Investment (i. no longer deductible. an interest in a subsidiary of less than 5% in relation to which the participation exemption applied on the basis of the old legislation. provided that 90% of the assets of these subsidiaries consist of real estate (see item f below).e. as of 1 January 2007. whereas a currency gain will normally be taxable upon 60 . Currency losses realized on loans used to fund participations must be recognized as soon as they are incurred. However. Furthermore. Where the Netherlands taxpayer owned. Expenses related to the acquisition of a subsidiary to which the participation exemption applies are added to the cost-price of the subsidiary and therefore not effectively tax deductible. Expenses incurred in relation to Participating Interests Apart from certain provisions limiting the deduction of interest expenses (as indicated in Paragraph 6 below).

Losses incurred on a completed liquidation of the subsidiary are deductible. under certain circumstances. Liquidation losses may not be deducted if the activities of the liquidated subsidiary are continued elsewhere within the same group. If a foreign branch is converted into a subsidiary. a revaluation reserve is created upon conversion. Generally. it is particularly important to check whether it is possible to avoid exposure to currency exchange risks by applying for fiscal accounting in the functional currency. If the fair market value of the loan increases 61 . This amount will be reduced by dividend payments made in the previous five (or sometimes ten) years. since this provision was met with considerable resistance in the corporate market (especially due to its adverse consequences for internal reorganizations and acquisition structures). Capital Losses under the Participation Exemption Conversion of Loans In the recent past. such a general rule is subject to the following exception. a new way of taxing “conversion profits” was introduced. apply only once losses of the branch incurred in the past have been recovered. For companies that fund foreign participating interests with loans denominated in currencies other than the Euro. the deductible amount is equal to the difference between the funds invested and the liquidation proceeds. the participation exemption will.Doing Business in the Netherlands redemption of the loan. which applies effective early 2006. Deduction of losses incurred in the liquidation of an intermediate holding company may be denied in certain situations. In the new system. However. The difference between the book value of the loan and its fair market value would form taxable income for the debtor. However. under certain circumstances. a conversion into equity of a loan that had (partially) been written off could lead to a direct realization of taxable profit for the debtor. this gain is not taxed immediately. the Dutch creditor realizes a gain upon conversion of a loan to its subsidiary if this loan has been written off by the creditor. subject to complex anti-abuse rules (which will not be discussed exhaustively here). However. As a general rule. Instead. capital losses and a decline in value of the shares in a qualifying participating interest are not deductible. equal to the amount by which the loan has been written off. which might have reduced the losses that were eligible for setoff.

a Dutch holding company may apply the participation exemption to such investments regardless of the jurisdiction in which the fund is located. the participation exemption regime used to be available only to 5% quota holders in Dutch mutual investments funds. 5% or more investments in active operations that are completely exempt from local taxation are now eligible for the Dutch participation exemption. As this requirement was removed for active companies. the application of the participation exemption may be extended to a number of interesting scenarios. Presently.” Mutual Investment Funds and Private Equity Funds In respect of mutual investment funds. depending on certain facts and circumstances. Active Companies located in “Tax Havens” Active companies in tax haven jurisdiction used to be disqualified for the participation exemption due to the subject-to-tax requirement. This makes the Netherlands an excellent jurisdiction for feeder companies holding larger investments in certain mutual and private equity funds. provided that the active asset test is satisfied. New Possible Tax Planning Opportunities as of 1 January 2007 Within the framework of the 2007 CIT Reform. This renders the Netherlands more attractive than in the past for all sorts of active investments in jurisdictions that traditionally do not levy a profit tax or grant extensive tax holidays and that are currently referred to as “tax havens. The revaluation reserve is simultaneously written off for the same amount of profit.Baker & McKenzie again after its conversion into equity. The removal of such condition and the extension of the participation exemption regime to hybrid instruments with 62 . Below are certain significant examples. The rationale of this requirement was the prevention of double dip structure resulting from mismatches in the classification of debt instruments in the jurisdictions involved. a taxable profit is recognized for the amount of the increase. Hybrid Instruments The participation exemption for proceeds from hybrid debt instruments in crossborder situations used to be contingent on the requirement that these proceeds were nondeductible at the level of the debtor.

63 . taxation of capital gains may be delayed: (a) Capital gains on voluntary or involuntary disposition of tangible and certain intangible capital assets may usually be temporarily reserved (“reinvestment reserve”). but may be deducted in full from business profits. however. both the investment activities (real estate investment) and the business activities would qualify for the participation exemption. it is therefore important to separate. If this is done properly.Doing Business in the Netherlands certain characteristics (as indicated in Section 6. Capital Gains Capital gains are generally subject to corporate income tax at the ordinary rate. If more than 90% of the property of the subsidiary (on a consolidated basis) consists of real estate and that real estate is not directly or indirectly owned by a fiscal investment institution. meaning that they will not have any effect on the minimum real estate percentage. the amendments to the participation exemption regime are particularly favorable with respect to real estate companies. as far as possible real estate investments from business activities such as property management. letter b) may open the door to new double dip structures whereby a Dutch parent company will derive exemption benefits from instruments leading to a deduction in the country of issuance. the participation exemption applies. Under certain conditions. with intercompany receivables and debts being set off against each other. This “90% Test” must be considered on the basis of the subsidiary’s consolidated balance sheet. provided the parent company holds at least five percent of the shares in the subsidiary. From 2007 onwards. Real Estate Companies Finally. the acquired asset need not have the same economic function within the business as the replaced asset. and (b) Capital gains earned when the capital asset is exchanged for another capital asset that has the same economic function in the business. Capital losses need not be deducted from capital gains. The value of the assets must be determined on the basis of their fair market value. For assets with a maximum depreciation period of 10 years. 5.

. Article 10a Corporate Income Tax Act 1969 Interest payments (including related costs and foreign exchange results) in relation to “tainted debt” are disallowed under article 10a CITA.e. a capital contribution in a related entity (e. no compensatory tax will be deemed to exist). business reasons. the shareholder) in order to fund a profit distribution.g. the business reasons criterion is used to exclude tax-driven schemes from eligibility for interest deduction. 6.g. has not predominantly been entered into for business 64 the interest payments are effectively taxed in the hands of the creditor at a rate of 10% in accordance with Dutch tax standards. the saving of taxes therefore will not qualify as a business reason) or.. a participation of at least 33%) or to acquire shares in another entity (which is or becomes a related entity as a result of the acquisition). the so-called “compensatory tax exception” (the use of loss carryforward or ACT credits is not allowed if the tax inspector can argue that the payments will not be effectively taxed due to losses or claims arising in a current year or in the near future. alternatively • As of 2008.Baker & McKenzie The gain may even be exempt: (c) Capital gains on the disposition of qualifying equity participating interests in resident or nonresident companies (as referred to above in Section 4 regarding the participation exemption). and (d) Capital gains on the transfer of assets (comprising a business or an independent part thereof) by one corporate taxpayer to another in exchange for shares (see Section 13 below). .. it can be demonstrated that the contribution of loan capital instead of equity is largely based on commercial motives (i. unless: • This Section provides an overview of certain restrictions on the deduction of interest expenses considering certain peculiarities of hybrid loans. Limitations on Deductions of Interest The interest expense in relation to these tainted loans is not deductible. Tainted debt basically is debt which was incurred from a related company or individual (e. or the transaction in connection with which the loan was given. this “compensatory tax exception” does not apply any longer if the tax authorities can reasonably establish that the loan.

1. or if it has a term of more than 50 years. but can be reclaimed only in case of insolvency. and the issuer is a related company of the creditor. as the tax authorities still have the opportunity to challenge a deduction for interest on a loan if the loan came into existence without sufficient business reasons. may potentially be challenged by the Dutch tax authorities. and The remuneration on the loan depends (almost) entirely on the profit of the borrower. Conversely. a related company of the creditor of the hybrid loan has a shareholding in the issuer that qualifies for the application of the participation exemption regime. As a result. if applicable). the deductibility of interest on all related party loans that were until 1 January 2008 defended on the compensatory tax exception. the interest on hybrid loans is also re-qualified into dividend and thus not deductible for corporate income tax purposes (or received tax-exempt under the participation exemption. if the following conditions are fulfilled: • • • The loan is subordinated to all creditors.d CITA Hybrid Loans Debt is re-qualified into equity for tax purposes if the hybrid loan meets certain requirements. liquidation of debtor. the participation exemption regime applies to income and gains received on hybrid loans. This means that meeting the 10% compensatory tax threshold at the level of the creditor does not necessarily entail the deductibility of interest at the level of the debtor.Doing Business in the Netherlands reasons. the creditor of the hybrid loan also has a shareholding in the issuer that qualifies for the application of the participation exemption regime. provided that: • • • The loan has no term. Debt is re-qualified into equity for tax purposes. Article 10. 65 . As the law does not include a grandfathering rule for existing loans.

the term of the loan will be deemed extended accordingly as of the date of issuance of the loan. 66 . a de minimis rule is applicable.Baker & McKenzie Finally. by 30% or more) from an arm’s-length interest rate. the following characteristics are present: Debtor and creditor of the loan are allied companies. although under certain circumstances third-party debt may be considered related-party debt if guaranteed by a related company. This may lead to an opportunity to tax efficient double dip structures. Whereas debt is taken into account in establishing the D/E ratio. Consequently. In addition. Thin Capitalization Rules As of 1 January 2004. which means that interest (including expenses) on the excess will not be deductible if and to the extent that the total debt exceeds three times the total equity. the (non-)deductibility of the interest paid at the level of the debtor in another country is not relevant for the application of the participation exemption in the Netherlands at the level of the creditor. interest on third-party debt will remain fully deductible..000 of debt in excess of the ratio remains deductible. the thin capitalization rules provide for a fixed maximum 3:1 debt-toequity (D/E) ratio.e. The loan has no term or a term of more than 10 years. The basic rules are reasonably clear: the D/E ratio is established on an annual basis by taking into account the non-weighted average equity at the beginning and at the end of the year. or If the redemption date of the loan is postponed. the Dutch Corporate Income Tax Act includes restrictions on the deductibility of interest expenses in the case of companies that are largely financed with debt. provided. Article 10b Corporate Income Tax Act 1969 • • • The interest paid and capital losses realized on a loan are not deductible. whereby interest on the first EUR 500. The remuneration on the loan deviates considerably (i. These “thin capitalization rules” can be summarized as follows: In principle. only interest paid to related parties may be disallowed (and only if and to the extent that such interest exceeds interest received from related parties).

1400 debt. As an alternative to applying the fixed D/E ratio. 7. Unlike the fixed ratio for this purpose. if possible. the respective D/E ratios will be established on the basis of the respective statutory (consolidated) accounts. “debt” is defined as the balance of all loans payable and all loans receivable (e. for a company with 200 equity. excluding fiscal reserves and with a deemed minimum of EUR 1. Flow-Through Entities 67 .000.” and (b) the interest and royalties received and paid relate directly or indirectly to a loan or a royalty transaction. the flow-through entity should still report an arm’s-length remuneration with regard to the services relating to the loan or royalty transaction.. Furthermore. (c) the transactions are “closely connected. based on the same accounting principles. and 800 loans receivable. Technically. As of 1 January 2002.g. for instance. a company may from year to year decide to apply the average D/E ratio of the (international) group to which it belongs as its maximum D/E ratio. “equity” is the company’s equity for tax purposes. The interest and royalties received and paid are excluded from the Dutch tax base under the following conditions: (a) the Dutch entity receives and pays interest or royalties to and from a foreign entity within the same group. Dutch entities that do not incur a genuine risk in respect of intra-group loans or royalty transactions are no longer permitted to credit the foreign withholding taxes related to such interest or royalty income. (d) the flow-through company does not incur a genuine risk that can affect its equity. This alternative may serve. companies active in a business with relatively high debt financing or with a high D/E ratio due to losses.000 and the taxpayer can prove that the equity capital will be affected if a risk arises. the denial of the credit is achieved by excluding the interest and royalties received and paid from the tax base in the Netherlands. A flow-through company is deemed to incur a genuine risk in respect of a loan if the equity is at least 1% of the outstanding loans or EUR 2. to the effect that the thin cap rules will not affect the mere borrowing and lending of funds within a group. Even though the interest and royalty income and expenses are excluded from the taxable income. and hence 600 net debt-all interest remains deductible).Doing Business in the Netherlands For the purpose of calculating this D/E ratio. The flow-through entity is in fact treated as an intermediary company.

due to the payment of the consideration). where it may be assumed that: (a) all or part of the dividend distributions that have been made. whereas such exemption may be granted with respect to the party paying the consideration. and 68 . directly or indirectly (for instance. or 2. an individual or legal entity with respect to whom or which no exemption may be granted from the withholding obligation. exemption.. that person or entity has paid a consideration (in the broadest sense) within the framework of a combination of transactions. by transferring shares temporarily to another party that would benefit from a full exemption from dividend withholding tax. reduction. in relation to becoming entitled to the dividend distribution. e. The Dutch tax authorities took the position in court that the parties that temporarily acquired the shares were not the beneficial owner of the dividends.g. an individual or legal entity (again. representatives of the Dutch revenue have indicated that a flow-through company is deemed to incur a genuine risk in respect of the receipt and payment of royalties if the equity of the flow-through entity is at least below 50% of the expected gross royalty payments to be made by the flow-through company or EUR 2. 8. A refund. the legislator decided to introduce dividend stripping rules which basically set out when a party cannot be considered the beneficial owner of the dividends. or credit of Dutch dividend withholding tax on the basis of Dutch tax law or on the basis of a tax treaty between the Netherlands and another state will be granted under the Dutch Dividend Tax Act of 1965 only if the dividends are paid to the beneficial owner of the dividends. after the Dutch tax authorities lost a number of cases in court. usually the original shareholder) whose entitlement to a reduction or refund of dividend tax is lower than that of the party paying the consideration. These attempts were however unsuccessful. for the benefit of: 1. taxpayers subject to dividend withholding tax have sought to benefit from tax treaty and domestic law provisions to which they would not be entitled themselves.000. Using so-called dividend stripping transactions.Baker & McKenzie During informal discussions in 2005 between tax advisors and the Dutch revenue.000 and at least 50% of that amount is paid in advance to the licensor. Dividend Stripping A natural person or a legal entity is not deemed to be the beneficial owner if.

The Dutch tax authorities are responsible for providing proof of dividend stripping under the new provision. no reduction of the 15% withholding tax is provided even if the deemed economic owner would have been entitled to a certain credit. 69 . or liquidation distribution) and the duration of the transfer. retains or acquires a position in stock. incidental. or profit-sharing bonds before the date on which the combination of transactions referred to above commenced.100 to EUR 111.000. Certain factors reduce the chance of a dividend stripping situation arising. profit-sharing certificates. If. profit-sharing certificates. or 40% is available for certain qualified environment investments (but not if an energy investment has already been applied for). such as the period between the moment of the transfer and the dividend distribution. the Dutch company has to withhold 15% withholding tax on its dividend distribution. 30%. Withdrawal from an asset is Furthermore. the character of the dividend (regular.g. more than EUR 2. or refund (e.100 to EUR 236. within five years after the beginning of the calendar year in which the investment took place. a proportionate percentage would be added to the company’s profit (divestment addition or desinvesteringsbijtelling). In the event of a dividend stripping transaction. reduction. Regrettably.Doing Business in the Netherlands (b) that individual or legal entity. or profit-sharing bonds that is similar to its position in such stock.000) and comprises a deduction of a percentage (in a degressive scale from 25% to 1%) of the invested sum from the profits of the year in which the investment was made. an investment allowance of 15%. directly or indirectly. In addition. 9. 10% instead of 15%). Tax Incentives Investment Allowance The following measures provide tax relief to taxpayers: The investment allowance (investeringsaftrek) is limited to small investments (EUR 2.100 in assets for which an investment allowance was claimed is disposed of.000). if the conditions for dividend stripping have been established.. an investment allowance of 44% is available for energy-saving investments (EUR 2.

the motion picture industry may also claim random depreciation or apply for an investment allowance. In addition. that a tax loss in 2007 can be credited with taxable profit of the year 2006 or with the years 2008 up to and including 2016. This means that tax losses incurred before 2003 will expire as of 2012..g. in one year) can be claimed for certain environmental-friendly assets that are on a list of assets and regions compiled by the Ministry of Environmental Affairs. other assets on a list compiled by the Ministry of Economic Affairs are eligible for random depreciation. Losses As of 1 January 2007. the anti-abuse provisions restrict loss compensation if both (i) at least 30% of the ultimate shareholders in a company have changed as compared to the oldest year in which the losses were incurred. and (b) for replacing tangible or intangible capital assets in case of voluntary or involuntary disposition (“reinvestment reserve”). The amount of tax losses that may be carried back or forward has to be determined by the Dutch tax authorities. This means. Assets that are used for the operation of a business to which a regulation to prevent international double taxation applies are excluded from the investment allowance. subject to certain detailed anti-abuse provisions. provided that proper accounting records are maintained. Tax-free Reserves A tax-free allocation of profits to a reserve is permitted in two instances. 70 .Baker & McKenzie deemed to be a disposal in this respect. Random Depreciation Random accelerated depreciation (e. As a transitional rule. In sum. for example. all tax losses incurred up to and including 2002 can be carried forward for compensation with taxable profit of the years 2007 up to and including 2011. 10. Furthermore. a tax loss incurred during a fiscal year can be carried back to the preceding or carried forward to the nine subsequent years. and (ii) the change of control has occurred after the company terminated or largely reduced its former business activities. Such reserves may be made (a) for the purpose of spreading intermittently recurring costs (“equalization reserve”). which they will do after the taxpayer files its annual corporate income tax return.

participation exemption to capital gain on qualifying shareholding). Capital gains arising from the liquidation of a company are subject to corporate income tax at normal rates. 71 .e. Dividend withholding tax will not be levied if the recipient is 11. 90% or more of its work consists of holding or group financing activities) can be set off only against profits derived in years during which the taxpayer also qualifies as a holding company.g. unless an exemption applies (e. The law provides for a safe harbor rule: companies with at least 25 full-time employees who are not engaged with the holding (management) of subsidiaries or the financing of affiliates are deemed not to be holding companies for loss compensation purposes. and therefore subject to dividend withholding tax. but excluding retained earnings.. including share premiums and capitalized profits. (i) a Dutch resident company that qualifies for the participation exemption. Liquidation In addition. is tax-free (with certain exceptions).Doing Business in the Netherlands Losses incurred in years during which the taxpayer qualifies as a holding company (i.. Liquidation distributions to shareholders are treated as follows: (a) Repayment of paid-in capital. holding company losses may neither be carried forward if a holding company increases the balance of its intercompany loans and liabilities (compared to the balance in the year when the loss was incurred) aimed at generating additional interest income which is to be set off against previous losses. (ii) an EU resident company that qualifies for the EU Parent-Subsidiary Directive and at the time of the liquidation holds at least 5% of the issued and paid-in capital of the distributing company. during 90% of the year. and/or (iii) a recipient that may benefit from an exemption based upon a tax treaty. and (b) Any other payment is deemed to be a dividend. This rule should prevent purelyholding companies from initiating active operations with the (exclusive) aim to set off their (holding) losses against operating profits.

Baker & McKenzie 12. (c) None of the companies suffered losses eligible to be carried forward prior to the merger. For instance. This condition implies that for tax purposes. and (e) The shares acquired by the transferring company are not disposed of within three years. The Ministry of Finance issued several regulations in the form of “standard conditions” that must be met for the merger exemption to apply if some of these conditions are not met. 72 . In general. This exemption has undergone only technical changes as a result of the implementation of the EC Merger Directive. This exemption is subject to the following conditions: (a) The only compensation received by the transferring company consists of shares in the receiving company. realized on the transfer of the assets and liabilities (comprising a business or an independent part thereof) of one company to another (existing or newly incorporated) company may be “rolled over” under the “merger exemption” if the business is transferred in exchange for shares in that other company. one company is an regular taxpayer while the other company qualifies as an investment institution and is therefore subject to a 0% corporate income tax rate. the exemption is also applicable if a permanent establishment of a nonresident company is converted into a resident company. This would not be the case if. (d) Both companies are subject to the same tax regime. (b) The future levy of corporate income tax is assured. In principle. mergers and demergers can be exempt from Dutch corporate income tax provided certain requirements are met. Under Dutch tax law. Mergers and Demergers Business Merger Taxation of capital gains. the transferee company must take the same basis in the assets and liabilities the transferring company had immediately prior to the transfer. the legal merger and demerger exemption does not apply if the merger/demerger is predominantly pursued with the aim of avoiding or deferring taxation. this exemption will apply only insofar as the transfer of assets leads to a full financial and economic integration of the business involved. for instance.

The shareholders in the absorbed company receive shares in the absorbing company. an individual) holding shares in a Dutch corporation to exchange those shares for shares in another EU corporation without triggering Dutch corporate income tax. and liabilities of a legal entity that ceases to exist on completion of the demerger are acquired by two or more other legal entities. In practice. a new third company can absorb the assets and liabilities of the two former companies. The two companies are basically amalgamated into one. without the separate transfer of all of the assets and liabilities. the (acquiring) corporation must acquire more than 50% of the voting shares in the Dutch corporation. the tax treatment of a legal merger will be similar to that of a business merger.e. Furthermore.. Once again. interests... The Corporate Income Tax Act of 1969 also provides for the “legal merger” facility.g. and the absorbed company itself ceases to exist. One of the most relevant conditions is the condition that both EU corporations involved in the merger must be qualified corporations. In general. i. In general. Legal Merger One of the conditions for a legal merger is that both companies involved must be either NVs or BVs. rights. whereby the assets and liabilities of the absorbed company are passed on to the absorbing company. The main principle is that the shareholders of the legal entity being demerged all become shareholders of the transferee-company (i. without the necessity of liquidating the absorbed company.Doing Business in the Netherlands Merger by Share-for-Share Exchange As a result of the implementation of the EC Merger Directive. specific requirements must be fulfilled. two main types of demerger may be distinguished: • Demerger a full demerger whereby the property. rights. and 73 . and liabilities of one legal entity to one or more other legal entities by means of a universal transfer of title. it is possible for a nonresident taxpayer (e. interest. Alternatively. the legal demerger of companies allows the transfer of all or part of the property.e. the acquiring company or companies).

as of the date of disposal of the subsidiary). and 74 . interests.Baker & McKenzie • 13. The Dutch Corporate Income Tax Act of 1969 provides for a fiscal unity regime that.g.g.. BV. permits companies that are members of a fiscal unity to file a consolidated tax return. rights. which is quite similar to the condition for the transfer of assets. Any income or expense at the level of the subsidiary company is automatically aggregated at the level of the parent company. qualifying subsidiaries may enter into a fiscal unity with the parent company during the fiscal year (e. subject to certain conditions. under certain conditions. a cooperative. (b) Under certain conditions. as of the date of acquisition of the subsidiary). Upon request. The most important characteristics of a fiscal unity are: (a) To opt for fiscal unity. Fiscal Unity a partial demerger involving a split whereby all or part of the property.. retain losses that have not yet been set off and that were incurred during the fiscal unity period. or a mutual guarantee association) may form a fiscal unity with subsidiaries in which a participation of at least 95% is held. (d) A company leaving the fiscal unity may. only the parent company is in fact recognized as a taxpayer for Dutch corporate income tax purposes. and liabilities of one legal entity are acquired by one or more other legal entities (the original legal entity does not cease to exist on completion of the demerger). The main advantages of the fiscal unity regime are that profits and losses may be freely set off among the members of the fiscal unity and members can avoid the realization of income on transactions between them. provided that these losses were attributable to that company. (c) Fiscal unities may be ended towards one or more consolidated subsidiaries during the course of the fiscal year (e. Demergers can be effected without corporate income tax being incurred under certain conditions. After the formation of a fiscal unity. companies that are tax residents of the Netherlands (an NV. a parent company must own at least 95% of the shares of a subsidiary.

Dutch permanent establishments of foreign companies may enter into fiscal unity with a Dutch (resident) company or another Dutch branch of a foreign company. 3. Furthermore. a European Union Member State or any other state in case a Double Tax Treaty has been concluded with that other state. Based on this regime. provided the legal form of these foreign entities is comparable to the NV. hereinafter referred to as “FBI”) enjoy a beneficial tax regime if certain requirements are met. under the obligation to distribute the net investment income within eight months of the following financial year. Investment Companies (FBI) Recently. the following cumulative requirements must be met throughout the entire tax year: 1. The changes were mainly intended to remove certain features from the regime that represent potential infringements to EU law. In order to qualify as an FBI. The net investment income must be distributed within eight months of the following financial year.Doing Business in the Netherlands (e) Under certain conditions. certain requirements of the FBI regime (i. 2. provided that there is a shareholding of at least 95% between the companies. accessible to foreign legal entities. shareholders’ requirements. Fund for Joint Account. The FBI must be set-up as a Naamloze vennootschap (“NV”).” Please note that profit distributions (except for a distribution of the reinvestment reserve) will trigger the application of a 15% Dutch dividend withholding tax. BV. Fund for Joint Account.e. unless reduced by an applicable tax treaty or the Parent Subsidiary Directive. 14.. Debt is maximized at 60% of the tax book value of real property investments and 20% of the tax book value of other investments. or any other Dutch resident entity established under the laws of the Netherlands Antilles. the scope of the regime with respect to real estate development activities has been amended. The (statutory and actual) activities are collective passive investments. profits are not subject to tax. and real estate development activities) have been amended. 75 . Investment Companies (Fiscale Beleggingsinstelling. capital gains are not mandatorily distributed and can instead be transferred to a tax-free “reinvestment reserve. besloten vennootschap (“BV”). Furthermore. 4.

or an employee of an entity which holds (alone or together with related entities) 25% or more of the shares in the vehicle. If the vehicle is quoted on a financial market under the Financial Supervision Act. With regard to the requirements (6) and (7). there cannot be any differences in distribution rights (e. 7. If the vehicle is not quoted on a financial market under the Financial Supervision Act. and • individuals cannot hold an interest of 5% or more. and 8. or by investment institutions quoted on a financial market under the Financial Supervision Act. . or the vehicle/its trust has a license under the Financial Supervision Act or has been exempt from being licensed: • • the interest is not held for 45% or more by an entity which is subject to a profit tax (excluding qualifying investment institution) or by two or more of these entities if they are related as defined in the law. The net investment income must be distributed pro rata to all participants. and individuals cannot have an interest of 25% or more in an exempt investment company quoted on a financial market under the Financial Supervision Act or in a non-quoted exempt investment company which has a license under the Financial Supervision Act.Baker & McKenzie 5. Furthermore. The interest in the vehicle is not held for 25% or more by Dutch resident companies via a nonresident corporate shareholder. unless this latter entity is quoted on a financial market under the Financial Supervision Act. Fiscal reserves or goodwill will be taxed at the moment the FBI regime becomes applicable. the regime cannot apply automatically.g. or the vehicle/its trust does not have a license under the Financial Supervision Act 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. we note that under certain conditions.. 6. A director or more than half of the members of the supervisory board cannot be a director. a member of the supervisory board. income and accumulation shares). However. the Dutch tax authorities accept that these requirements are not yet fulfilled during the two years following the incorporation of the FBI. 76 9.

as long as the costs related to the renovation stay within 30% of the fair market value of the real estate. or any other Dutch resident entity established under the laws of the Netherlands 77 . The renovation of real estate by the FBI itself is also allowed.5% corporate income tax rate. provided the following requirements are met: The VBI must be set up as a Naamloze vennootschap (“NV”). The result is a taxable development activity at the level of the subsidiary and exempt passive investment income at the level of the FBI. Exempt Investment Fund (VBI) Currently. Such subsidiary will be taxed against the regular 25. 15. herein referred to as “VBI”) has been introduced as from 1 August 2007. the profits (excluding capital gains) realized by the FBI must be distributed to the participants annually and. If the FBI wishes to develop its own real estate investments. under the following limitations: • • The FBI is allowed to hold shares in a subsidiary that conducts real estate development activities. the subsidiary may develop the real estate held by the FBI in exchange for an arm’s-length remuneration. consequently.e. Dutch dividend withholding tax that should be paid by the FBI to the tax authorities can be reduced by the Dutch and foreign withholding tax levied on investment income of the FBI. become subject to 15% Dutch dividend withholding tax. However. no dividend withholding taxation in the Netherlands) a second investment vehicle (Vrijgestelde Beleggingsinstelling. Fund for Joint Account. no mandatory distribution of dividends. The FBI is explicitly not allowed to develop real estate in the FBI itself. • As from 1 January 2008. or via a transparent entity..Doing Business in the Netherlands Real estate development activities are now allowed by the FBI or by 100% subsidiaries of an FBI. In order to create a more favorable regime (i. investments are pooled via the FBI regime mentioned above. The main advantage of the FBI is that the proceeds from the investments are not subject to corporate income tax. a new credit mechanism was introduced for FBI’s. Based on this credit mechanism. • Any taxpayer in the Netherlands that is subject to corporate income tax can opt for the application of this VBI regime.

g.e. futures. swaps. In addition. withholding tax levied by the investor country will be actual costs for the investment fund. while the limitation is only focused at Dutch real estate. Interest bearing investments (instead of dividend generating investments) are therefore most interesting. options. For the same reason. e. as it is not subject to tax. the VBI regime may not be used as a portfolio investment company that was primarily set-up for one shareholder.Baker & McKenzie • • The VBI should be set up as an open-end investment fund. However. Note that the Dutch participation exemption does not apply to a shareholding in a VBI. corporations. shares. Please note that due to the lack of tax treaty protection.VBIs do not have access to the Double Tax Treaty network of the Netherlands. i. • The VBI regime is stricter towards the allowed activities. Antilles. a VBI cannot credit withholding taxes incurred. since less countries levy interest withholding tax. Conclusively. However. in order to meet the collective investments test. BV. provided the legal form of these foreign entities is comparable to the NV. since inbound interest flows are usually not subject to 78 . the VBI is an attractive vehicle for structuring investments like interest bearing investments. Dutch (corporate and individual) investors do have to revaluate their interest to fair market value every year.. a European Union Member State or any other state in case a Double Tax Treaty has been concluded with that other state. The VBI regime does not have any distribution obligations. bonds. • The VBI has no specific shareholders requirements. as a result of which the underlying (realized and unrealized) income will be taxable at the level of the Dutch shareholders. thus individuals. via a (non-transparent) Dutch or foreign entity or a real estate investment fund. and The VBI should be diversifying risks. It is only allowed to invest in so-called “financial instruments” as defined in the MiFID. meaning it cannot invest in one asset only (apart from feeder funds). It is allowed to invest in Dutch and foreign real estate indirectly. and institutional investors can invest via a VBI. it is possible to invest in foreign real estate through a transparent or non-transparent entity or partnership. Fund for Joint Account. Furthermore. meaning that the fund should allow the repurchase of shares at regular moments..

16. 79 .Doing Business in the Netherlands withholding tax. wage tax). 17. Arm’s-length prices in case valuation is uncertain. Most important are the decree IFZ2004/680M (which contains information on Group services and shareholder activities. An EEIG with official address in the Netherlands is considered a legal entity under Dutch law. as the income of the VBI is not taxed in the Netherlands and neither is a dividend distribution from the VBI to its shareholders. Crediting or offsetting withholding taxes) and IFZ2004/126M on the former flow-through entities (FTE). Transfer pricing regime The Netherlands transfer pricing regime is covered by a series of six relevant transfer pricing decrees that address roughly anything from advanced certainty to observations regarding the appropriate cost base and competencies. the proceeds derived from investments are received without any Dutch tax burden by the ultimate shareholder..g. European Economic Interest Grouping and Societas Europaea EEIG Since July 1989. The Dutch tax authorities aim to be the premier service providers in that they strive to provide for rapid advance certainty in a mutually agreed period of time. Cost Contribution Arrangements (CCA). The profits resulting from the activities of an EEIG are taxable only in the hands of its members. The following general rules apply: (a) EEIGs are “tax-transparent” and therefore not subject to Dutch corporate income tax. Contract research. An EEIG must be registered with the Trade Register of the Chamber of Commerce. (b) “Tax transparency” does not apply to other taxes (e. In such case. it is possible to form a European Economic Interest Grouping or “EEIG” (in Dutch: Europees Economisch Samenwerkingsverband or EESV) in the Netherlands. A regulation has been published with respect to the taxation of EEIGs. “Support” services.

such as the fiscal unity facility and the participation exemption. and Societas Europaea As of 8 October 2004. The SE has legal personality and is in many respects comparable to a Dutch NV or BV. the EU Interest and Royalties Directive. (e) No capital tax is due in the absence of any capital divided into shares. an SE that has its registered office in the Netherlands is treated similarly to a Dutch NV (a public limited liability company). it is possible to incorporate a European company or Societas Europaea (SE).g. and (i) two companies based in two different EU Member States. In addition. Although there are rules restricting the way an SE may be incorporated. SEs are also eligible for the benefits of the EU Parent Subsidiary Directive. (c) through incorporation of an SE as a subsidiary of: (ii) an SE. There are four ways to incorporate an SE: (a) through a legal merger between two companies based in different EU Member States. anyone can become a shareholder. For Dutch tax purposes. This means that SEs are subject to the same taxes as Dutch NVs and that SEs have access to the same tax facilities available to NVs. An SE is able to transfer its registered office from one EU Member State to another. a group that has companies throughout the EU can now create a uniform 80 . an NV) to an SE. (d) The EEIG itself does not have access to the Dutch tax treaty network. or (d) through a change of corporation form from an eligible company (e.. as it does not qualify as a Dutch resident. (b) 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. and the EU Merger Directive.Baker & McKenzie (c) Foreign members will be subject to tax in the Netherlands only if the business in the Netherlands is run via a permanent establishment or a permanent representative.

a zero withholding tax rate applies for payments between Member States. companies that are directly related and are able to meet certain conditions are no longer subject to withholding tax on interest and royalty payments. EU Parent-Subsidiary Directive The Directive gives complete relief from double taxation in the EU on dividend income by abolishing dividend withholding tax on dividends flowing from a subsidiary to its parent company (or to a permanent establishment of the parent company) within the EU. Another relevant practical aspect is that the formation of SEs makes international legal mergers possible between companies incorporated under the laws of an EU Member State. and Luxembourg. Since the Netherlands does not levy a withholding tax on interest and royalty payments. 19. The Directive is effective for the EU Member States.Doing Business in the Netherlands management structure by forming an SE. the effects of the implementation of the Directive in Dutch legislation are limited. Payments made in one Member State to beneficial owners who are individual residents for tax purposes in another Member State fall under the scope of the Directive. since SEs can opt for a one-tier or two-tier board system. participating interests in a parent-subsidiary relationship of 15% or more qualify for the provisions of the 81 . a transitional period is observed for Austria. The EU Savings Directive took effect on 1 July 2005. 18. As of 1 January 2007 (and in 2008). Belgium. the income may be taxed in accordance with the laws of the latter Member State. However. provided that the companies have a qualifying parentsubsidiary relationship. EU Member States have the option not to apply the Directive if companies do not meet a direct shareholders’ test for an uninterrupted period of two years. Referring to the Directive. After the obligatory exchange of information from the Member State where the payment originates to the Member State of which the beneficiary is a resident. The aim of the Directive is to enable taxation of savings income in the form of interest payments. Furthermore. EU Interest and Royalty Directive The EU Interest and Royalty Directive took effect on 1 January 2004. EU Savings Directive 20. In principle.

interest. Summary of the Netherlands’ Bilateral Tax Treaties The Netherlands has one of the most extensive tax treaty networks in the EU. Dutch domestic law provides for an exemption from dividend withholding tax on distributions made to 5% or more shareholders in the EU. according to the tax laws of their respective countries. Most tax treaties negotiated by the Netherlands relating to income and capital are based on the draft models published by the Organisation for Economic Co-operation and Development (OECD) in 1963. EU Merger Directive The EU Merger Directive is implemented in Dutch law and is described under Section 12. and royalties. (1) The parent company holds a minimum of 15% of the capital of the subsidiary. This means that the Dutch rules are more favorable than required by the EU participation exemption. 21. (4) The parent and subsidiary are companies that are subject to one of the taxes listed in the Directive. 22. The treaties generally provide for substantial reductions of withholding tax on dividends. 82 . Starting 1 January 2009. As of 1 January 2007.Baker & McKenzie Directive. (3) The parent and subsidiary are companies that. are considered resident in their respective countries for tax purposes and under the terms of a double taxation agreement concluded with a third country. Appendices II-V contain lists of the treaties currently in force and under negotiation as well as the treaty reductions for withholding taxes. without the possibility of being exempt or having an option to be exempt. 1977. and 1992-2000. this percentage will be lowered to 10%. Neither is considered to be a resident for tax purposes outside the EU. The withholding tax exemption may be applied under the Directive if all the following criteria are complied with: (2) Both the parent and subsidiary have one of the legal forms listed in the Annex to the Directive.

Doing Business in the Netherlands Tax treaties are currently in force in the following countries: • • • • • • • • • • • • • • • • • • • • • • Albania Argentina Armenia Aruba • • • • • • • • • • • • • • • • • • • • • • • Germany Ghana Greece India • • • • • • • • • • • • • • • • • • • • • • • Moldova Mongolia Morocco Netherlands Antilles New Zealand Nigeria Norway Australia Austria Bangladesh Barbados Belarus Brazil Belgium Hungary Indonesia Iceland Ireland Israel Italy Pakistan Poland Philippines Portugal Bulgaria Canada China (excluding Hong Kong and Macau) Croatia Czech Republic Denmark Egypt Jersey Japan Jordan Korea Romania Russia Singapore Slovenia Spain Kazakhstan Kuwait Lithuania Latvia Slovak Republic South Africa Sri Lanka Sweden Estonia France Finland Georgia Macedonia Malta Malaysia Luxembourg Suriname Switzerland Mexico Taiwan 83 .

* See (b) for application treaties with the former Soviet Union and formerYugoslavia. 84 . Serbia (Fed.Baker & McKenzie • • • • • Thailand Tunisia Turkey • • • • • Ukraine United Kingdom United States Uzbekistan Venezuela • • • • Vietnam Zambia (former) Yugoslavia Zimbabwe Turkmenistan Uganda Tax treaties are still in force in the following countries after split or separation from the (former) Soviet Union: • • • • • • • • Azerbaijan * Tajikistan * Kyrgyzstan * Turkmenistan (former) Yugoslavia: Bosnia-Herzegovina Slovenia Montenegro (Fed. Republic) * Treaty unilaterally applied by the Netherlands. Republic) ** Signed on 8 December 2006. Treaty is not yet in force.

) air/sea air Latvia sea air air/sea 85 .Doing Business in the Netherlands Negotiations are underway or will be held regarding the conclusion of tax treaties with: • • • • • • • • • • Algeria Australia Brazil • • • • • • • • • • Germany Hong Kong Indonesia Iran • • • • • • • • Peru Saudi Arabia Slovakia Switzerland Tanzania Turkey Turkmenistan * United Kingdom Azerbaijan * Canada China Cuba Isle of Man Japan Kenya Libya Cyprus France Costa Rica Kyrgyzstan Mexico Tax treaties with regard to the profits from air and/or sea shipping are currently in force in the following countries: • • Armenia Argentine air air/sea air • • • • • • • • • • • Croatia Cuba air air • • • • • • • • • Azerbaijan Bahrain Belarus Brunei Canada Barbados Albania air air air air air Egypt Czech Republic Estonia air air Georgia air/sea air air/sea Hong Kong Hungary Korea Iran Cape Verde air air China (People’s Rep.

Baker & McKenzie • • • • • • • • • • • • • • Lithuania Macau Macedonia Malawi Maldives Mexico Oman Poland Qatar air air air/sea • • • • • • • • • • • • • Slovak Republic Slovenia Sudan Syria Togo South Africa Suriname air air air air air air air sea sea air air air air air Panama Russia air/sea sea Ukraine United Arab Emirates air Uruguay Uzbekistan Venezuela Vietnam air air Saudi Arabia Senegal Seychelles air air air air/sea air Negotiations are underway regarding the conclusion and/or amendment of tax treaties with regard to the profits from air and/or sea shipping with: • • • • • Angola Colombia • • • • • Guatemala Haiti Faroe Islands Gabon Ghana Iran Ivory Coast Jamaica 86 .

Various exceptions to this general Place of Supply 87 . If a foreign business (without a fixed establishment in the Netherlands) supplies goods or services to a taxable person or a nontaxable entity established in the Netherlands. and the importation of goods from outside the EU by anyone. it is considered a taxable person for Dutch VAT purposes. Other Taxes Taxable Persons Doing Business in the Netherlands 1. Value-added Tax (VAT) In general. the intra-Community acquisition of new means of transport by anyone. Services are generally deemed supplied (and are therefore subject to VAT) in the country where the service provider is established. taxable persons are all entities or individuals that perform taxable supplies of goods and services.XI. If the goods are transported in relation to the supply. in the course of a business. Dutch VAT is due if these transactions can be located in the Netherlands. Pursuant to the reverse charge mechanism. a reverse charge mechanism generally applies.There is no VAT registration threshold in the Netherlands. Taxable Transactions • • • • VAT is imposed on the following transactions: the supply of goods or services by a taxable person in the course of a business. or intra-Community acquisitions. Goods are supplied (and VAT is due) in the country where the goods are located at the time the right to dispose of the goods has transferred. the Dutch VAT due is levied on the taxable person or nontaxable entity receiving the goods or services. in the Netherlands.VAT is due in the country where that transport commences. the intra-Community acquisition of goods from other EU countries by a taxable person or a non-taxable legal person in excess of a certain threshold. If a foreign business supplies goods and services within the Netherlands.

g.The general rule for businessto-consumer services will not change. and telecommunication services are deemed to take place (and are taxed) in the country where the (VAT-taxable) recipient of the service is located. the general rule for business-to-business supplies of services will be that services are deemed to take place in the country where the recipient of the service is established. In cross-border situations. the rules for the place of supply will change. (ii) the supply of “building land” is subject to VAT. advisory services.000 in the Netherlands) in the current calendar year. or social welfare. financial services. Non-taxable legal persons are treated as taxable persons for their intra-Community acquisitions if such acquisitions exceed an annual threshold (EUR 10. or exceeded this threshold in the previous calendar year. the supply of Dutch real estate is exempt from VAT. As of that date. the liability to pay VAT is shifted to the (VAT-taxable) recipient. Building land can be described as undeveloped land intended for building purposes. Exempted Activities • • • VAT exemptions include the following categories: exemptions based on a policy to avoid administrative complications for the supplier (such as postal services. and other financial transactions). exemptions for public policy reasons in the fields of education. e. A taxable person who sells and transports goods to a taxable person located in another EU country performs an intra-Community supply in the EU country of dispatch of the goods. banking. As of 1 January 2010.VAT on the supply of such property is due only if at least some activities have been carried out to make the land more suitable for building activities or if a building permit is issued.The receiving taxable person performs a taxable intraCommunity acquisition in the EU country of arrival of the goods. and exemptions related to the supply of Dutch real estate. In principle.There are three exceptions: (i) the supply of a building and accompanying land up to a period of two years after the first use of the building is subject to VAT. culture.Baker & McKenzie rule exist. and 88 . Exceptions to the general rule for business-to-business services will continue to exist.

This request can be granted only if the purchaser uses the real estate for more than 90% of the taxable activities. and the like. or annually. and Administrative Requirements VAT is due on the aggregate value of the goods and services sold during the preceding period. Depending on the amount of turnover. such as food. Taxable persons performing intra-Community supplies must also file quarterly EC Sales listings. A zero rate generally applies to supplies of goods not cleared through Customs (either because they are merely passing through the Netherlands or because they are in storage in the Netherlands). taxable persons have to provide the Dutch Central Bureau of Statistics with information regarding their intra-Community trade if their intra-Community supplies or acquisitions exceed the threshold of EUR 400. The VAT system is built around invoices and the obligation to issue them. and services connected to such supplies. gas. In addition.e. Invoices have three functions in the VAT system: (i) They contain information as to which VAT regime is applicable.Taxable persons established in the Netherlands must file their VAT returns electronically (i.VAT returns must be submitted and the VAT due must be paid within one month after the filing period. supplies of goods that are exported out of the EU.Doing Business in the Netherlands Rates (iii) the supply of real estate may also be subject to VAT if the seller and the purchaser have opted for a VAT-taxed supply through a joint request.VAT returns must be filed monthly. Payment.VAT can be calculated on the profit margin. electricity. works of art. intra-Community supplies. stating the names and the VAT identification numbers of their customers in other EU countries. VAT Returns. A special scheme exists for qualifying sales of used goods. 89 . The general Dutch VAT rate is currently (2008) 19%. A reduced rate of 6% applies to a number of essential goods and services. online or using a designated software program). antiques. pharmaceutical products. quarterly. Under this scheme. and collectors’ items.000 (INTRASTAT filings).

an exemption may apply if the acquisition of the supply of immovable property is subject to VAT. whichever is higher. and certain certificates entitling the holder to a proportionate share of immovable property are. also subject to the 6% transfer tax. There are several mandatory items that must appear on invoices. Furthermore. Reference is made to Sections 4 (0% under the participation exemption). Under the law. Dividends and other distributions of profits (including interest on loans which are considered to be equity and liquidation payments in excess of the paid-in capital) paid by companies that are resident in the Netherlands are subject to 15% dividend withholding tax in the Netherlands. including the acquisition of beneficial ownership. Under certain circumstances. transfer tax is to be paid by the purchaser. whenever necessary. is subject to a real estate transfer tax of 6%. Acquisitions by way of inheritance and gifts (except for gifts of shares in real estate companies) and acquisitions by a company within the scope of an internal reorganization qualify for an exemption from transfer tax under certain conditions. 90 3. 2. shares belonging to a substantial interest in a real estate company. and (iii) They enable taxpayers to prove. or 10%). and 19 (the rate is reduced under bilateral tax treaties to usually 0%. under certain conditions. the rate of 15% is reduced. 17 (0% under the EU Parent Subsidiary Directive).The transfer tax is calculated on the purchase price or the market value.Baker & McKenzie (ii) They enable the tax authorities to carry out audits.Taxable persons must have copies of all their sales invoices and originals of all purchase invoices in their records at all times. Real Estate Transfer Tax The acquisition of (the beneficial ownership of) rights to real estate. 5%. The acquisition of Dutch immovable property. their right to recover input VAT. but it is customary for the buyer and the seller to agree on who will effectively bear the tax. Withholding Tax Dividends .

and the dividend tax withheld must be paid to the Tax Collector within one month after the date on which the dividend becomes payable. 91 .Doing Business in the Netherlands A dividend tax return must be filed with the local Tax Inspector by the distributing company.The Tax Inspector may impose a penalty for late filing of a dividend tax return. Interest and Royalties There is no Dutch withholding tax on interest and royalties paid by companies that are resident in the Netherlands.

which lists the information to be provided. The FSA encompasses practically all the rules and conditions that apply to the Dutch financial markets and their supervision. Insurance Undertakings Acts. supplemented by implementing regulations based thereon. certain designated residents are required to report some payment information to the Dutch Central Bank (De Nederlandsche Bank. required to report their activities within two weeks of starting business operations in the Netherlands.1 Banking activities below. the FSA replaces eight former supervision acts (i.. pursuant to the 1994 Foreign Financial Relations Act (Wet financiële betrekkingen buitenland 1994) and the 2003 Reporting Provisions (Rapportagevoorschriften betalingsbalansrapportages 2003). the “FSA”) has come into effect on 1 January 2007. Exchange Control Regulations The information to be provided depends on the type of institution that has foreign financial relations.g. Regulated financial activities . branch profits.. finance companies are. Finance companies established or active in the Netherlands are required to notify this to DNB within three weeks after they have been established. Some institutions may be designated as “reporting institutions” by DNB if certain criteria. The Financial Supervision Act (Wet op het financieel toezicht. and fees. In total. Financial Regulations No license is required for payments in euros between residents and nonresidents.e. in general. Please also refer to section 3. as long as the requirements of the 2003 Reporting Provisions are observed. Under the 92 3. 1.). and the like. DNB may also request specific information from institutions that are not designated institutions. royalties. dividends. Securities Trade Supervision Act. Capital/Loans No license is required for the repatriation of capital. 2. loans. However. Dutch Banking Act. e.Baker & McKenzie XII. are met. regarding the scope or frequency of international payments.The extensive system of supervision of financial institutions is therefore now regulated by one single act. Pursuant to the 2003 Reporting Provisions. DNB has set specific profiles. interests. “DNB”) for statistical purposes.

As the definition of “repayable funds” could entail more than just the borrowing of the monies. In addition.The legal relation implies that the “members” of such restricted circle must reasonably be aware of the financial situation of the person/company attracting the repayable funds. “Non-banks” (such as certain finance companies and cash-pooling hubs) may also qualify as credit institutions. if it is clear beforehand what the nominal repayable amount is and in which manner any remuneration (such as interest) is to be calculated. Professional market parties include. licensed institutions such as banks.” It is possible that monetary obligations which are created in the context of complex financing structures but which do not necessarily constitute an obligation to repay borrowed monies could be deemed to be “repayable funds” in the context of the Financial Services Act. some caution is required when assuming that a company does not qualify as a “bank” as it is not attracting “repayable funds. investment funds and large corporations. other than from so-called “professional market parties. An exception from the license requirement is available 93 . such as to ensure that access to such group is not easily realizable. a “restricted circle” presupposes and requires the existence of a legal relation between the person/ company that attracts repayable funds and the persons/companies that provide such funds at the point in time where the aforesaid funds are attracted. The following description does not intend to be exhaustive but rather to give a highlevel overview of the most important activities that are regulated under the FSA.” pursuant to section 1:1 of the FSA and grants loans for its own account qualifies as a “credit institution” (bank). for whatever legal reason. a license requirement applies. the criteria of access to which are determined in advance.Doing Business in the Netherlands FSA a clear distinction is made between the supervision tasks of DNB (prudential supervision) and those of the Autoriteit Financiële Markten (the “AFM”) (supervision of conduct of business). subject to a general exemption being applicable or an individual dispensation being granted by DNB. Banking activities In order for any company to act as a credit institution in the Netherlands. Any company that in the conduct of its business or profession obtains “repayable funds” outside a restricted circle from (legal) persons. inter alia. “Repayable funds” comprise any monies that must be repaid. A “restricted circle” is deemed to exist between persons and/or companies that belong to an objectively limited group.

(x) money broking. (vi) guarantees and commitments. An exception is made for the supervision of the administration and solvency of Dutch branch offices of banks that have their corporate seat in another EU country. certificates of deposit. and (e) transferable securities. effecting domestic and international money transfers. and The FSA also regulates the activities of so-called “financial institutions” in the Netherlands. Being the following activities: (i) acceptance of deposits and other repayable funds. credit cards. (iii) financial leasing. liquidity. bills.. (c) financial futures and options. i. in which case the supervision remains with the banking authorities in the bank’s country of origin. including: • • • • • granting loans. (ii) lending.. (d) exchange and interest-rate instruments. (viii) participation in securities issues and the provision of services related to such issues. DNB closely supervises the administration. and (xiv) safe custody services. and the like). They may rely on the license of their home state (“home state control”) pursuant to a socalled “European Passport.g.” The “European Passport” can be relied upon once the relevant notification requirements have been fulfilled. (v) issuing and administering means of payment (e. industrial strategy and related questions and advice as well as services relating to mergers and the purchase of undertakings.Baker & McKenzie for group finance companies that technically qualify as “banks” if the conditions of that exception can be met. (ix) advice to undertakings on capital structure. (b) foreign exchange. and bankers drafts). A company may not operate as a bank or use the term “bank” without the proper license and registration. Dutch banks are generally involved in a wide range of financial activities. Banks and credit institutions that have been established in the European Union do not require a new license to act through branch offices in other countries within the European Union. (xi) portfolio management and advice. 94 .e. (vii) trading for own account or for account of customers in: (a) money market instruments (cheques. companies whose main business it is to perform one or more of the activities listed in Appendix I of Directive 2006/48/EC2 or to acquire or hold ____________________ 2 assisting in the introduction of companies for the application of listing on Eurolist by Euronext Amsterdam NV. travelers’ cheques. (xii) safekeeping and administration of securities. and solvency of all Dutch banks. brokering publicly-listed securities. (xiii) credit reference services. (iv) money transmission services. exchanging foreign currency.

may rely on such certificate to provide the same services in the Netherlands (either via branch or cross-border).g. The implementing regulations promulgated pursuant to the FSA contains several grounds for exemption from the prospectus requirement (e.5 million. or (iii) other tradable securities issued by a legal person.000). offerings of securities with a consideration lower than EUR 2. The legislative proposal implementing Directive 2004/25/EC. 95 . it is also prohibited to make a public bid for securities that are listed on a securities exchange in the Netherlands unless an offering document. which limit shall be calculated over a period of 12 months). Pursuant to current Dutch law.. For non-EU financial institutions. offerings of securities with a minimum consideration per investor/minimum denomination per security of EUR 50.Doing Business in the Netherlands participating interests and that do not also qualify as “credit institution” (as defined above). which must meet certain specific criteria. a DNB license may be required. EU-based financial institutions that are authorized to act as such in their home state on the basis of a certificate of supervised status. Pursuant to the FSA. depending on the specific nature of the services provided. (ii) tradable bonds or other forms of negotiable securitized debt. offerings targeting exclusively-qualified investors. it is prohibited to offer securities3 to the public in the Netherlands or to or have securities admitted to trading on a regulated market (within the meaning of Directive 2004/39/EC) situated or operating in the Netherlands unless a prospectus drafted in accordance with Directive 2003/71/EC (the “Prospectus Directive”) has been approved by the AFM prior to such offering or admission to trading. company or institution through which securities meant under (i) or (ii) may be acquired by the performance of the rights pertaining thereto or by conversion or that is settled in money. offerings to less than 100 persons not being qualified investors in the Netherlands. which came ____________________ 3 Securities Being: (i) tradable shares or other tradable securities or rights equivalent to tradable shares. Once a prospectus has been approved by the competent authority of a Member State. subject to prior notification to the DNB. a simple notification to the competent authority of another Member State is in principle sufficient in order for the issuer to be allowed to offer the securities at hand in such other Member State. has been made public by the bidder in the Netherlands prior to such public bid.

” or “nonprofessional client. for each type of financial instruments. investment firms must comply with certain financial. acting alone or in concert. ____________________ 4 into effect in the Netherlands on 28 October 2007. “market-makers” and portfolio managers) must have a license to offer or render investment services in the Netherlands. Under the MiFID rules. channel. investment firms are obliged to classify4 their clients in accordance with the MiFID rules prior to any investment services being provided. Clients can be classified as either “professional client. brokers.Baker & McKenzie Investment firms (i. investment firms. The requirements that securities institutions have to fulfill are quite elaborate and the institutions are closely monitored by the AFM for compliance. Pursuant to the new best execution rules introduced by the MiFID. dealers. commodity derivative contracts now fall within the scope of the definition of “financial instruments” under the FSA. and organizational requirements.. acquires a participating interest of 30% in a public company the shares of which are admitted to trading on a Dutch stock exchange. and manage conflicts of interest. different regimes apply. a notification to the AFM is sufficient for them to offer their services in the Netherlands. administrative. subject to the aforesaid license requirement.” 96 . introduced a compulsory bid requirement for any (legal) person who/which. investment firms are required to draft an execution policy describing. Furthermore. For EU-based investment firms holding a permit to offer their services in another Member State. the procedures and arrangements they have in place with a view to providing best execution their clients. They must inform their clients in respect of the measures they have taken in order to tackle conflicts of interest. The daily policy makers of such firms must also pass certain reliability and solidity tests. inter alia. notably in respect of the level of protection and pre-contractual information due to clients.e.” “eligible counterparty. To obtain such license. Based on such classification. prevent. either through a branch or “cross-border” (though several Dutch additional rules will still apply to branches). including portfolio managers must implement (and regularly review) adequate measures and procedures to tackle. As a result of the implementation of the Markets in Financial Instruments Directive (“MiFID”) in the Netherlands as of 1 November 2007. Intermediation activities relating to these “new” types of financial instruments are therefore.

Licenses are granted by the Ministry of Finance. in a way that results in a contract. and NYSE Euronext (Holding) NV 97 .e. ____________________ 5 6 “Multilateral trading facilities” are trading platforms operated by an investment firm or a market operator. which is the only MTF currently active in the Netherlands. As a result of the implementation of MiFID cross-EU/EER. along with the Public Prosecution Service. which bring together multiple third-party buying and selling interests in financial instruments in the system in accordance with non-discretionary rules. It is also forbidden to manipulate any regulated market (i. In addition. NYSE Euronext (Holding) NV. regardless of whether the price goes up or down. if published.Doing Business in the Netherlands Entities that operate a regulated market or a Multilateral Trading Facility5 (“MTF”) are also required to have a license in order to be lawfully active as such in the Netherlands.6 as well as MTS Amsterdam NV and European Energy Derivatives Exchange NV currently hold a license to operate a regulated market in the Netherlands. any entity holding a license to lawfully operate as a multilateral trading facilities in a member State may use such license as a so-called ‘European passport’ Including. worldwide) on which securities are traded that are also admitted to a regulated market in the Netherlands. Issuers are obliged to maintain and regularly update insider lists. can be expected to influence significantly the price of the issued securities (or linked financial instruments). The AFM is responsible for the enforcement of the relevant provisions of the FSA. NYSE Euronext (International) BV.. Euronext NV. inter alia. the aforementioned Euronext entities also hold a license to operate Alternext Amsterdam. NYSE Euronext (International) BV. The Market Abuse Directive has been fully implemented in the Netherlands. Inside information is specific information about a company that has not been published and. Euronext (Holding) NV. It is prohibited to effect a transaction in or from the Netherlands involving listed securities (either in the Netherlands or in a regulated market in another Member State) or similar instruments while having inside information about a company that issued the said securities or instruments.This is often referred to as ‘in-house matching’. Several Euronext entities.

and 95%. shares) one holds and the total number of votes one is entitled to cast in the general meeting of shareholders of the relevant Issuing Institution. 50. and (iii) ongoing reporting requirements for shareholders and other persons holding a right to vote in the shareholders’ meeting of an Issuing Institution. 40.. 30.e. The following thresholds are applicable: 5. The FSA contains a very elaborate regime for the determination of both the entity obliged to disclose and the calculation of the relevant participating interests and/or total votes held.3 of the FSA contains amended7 reporting requirements in respect of major holdings in Dutch public companies (i. a subsidiary is deemed not to hold any participating interests or voting rights. The reporting requirements are applicable to changes in both the participating interest (i. This rule may result in the parent company being obliged to aggregate and disclose different participating rights and/or votes held in the same Issuing Institution by different ____________________ 7 The new provisions implement EU Directive 2001/34/EC in the Netherlands. 10. (ii) initial and ongoing reporting requirements for managing directors and supervisory directors of Issuing Institutions in respect of their voting rights and participating interest in both the Issuing Institution at hand and so-called “related Issuing Institutions”. a parent company is deemed to hold both the participating interests and the voting rights held by its subsidiaries. 98 . 75.. This includes: (i) reporting requirements applicable to Issuing Institutions themselves in respect of their issued share capital (e.e. the so-called NV’s) the shares of which are listed on an EU regulated market (“Issuing Institutions”). Major disclosure reporting The scope of the below overview is limited to the above category under (iii).g.Baker & McKenzie Chapter 5. any person or entity acquiring or losing control over shares in the issued capital of a Dutch public company the shares of which are listed on an EU regulated market must report that change pursuant to the Disclosure Act if the change in control leads to a transgression of one of the thresholds laid down in the FSA.. reporting requirements for each change of 1% or more compared with previous notification made). Pursuant to the FSA. For example. 25. Section 5:45 FSA lays down several general criteria based on which imputation of the participating interests and/or voting rights takes place. in general terms. 15. 60. 20.

The obligation to report changes also applies to indirect control held through (security) interests (e. right of pledge. Ireland..e. Investment Funds (Management companies of) so-called Undertakings for Collective Investments in Transferable securities (“UCITS”) incorporated and duly licensed as such in a Member State of the European Union may offer their participation rights in the Netherlands subject to notification to the AFM. for example. The disclosure of major holdings in listed companies is enforced by the AFM. and the United States of America) which intend to offer their participation rights in the Netherlands are obliged to inform the AFM of such intention. (temporary) exemptions may apply. A collective investment scheme is an investment company or a unit trust that solicits or obtains monies or other goods for collective investment in order to allow the holders of participation rights to share in the income of the investment. administrative. the participation rights are exclusively offered to. Jersey. Collective investment schemes (not being EU-based UCITS) having their seat in a country where adequate supervision is exercised (being currently. and any monies or goods are obtained exclusively from qualified investors or if such offer does not exceed 100 investors.. An exemption from the requirement to obtain a license may apply if. it is prohibited to offer a participating right in a collective investment scheme the management company of which does not have a license granted by the AFM. A license to operate as (the management company of) a collective investment scheme in or from the Netherlands can be obtained from the AFM if certain financial. subject to change: Guernsey.g. not being qualified investors. In certain cases. right of usufruct). in principle. Similarly. Section 5:45 FSA also contains specific provisions with regard to participating interests and votes held by collective investment schemes and/or their management companies. organizational. Pursuant to the FSA. Luxembourg. The AFM maintains a special register of these UCITS.Doing Business in the Netherlands subsidiaries. Malta. a person is deemed to indirectly hold the voting rights that a third party holds if such person has entered into a durable (i. either cross-border or via a Netherlands branch. for more than one shareholders meeting) voting agreement with such third party (and vice-versa). and solidity criteria are met. providing the AFM in due course with a socalled “certificate of supervised status” issued by the regulator of the relevant 99 . An exemption may also apply to venture capital companies (participatiemaatschappijen). reliability.

the FSA also regulates. (i) insurance and reinsurance activities (including (re)insurance intermediation and advising on insurance-related products).e. and other precious objects to be designated by governmental decree 100 .. 10% or more) in a bank. and intermediation in respect of individual investment objects. entities whose business it is to conclude contracts regarding financial instruments with a central counterparty that acts as an exclusive counterparty in respect of these contracts. objects of art. advising on. (v) the recognition and operation of securities exchanges in the Netherlands. UCITS. on a market in financial instruments and which indicate the essence of the performance in the latter contracts. and Money Laundering Pursuant to the Disclosure of Unusual Transactions Act (Wet Melding Ongebruikelijke Transacties). of means of transport. The AFM maintains a register of these “adequately supervised” collective investment schemes. precious stones and metals. (iii) the offering... advising on and intermediation in respect of financial products to consumers (in most cases) in the Netherlands. investment firm or insurer established in the Netherlands. or the mediation in the sale. Other regulated activities In short. of which the provisions indicating the essence of the performance correspond to the provisions forming party of contracts concluded by third parties or by the party itself in its capacity as a party to the contract. antiquities. jewelry. banks and brokers) or other services involving the sale.e.Baker & McKenzie “adequate supervision country. collective investment scheme management company. (vi) clearing institutions (i. (iv) advertisements in respect of financial products in the Netherlands. the following activities/entities: (ii) the offering. (vii)the acquisition of a qualified holding (i. among others. jewels. any company that renders financial services on a professional basis (e.g.” The AFM may reject such application if either the contemplated offering or the related distribution scheme is not in accordance with the applicable Dutch provisions.

or mediation in the sale. inter alia. the responsibility to identify transactions of which the obvious objective is money laundering or terrorist financing and to refrain from facilitating such transactions. product or transaction in order to determine the risk involved. the new rules will focus on the goal. Parties to transactions involving the sale. and other precious objects. antiquities. notaries. objects of art. relationship. in theory. jewelry. No expected implementation date has been published. Financial institutions had indicated that the very specific requirements for customer identification were unnecessarily confining. and tax advisors. the Dutch legislator has proposed to change the Disclosure of Unusual Transactions Act and the Service Identification Act. Both proposals are currently being debated in the House of Representatives (“Tweede Kamer”). 101 . precious stones and metals. Furthermore. pursuant to the Services Identification Act (Wet Identificatie bij Dienstverlening). rather than the means. Service providers must consider the client. How institutions will determine these factors is. Instead of prescribing the exact process of gathering the relevant information. including attorneys. The new regulations will be ‘principles based’. Another proposal has been made to combine the two separate Acts into one coherent Act. The Dutch financial regulator has taken the view that institutions will develop their own policy in this regard. The Ministry has established certain objective indicators to allow companies to judge whether a transaction is deemed unusual and should be reported.Doing Business in the Netherlands must report “unusual” transactions to the Unusual Transactions Disclosure Office (Meldpunt Ongebruikelijke Transacties) of the Ministry of Justice. In order to implement the Third Money Laundering Directive. The Disclosure of Unusual Transactions Act will include. The identification requirements and reporting requirements also apply to other professionals. up to them. which are partly or wholly paid in cash must be formally identified under the Services Identification Act. Customer identification requirements will be based on a ‘risk oriented approach’. of means of transport. which will be subject to their scrutiny. jewels. any company that renders specific (financial) services on a professional basis must verify the identity of a client before those services may be rendered to that client in or from the Netherlands.

Residence Permit. Member States of the Schengen Area are: Austria. Monaco. which enables the holder to live in the Netherlands. Malta. It is advisable to check with the Dutch Embassy or Consulate whether a visa is required. Estonia. Iceland. Please note that an MVV is not required for citizens of the European Economic Area. and Sweden. Visit to the Netherlands Not Exceeding Three Months Many foreign nationals do not require a tourist or a business visa to enter the Netherlands if their stay will not exceed three months. Greece. the Netherlands. Lithuania. Luxembourg. Latvia. and (iii) Under certain conditions. and New Zealand. Germany. Japan. and is not extendible. Visa. the European Union and Switzerland. The visa is issued for a maximum period of 90 days. Slovakia. (ii) A residence permit. Furthermore the holder of the visa may remain no longer than 90 days within half a year within the Schengen Area. 2. Portugal. a residence permit for the purpose of work will be handled. Belgium.The conditions for obtaining a residence permit depend entirely on the purpose of coming to the Netherlands. which enables the holder to work in the Netherlands. the Czech Republic Denmark. and Work Permit for Non-EU Nationals 1. Slovenia. usually. Norway. Spain. In this chapter. Italy. obtain three types of documents: (i) A temporary residence permit (Machtiging tot Voorlopig Verblijf or “MVV”). a work permit. Canada.Baker & McKenzie XIII. Finland. France. which enables the holder to enter the Netherlands. Poland. Australia. A foreign national intending to work and reside in the Netherlands must. Visit to the Netherlands Exceeding Three Months A foreign national intending to remain in the Netherlands for more than three months must apply for a residence permit. 102 .

A foreign national who intends to stay in the Netherlands for more than three months and who has gained entrance to the Netherlands. the MVV will usually be granted within two to three weeks. In this respect. the Dutch employer must prove that the labor market has been scanned for workers who have priority.Doing Business in the Netherlands There are two different procedures for applying for an MVV: (i) The foreign national can apply in the country where he or she lives. obtaining an MVV can take between two weeks to six months. work permits are usually required. An employer who wants to recruit an employee from outside the EU/EEA usually needs to apply for a work permit for that employee. After having been in the possession of a residence permit for five years. the employer must prove that the 3. the foreign national is not allowed to enter or reside in the Netherlands. For completeness’ sake. In this respect. Work permit 103 . the foreign national may apply for a permanent residence permit. Residence permit 4. There are different procedures for applying for a work permit. or (ii) The employer in the Netherlands or the person with whom the foreign national will be staying in the Netherlands can apply on his or her behalf. For employment purposes. The residence permit is generally issued for a maximum of one year and if no changes of circumstances have occurred.This permanent residence permit is renewable every five years. please note that the Netherlands has (temporarily) opted out for the full mobility of the workforce in respect of two new EU members. Please note that during the MVV procedure. for those nationals from Romania and Bulgaria. Generally. is required to obtain a residence permit (verblijfsvergunning). it is extendible on a yearly basis. Please note that a residence permit will not be granted if the foreign national was first required to obtain an MVV. and if the Dutch employer applies by means of the expedited procedure. Depending on the purposes of stay. The applicable procedure depends entirely on the applicant’s specific circumstances and the nature of the company he or she is being posted from and the nature of the company where he or she will be working in the Netherlands.

to the European Employment Service (EURES) for at least five weeks prior to the work permit application. Knowledge Migrant Workers Skilled and highly educated foreign workers do not require work permits to work in the Netherlands. Furthermore. 104 . the company is advised to consult our office in advance.881 (up to and including the age of 29). and for this reason. the field of sports. it is advisable to contact our office timely. no contracts will be signed with entities established in a foreign country. Please note that application procedures for different types of employment require extensive preparation. Knowledge economy workers will not be covered by the Dutch Foreign Employment Act but are expected to comply with the rules of the Immigration and Naturalization Service (IND). a professional journal. and must have engaged a recruitment office. The knowledge migrant worker must therefore apply for the required residence permit and the IND will decide whether to grant the residence permit. or for those who want to work in a university. This regulation is applicable to those who hail from Romania and Bulgaria and those countries which are not members of the European Economic Area. please note that the IND will sign the contract only with an established legal entity in the Netherlands where the knowledge migrant worker will be employed. a knowledge migrant worker is one employed in the Netherlands and receives an annual salary of at least EUR 47. For completeness’ sake. usually.565 (from the age of 30 onwards) or EUR 34. but also for those who want to stay in the Netherlands as self-employed. Consequently. 5. the employer is required to advertise the job in a Dutch national newspaper. In order to avoid unexpected refusals. An important requirement for admission as a knowledge migrant worker is that the future employer has a contract with the IND. As of 1 January 2008.This is not only necessary for the application as described above. companies should be cautious about assuming that a job does not need to be reported to the various authorities. This decision will be taken within a short period (approximately two to three weeks) assuming that the IND receives a complete application. Several exceptions exist. or elsewhere.Baker & McKenzie vacancy has been reported to the Centre for Work and Income and. If a company is unsure whether it is subject to the said reporting obligation.

the initial base salary and any other pay components. or for a specific task or project. vacations. In either case. whether a pension arrangement is in place. The length of the probationary period must be the same for both parties.The statutory maximum probationary period for an employment contract for an indefinite term is two months.XIV. During the probationary period. If no term (or special task) is specified. and the notice period. the probationary period will be invalid altogether. A written contract may take the form of an agreement or letter signed by both parties. Probationary Period Parties to a contract may agree on an initial probationary period in writing only. Term Doing Business in the Netherlands An employment contract may be concluded verbally or in writing. for a specified term (as in a fixed-term contract). The statutory maximum probationary period for a fixed-term employment contract is one month if the contract covers a period of less than two years. but is not limited to the following: • • • • • the parties’ identities and places of residence. and An employment contract may be concluded for an indefinite term (as in an openended contract). either party may terminate the contract at any time. the employer is obliged to inform the employee in writing of the conditions applicable to his or her employment. The information to be provided by the employer is based on peremptory law and must include. If the maximum period is exceeded. and it is two months if the contract covers a period of two years or more. the length of the employee’s normal working day or week. the contract will be deemed open-ended. Labor Law 1. without observing a notice period and without any liability 105 . the place of work. Deviations to the detriment of the employee are possible pursuant to a collective labor agreement.

the non-competition clause must be agreed upon in writing and signed by both parties and the employee must be at least be 18 years of age at the time of signing. certain geographical area.. the employer must provide the causes for termination of the employment contract during the probation period. for instance. applicable for a certain scope of activities. are quite common in the Netherlands. Any dismissal by an employer without the approval of the CWI is void. Termination An employer must obtain approval from the Dutch Center for Work and Income (“CWI”) before terminating an employment contract. this approval of the CWI is no longer required. At the employee’s request. the employer may terminate the employment contract. A non competition clause may become invalid if the responsibilities ensuing from the employee’s position are substantially amended in the course of employment. Non-competition clauses. 2.Baker & McKenzie for severance pay unless the termination is. In order to validly restrict an employee from accepting competing employment after termination of the employment contract. Due to new legislation in 2006. This procedure usually takes about four to eight weeks. and for a certain number of years. depending on the circumstances of the case. 106 . The mere reference to a non-competition clause in a collective labor agreement and/or internal rules and regulations will not suffice. the CWI will no longer subject the business economical necessity for dismissal to a test if the employer and the trade unions have reached an agreement on that subject. A request for enforcement of the non-competition clause by the employer can be restricted or denied by the court. unless there is a ban on termination imposed by law (e. Non-Competition Clause 3. The court might deny the request of the employer for enforcement of the non-competition clause when an employee becomes too restricted by the non-competition clause in finding a new job as a consequence of this clause which is too broad. Open-ended Contracts Under certain circumstances. with due observance of the statutory or agreed-on notice period. After obtaining approval from the CWI.g. for discriminatory reasons. illness or pregnancy).

It is therefore recommended that the employee seeks legal advice in this respect before accepting it. or crimes involving a breach of trust. the employer is entitled to terminate the contract effective immediately. theft. It is important for the employer to make sure that the employee’s consent to the agreement is unambiguous. without giving any notice thereof. However. with or without observance of the statutory or agreed-on notice period and with or without payment of compensation. divulging trade or professional secrets. fraud. If more than three fixed-term employment contracts are concluded between the same parties at intervals not exceeding three months or if the total duration of successive contracts is three years or longer. an employee can be given no more than three consecutive fixed-term contracts that end by operation of law (and therefore require no notice of termination).” such as gross negligence in the performance of duties.Doing Business in the Netherlands Fixed-term Contracts An employment contract entered into for a specified term or for a specific project ends by operation of law upon expiration of the term or completion of the project.. Within three years. only the competent court can determine whether the facts of a given case actually constitute urgent cause. the last employment contract will be deemed to be a contract for an indefinite period. A party to an employment contract may be confronted with a situation in which he cannot reasonably be expected to continue the employment relationship (urgent cause). If the employee causes the situation. The law sets forth a number of examples of “urgent causes. embezzlement. All employment contracts may be terminated at any time by mutual consent. an openended contract. The employee has a similar right. Termination by Mutual Consent Immediate Termination for Urgent Cause 107 .e. i. A fixed-term employment contract of three years or longer may be extended once immediately after it expires (for no more than three months) without giving rise to an open-ended contract and therefore without giving any notice of termination.

A serious cause may be an “urgent cause” (i. the employee’s age. take the rights under a Stock Option Plan into account when calculating severance pay and may even rule to continue a Stock Option Plan after termination of an employment contract. Whether compensation is awarded and how much is awarded depends on several circumstances (e. The Cantonal Division of the competent court will dissolve a contract only for serious cause.” Years of service up to the age of 40 are multiplied by one. Other perquisites.. are in principle not taken into account. years of service between 40 and 50 are multiplied by 1. 108 . be able to prove that dissolution of the employment contract is not in any way related to the employee’s illness. the adjustment factor is set at one. courts consider stock benefits to be part of the employee’s salary and for that reason. however. and even if the employee is pregnant. Courts handle employment matters and operate quite independently of the CWI. number of years of employment. position.. In a “neutral” situation. or disabled. If the employee is to blame. According to the commonly used “Cantonal Court Formula.Baker & McKenzie Termination by the Court Employers and employees have the right to file a petition for dissolution of an employment contract. however. The employer must. If the termination of the employment relationship can be blamed on the employer. the competent court may decide to award compensation according to the principle of reasonableness. An employer or an employee may request the Cantonal Division of the competent court to dissolve an employment contract. the factor will be higher than one.e. reasons such as those described in subsection [4] above or a “change of circumstances” that justifies termination of the contract on short notice. Case law. sick.” severance pay is calculated by multiplying the number of weighed years of service by the gross monthly salary and an “adjustment factor.g. the factor will be less than one. Dissolution by court order may be requested at any time.5 and years of service from the age of 50 and over are multiplied by two. and the like). shows that under some circumstances. whether the contract is on a fixed term or open-ended. In the case of termination on the ground of a change in circumstances. such as pension premiums. future prospects. such as structural bonus payments. The basis is the fixed (gross) monthly salary plus all fixed and agreed-on salary components.

If an employee believes that his or her dismissal was manifestly unreasonable. the notice period should in principle be observed. in most cases. The Managing Director must be given timely notice of the meeting and his intended dismissal and be given the opportunity to defend himself against the intended dismissal. A dismissal is considered “manifestly unreasonable” if. this is not a legal requirement. depending on the circumstances. in which case. a distinction must be made between the corporate and employment relationship of Managing Directors. In the case of dismissal. Depending on the company’s Articles of Incorporation. awarded by the employer and the likelihood that the employee will find other types of suitable employment) compared with the interests of the employer. the dismissal may nevertheless be manifestly unreasonable. the consequences of termination are unreasonably harsh for the employee (in view of the severance payment. After the aforementioned requirements have Managing Director 109 . However. The employer may terminate the employment contract without the prior approval of the CWI. The employment contract of the Managing Director may in principle also be terminated during the same meeting of shareholders. Payment of additional compensation may be required. because a Managing Director has a twofold relationship with the company: a corporate relationship and an employment contract. for instance. whereas the Cantonal Division of the court is usually competent in labor cases. As stated above. If no compensation is offered.Doing Business in the Netherlands Manifestly Unreasonable Dismissal Even if an employer has terminated an employment contract with due observance of the notice period after first obtaining permission from the CWI. authorized to dismiss a Managing Director from his or her corporate position as Managing Director. The court rules in cases involving Managing Directors. The company may replace it by paying (at least) the equivalent of the salary due during the applicable notice period. Terminating the employment contract of a Managing Director appointed pursuant to the Articles of Incorporation (“statutair directeur”) is different from terminating an employment contract with an ordinary employee. the shareholders’ meeting is. the termination may be deemed manifestly unreasonable. damages may be awarded. if any. he or she may petition the competent court for damages.

“bestuurder” within the meaning of the Works Councils Act). also counted when determining the number of employees. enterprises with 50 or more employees must establish a Works Council. the Works Council also has a right to information on the height and content of the terms and conditions of 110 4. if the Managing Director reported ill before having received the invitation for the shareholders’ meeting. Under the Dutch Works Councils Act. The purpose of the Dutch Works Councils Act is to promote consultation between management and employees with regard to the business and policies of the company.. the Works Council should be requested for its prior advice regarding the intended dismissal of the Director before seeking termination. The members of the Works Council are chosen directly by the employees from among their own ranks. in principle. A Managing Director cannot be a member of the Works Council. In such cases. as the Managing Director would be protected by the prohibition to give notice during illness. The management of the company and the Works Council meet at least twice a year. As of 1 September 2006. the employer is obliged to petition the competent Court to dissolve the civil law employment relationship. however. The number varies from three to 25. the Managing Director’s corporate position and civil position (as an employee) will be terminated. Part-time employees and those who are hired in or out are.Baker & McKenzie been met. the meeting of shareholders could dismiss him from his position as Managing Director under corporate law. During those meetings. Works Council . If a Managing Director were to become ill. may only advise management in connection with the company’s business. This is different. One of the members is appointed chairperson. in general. discussions about subjects concerning the company that either management or the Works Council believes merit deliberation are held.e. The management has an obligation to provide the Works Council with the necessary data and documentation (such as the financial results and the legal structure of the company) and to inform it about the results and the prospects of the company. depending on the number of employees in the company. The Works Council has no executive power and. but termination of his employee status would not be permitted. In the event that the company has established a Works Council and the Managing Director is the consultation partner of the Works Council (i.

If an enterprise with at least ten but fewer than 50 employees has neither personnel representation committee nor a Works Council. and the development in relation to the previous year. mergers. termination of or a major change in the company’s activities. Management must consult with the personnel representation committee on a number of subjects. 111 . are required to set up a “personnel representation committee” if the majority of the personnel so requests. it is obliged to give its employees the opportunity to meet with the owner twice every calendar year. However. over the workforce.Doing Business in the Netherlands employment with respect to different groups of employees. The management has an obligation to provide the Works Council with this information. Enterprises with at least ten but fewer than 50 employees that do not have a Works Council. takeovers. The management must furthermore consult the Works Council in connection with a number of important subjects. its powers are more limited.The committee has the same facilities at its disposal as a personnel representation committee in an enterprise with ten to 50 employees. the income development between the different groups of employees in the company. or shares joint authority with others. The Works Council has a power of veto over a limited number of decisions that directly affect employment conditions. Members of the Works Council are obliged to observe strict confidentiality with respect to what they learn during meetings with management. In principle. major investments. changes of location or major workforce layoffs. such as proposed decisions that may result in job losses or in major changes in the working conditions of at least a quarter of the employees. The Dutch Works Councils Act also provides the personnel with certain advisory powers. they cannot be dismissed from employment during their membership without the court’s permission. such as a transfer of control of the company. significant reorganizations. and dismissals. In principle. such as pension plans or in-house employment regulations. the Works Council must also be consulted on the appointment and dismissal of a Managing Director if the latter has sole authority. Small enterprises with fewer than ten employees may also set up personnel representation committee on a voluntary basis.

(Please do not hesitate to contact us if you require further information or if you would like to receive updated information.) 112 .Baker & McKenzie It is impossible to give an exhaustive overview of Dutch labor law in this publication.

The following Acts fall under this category: • • • • General Surviving Relatives Act (Algemene Nabestaandenwet or ANW). General Old Age Pensions Act (Algemene Ouderdomswet or AOW). As of 1 January 2008. The obligation to pay premiums ends at the age of 65. Premiums In general.15% for the AWBZ and 1% for the ANW premiums. General Child Benefit Act (Algemene Kinderbijslagwet or AKW). all premiums paid within the national insurance system are levied with and part of the personal income tax rates. 113 . a distinction should be made between: national insurance and employee insurance. Doing Business in the Netherlands With respect to social security within the Netherlands. 1. 17. Social Security and Pensions • • • • national insurance and employee insurance. National Insurance The types of insurance in the national insurance system apply to all residents of the Netherlands. a distinction should be made between: With respect to social security system within the Netherlands. Exceptional Medical Expenses (Compensation) Act (Algemene Wet bijzondere ziektekosten or AWBZ). The AKW premium is 0% because it is funded by the government. 12. irrespective of their nationality.9% is levied for the AOW premiums.XV.

divides disability into two plans: one for individuals who are incapable of working due to full permanent disability (IVA) (a) and one for individuals with a remaining ability to work and therefore earn some income (WGA) (b).2% of the annual salary up to a maximum of EUR 2. This act. The Work According to Labour Capacity Act (Wet Werk en Inkomen naar Arbeidsvermogen or WIA) (The amount of the premium paid varies. Employees’ Insurance • Performing employment activities in the Netherlands in general. • • • Unemployment Insurance Act (Werkloosheidswet orWW). employees who received WAO benefits before 1 January 2004 will still be covered by the WAO. Individuals who are less than 35% disabled (earn more than 65% of the maximum hourly wage) (maatman inkomen per uur) are not eligible for a WGA benefit (nor IVA benefit). depending on the type of work and the type of company) and Disablement Insurance Act: (Wet op de arbeidsongeschiktheidsverzekering or WAO). leads to compulsory insurance in compliance with the following Acts: • Sickness Benefits Act (Ziektewet or ZW).249 in 2008). The New National Assistance Act (Nieuwe Algemene Bijstandswet or NABW). Currently. The WIA creates incentives for rehabilitation and reintegration into the workforce. WIA/WAO The NABW helps people to provide basic living standards for themselves when they are not entitled to any other benefit. The Disablement Insurance Act (WAO) is replaced by the Work According to Labour Capacity Act (WIA) on 1 January 2004. . The New Health Insurance Act (Nieuwe Zorgverzekeringswet) (The employer is obliged to compensate his employee for the mandatory income related contribution of 7.Baker & McKenzie 2. Therefore. the Disablement Insurance Act is merely applicable to employees who became or would become ill before 1 January 2004. 114 The Disablement Insurance Act insures employees for a wage replacement benefit after 104 weeks of full or partial disability.

full and permanent disabled employees are entitled to 75% of their last salary (which is maximized to the maximum daily wage). Conversely. The Dutch Premium Differentiation and Market Operation Act (theWet Premiedifferentie en Marktwerking bij Arbeidsongeschiktheidsverzekering or PEMBA) took effect on 1 January 1998 and applied to all types of disablement insurances. individuals who were partially unemployed would receive income benefits equal to 70% of the minimum wage multiplied by the percentage of their disability. Companies having few employees falling under the disablement legislation would therefore pay a low premium. The duration of this benefit will be dependent on their employment history. The premium was to be fully paid by the employer. which must be at least six months to a maximum of five years.Doing Business in the Netherlands Employers have the choice of self-funding the disability benefit and/or insuring this risk with private insurers. PEMBA The purpose of PEMBA was to differentiate the disability premium on a companyby-company basis which depended on a company’s disablement risk. Employees. Full and permanent Disability (IVA) As of 1 January 2007. who in 2006 already received an IVA benefit. those with several such employees pay a high premium. However.The premium differentiation was valid for five years. After the wage-related benefit. partially disabled employees who returned to work would be entitled to supplemental wage benefits equal to 70% of the difference between prior earned wages before unemployment (maximized to the maximum daily wage) and the current wages. Companies could take out insurance to cover this risk. 115 . Partial Disability (WGA) Partially disabled employees are entitled to 70% of their last salary (which is maximized to the maximum daily wage). have received a raise of 70% up to 75% with retroactive effect from 1 January 2007. UWV). or pay contributions to a government agency (Authority for Employee Insurance.

however. Employers are currently allowed to take the WGA risk upon themselves for a period of four years. If the employer chooses to take the WGA risk himself (or insure the risk). are not allowed to take the IVA risk upon themselves (or insure this risk). Employers will have the possibility to recover the WGA expenses on the employees to a maximum of 50%. the possibility of premium differentiation for the IVA is also not implemented. Social Partners (bodies representing employers and employees or unions) and the Dutch Government reached an agreement. The differentiation of the premium will be applied on a company-by-company basis. social partners do not yet comply with this agreement and the 70% maximum is exceeded in most of the Collective Bargaining Agreements (CBAs). Research shows. 3. Both parties are obliged to adopt an active approach 116 . with the possibility of differentiation in premium. As of January 2007. Please note that in November 2004. Furthermore. Sickness and Disability Under present Dutch law (Article 7:629 of the Dutch Civil Code). both the employer and the employee have far-reaching obligations with respect to reintegration. the employer is obliged to pay at least 70 percent of his or her most recent salary for the first 52 weeks (based on the statutory minimum wage) and for a period of 104 weeks (based on the maximum daily wage) or until the date on which the employment contract expires. and employers therefore. there are no more individual (for large employers) nor branch-wide (for small employers) differentiated premium obligation regarding the WAO. During an employee’s period of illness. there is no obligation to pay the differentiated premium. if earlier. employers are obliged to continue paying the salary of ill employees for a maximum of 104 weeks. All the public insured employers are obliged a uniform premium for the WAO from that time on. all the WGA benefits have been funded by a basic and a differentiated premium. Moreover. that in practice. which implied that employers would pay a maximum of 70% of the last salary (up to the maximum daily wage) in total during 104 weeks of illness.Baker & McKenzie As of 1 January 2008. as intended.

employers are not obliged to provide pension benefits.” All residents of the Netherlands are entitled to an AOW pension when they reach the age of 65. Please note that as of 1 January 2007 the new Pension Act has come into force. a surviving-relatives pension. (a) The first tier of the Dutch pension plan is the government pension known as the Old-Age Pension or “AOW (Dutch: Algemene Ouderdoms Wet). Employees sometimes arrange for additional pension plans with their employer by concluding agreements with life insurance companies. disability pension. In some branches (industries). 4. We will explore this in further detail later on. This new Pension Act replaced the Dutch Pension and Savings Fund Act (Dutch: Pensioen. and supplementary to a governmental provision for surviving relatives (ANW).Doing Business in the Netherlands in this respect. supplementary to Dutch disability law (WIA). The new Pension Act offers more clarity about responsibilities and liabilities between the employer. a compulsory Industry Wide Pension plan (Dutch: BPF) is effective. Although in principle. There is no relation between the amount of the AOW benefit and the amount of contributions paid. and the pension funds/insurance companies. All these second-tier pensions are financed by contributions paid by the employer and/or the employee. There are many ways in which the second-tier pension benefits can be arranged. the employer must make sufficient efforts to reintegrate the employee to the extent possible. even in case of one whose employment contract will end on short notice. Dutch Pension System The pension system in the Netherlands is based on this three-tier system: (b) The second tier consists of old-age pension benefits that are supplementary to the AOW. there are some situations in which they do not have an option. employers who do not inform the new employee of the willingness 117 Second-tier Pension Benefits . (c) The third tier of the Dutch pension system consists of private insurance for the employee’s salary that is in excess of the second-tier benefits. the employee.en Spaarfondsenwet). In this light. Similarly. as of 1 January 2007.

Because investment returns tend to be higher. a “profit” or “gain” can be generated on the policies.g. combined with risk insurance to provide pre-retirement and post-retirement death benefits and a waiver of premiums on disability. existing collective labor agreements. can be done by means of a “B Policy. joining an industry-wide pension plan (this might be compulsory). and who are already offering a pension plan to their other employees in the same line of business. or by insurance companies. and the like). or some specific merger and acquisition situations might also lead to pension obligations for the employer. Three Insured Pension Plans As an alternative to an industry-wide pension plan or a company pension plan. The following options apply: 1. and 3. will be considered to have offered the same pension plan to the new employee. by law.. pension plans may be fully insured by a life insurance company that is licensed in accordance with the Dutch Act under the supervision of the Insurance Industry. various forms of legislation on equal treatment (age. 2. a life insurance company that ensures the employees an individual or collective entitlement. full-time/part-time. 118 . setting up a company pension plan through self-administered funds approved by the Ministry of Social Affairs and supervised by the Dutch National Bank (DNB) and the Authority Financial Markets (AFM). man/woman. Furthermore. The rates are mostly based on an interest discount rate of 3% a year. In contrast to the former Pension and Savings Fund act.” A “B Policy” means setting up insurance entitlement between employer and an insurance company.Baker & McKenzie to offer a pension plan or not within one month after he starts his job. the new Pension Law as of January 2007 no longer allows new pension plans to be based on a C-Policy. The second-tier pensions. are held by industry-wide pension funds. e. Insurance companies use deferred annuity contracts as the funding instruments. licensed by the Dutch Supervisory Authorities. company pension funds. making it possible for the employee to take out a policy with a licensed life insurance company by giving an allowance for purchasing such an insurance). temporary labor contracts/indefinite labor contracts. Insuring a pension plan by a life insurance company as mentioned above. insuring employees with a life insurance company.

.Doing Business in the Netherlands Several Ways to Finance and Arrange Supplementary Pension Benefits Defined Benefit system (DB) a. Final Pay System. time-proportional pension claims must be paid up. the pension accrued is a fixed percentage of the pensionable base (salary minus franchise) applicable in the initial year as of the commencement date of service or the commencement date of the pension plan. any salary increases lead to an ideal pension accrual. pension claims are allocated to the previous years of service from the commencement date of employment or of the plan. Advantage of the final pay system: • • • Under the final pay system. There are several ways in which old-age pension benefits can be arranged and financed. The pension costs may increase out of control due to salary increases (thus increasing the pensionable base) at a later age. because the pension is based on the most recent salary. With regard to future increases of the pensionable base. i. the amount of the old-age pension depends on the employee’s salary on the pension date.e. the years of employment and the franchise. A DB system can take the following forms: Final Pay System Under the Final Pay System. Disadvantages of the final pay system: If employment is terminated. i. 119 . Average Pay System.e. the pension costs will also be progressively lower. by a defined benefit system or a defined contribution system. less the pension claims in relation to the period between the termination date and the pension date.. and b. upon a reduction of the pensionable base. the total pension claims on the basis of the employee’s most recent salary. Conversely. Therefore.

as salary decrease occurs later in the employee’s career. particularly if a major salary increase occurs at a later age. Average Pay System In this system.Baker & McKenzie Note: Moderate Final Pay System To prevent a situation in which pension increases at a later age will lead to major costs increases. In this way. the pension accrual is a fixed percentage of the pensionable base in the first year as of the commencement date of employment or the commencement date of the plan. A frequent provision stipulates that the pensionable bases after a certain age (55 or 60 years) are taken into account only with respect to future years of service. Upon each consecutive increase of the pensionable base. This can be compensated to some extent by indexing the pension claims 120 . it may be determined that promotions after the employee reaches a certain age (55 or 60 years) no longer count for pension increases. but only the usual periodical salary increases. If the pensionable base decreases due to a lower salary. because pension increases following major salary increases are granted only for future years of service (average). there will be no need to pay up any time-proportional pension claims. the pension loss will be smaller. Pension accrual is not ideal. Advantages of the average pay system: • • • • The costs of an average pay system can generally be estimated easily and kept under control. Employers have to be aware that these kinds of stipulations might be in conflict with Dutch equal treatment law. Alternatively. a pension is accrued only for years of service yet to come. and Disadvantage of the average pay system: Upon termination of the employment contract. the final pay system often includes provisions to limit the costs. the pension to be distributed on the pension date is calculated on the average of all pensionable bases over the entire period of participation in the plan.

121 . As the employee gets older. premiums can be used to accrue pension at the employee’s discretion.Doing Business in the Netherlands Defined Contribution System (DC) a. it is not the final pension that is the standard. Defined Contribution System Under a defined contribution system. but the costs that form the basis of the pension commitment. and A DC system can take the following forms: b. Collective Defined Contribution System. The pension premiums will be shown only in the profit and loss account (resultaten rekening). a premium commitment is involved. In a defined contribution system. the pension accrued by the employee in the past will not be affected. Upon termination of the employment. If the pensionable base decreases. and Disadvantages of the defined contribution system: • • As pensions are partly the responsibility of the employee. The International Financial Reporting Standards (IFRS) will not lead to any records of pension obligations in the company books (balans). For instance. the employer need not pay up any time proportional pension claims. Defined Contribution System. Older employees who develop their career later in life in a situation with a high rate of inflation may not accrue a full pension. which means that less pension can be accrued. the years for premium payment become fewer. Advantages of the defined contributions system: • • • • • • A premium system is one in which the employer can control the costs. Thus. it is still possible to accrue a full pension of 70% of the employee’s final pay. rather than a pension commitment. the employee could insure only an old-age pension rather than an old-age pension in combination with a surviving relatives’ pension.

when having a DB pension plan. and the like) is not as easy to forecast. periods of service. most of them also wish to keep the advantages of the DB System. interest. However. The basic assumption will be that the premium should provide for the expected pension. and . Collective Defined Contribution system (CDC) As of 2005. • 122 Indexation might be paid by extra interest profits.Baker & McKenzie • • Upon marriage. The Project Unit Credit (PUC) method based on IFRS used. based on the Average Pay System. salary increases. The combination of the two leads to a so-called Collective Defined Contribution system. the employees will collectively carry the actuarial/investment risks and benefits. International Financial Reporting Standards (IFRS) for companies quoted on the stock exchange has led companies to reconsider their existing DB pension plans. if there is a mismatch in expectations and in the final result. A CDC pension plan. Extra risk insurance is already included in the pension premium. a prefixed pension premium. Although most of the companies affected by IFRS do not wish to be confronted with the high liabilities in the company books. or expansion of the family at a later age. cohabitation. The impact of IFRS on the company books. is tremendous. might show the following aspects: The pension fund will use the DB system to divide the pension accrual. and other actuarial factors. leads to very high pension liabilities in the company books due to the fact that this method takes into account discount rates. it is impossible to indicate the relation between the employee’s final pay and the insured pension on the pension date. owing to different circumstances (investment risks. Therefore. and The final pension. provisions for surviving relatives have to be financed from the same premiums. making the yearly pension accrual flexible. • • • • The employer pays on a yearly base (within a few years). inflation.

which will imply a considerable risk for the employer. The interpretation of the DNB has a direct effect on the way the pension plan has to comply with specific pension provisions. The important interpretation for IFRS might depend on the interpretation of the pension plan system by the specific accountant. has already been very critical on the socalled CDC pension plans and has interpreted some of these plans as a DB plan.Doing Business in the Netherlands The Dutch National Bank (DNB). 123 . This means that the CDC pension plan might not be IFRS-proof. however.

specialization agreements. restrict. In addition.Baker & McKenzie XVI. All Regulations have direct effect and are directly applicable in the Netherlands. or distort competition in the European Union (EU) and which may affect trade between EU Member States. provided that the agreement neither imposes restrictions that are not indispensable to the attainment of these goals. the Regulation automatically exempts 124 Whether a certain agreement or practice satisfies these conditions for exemption has to be determined by means of self-assessment. Competition Rules and Free Movement of Goods 1. Individuals can therefore invoke these articles before the Dutch courts and they are obliged to apply them. inter alia. as well as other agreements in specific sectors. such as the insurance sector and the transport sector. Article 81(1) of the EC Treaty prohibits agreements and concerted practices between undertakings (natural or legal persons) the object or effect of which is to prevent. motor vehicle distribution. research and development agreements. the Commission provides guidance through the “Modernization Package. nor afford the parties the opportunity to eliminate competition in respect of a substantial part of the products or service in question. the Commission has adopted the so-called Block Exemption Regulations that automatically exempt certain categories of agreements. benefit from an exemption pursuant to Article 81(3). while allowing consumers a fair share of the resulting benefit. In principle. Competition Rules The EC competition rules provided in Articles 81 and 82 of the EC Treaty have direct effect in the Netherlands. however. EC Block Exemption Regulations currently exist in relation to. To facilitate this self-assessment. Such restrictive agreements or practices may. An important EC Block Exemption Regulation is that for vertical agreements that took effect on 1 June 2000. This exemption applies if the agreement or practice improves the production or distribution of goods or services. technology transfer agreements.” a set of notices and one procedural regulation. . or promotes technical or economic progress.

provided that the supplier’s market share does not exceed 30% and the agreement concerned does not contain any “hard core provision. a transaction is considered to have a Community dimension. The Dutch Competition Act (Mededingingswet) took effect on 1 January 1998. Illustrations of possible abusive behavior are excessive pricing (whether low or high). Agreements exceeding the 30% market share threshold are not eligible for automatic exemption. and prior notification and clearance of such transaction is mandatory in the EU. Transactions that fail to meet the monetary thresholds of the EC Merger Regulation may still be caught by the local merger control regimes of Member States. and absolute customer restrictions. Upon infringement of the Article 81 or Article 82 prohibition. as well as certain types of joint ventures. Article 6(1) of the Competition Act contains a general prohibition against restrictive agreements or practices whether of a horizontal or a vertical nature. with a Community dimension is also directly applicable in the Netherlands. absolute territorial restrictions. Article 82 of the EC Treaty provides that any abuse of a dominant position by one or more undertakings within the EU (or a substantial part of it) is prohibited if trade between EU Member States may be affected. the European Commission is empowered to impose fines of up to 10% of the worldwide group turnover of undertakings involved. If certain monetary thresholds are met. Agreements or practices that violate the 2. The EC Merger Regulation. provided that the de minimis thresholds are exceeded. fidelity rebates. Dutch Competition Act 125 . but may still be exempt pursuant to Article 81(3) following an individual selfassessment.Doing Business in the Netherlands from Article 81(1) of the EC Treaty all vertical agreements for the purchase or sale of goods and services. which gives the European Commission control over mergers and acquisitions. Non-competition restrictions imposed on a purchaser in a vertical agreement are generally required not to exceed five years. and discriminatory practices. The Dutch Competition Act implements a prohibition system virtually identical to that of Articles 81 and 82 of the EC Treaty.” Typical hard core restrictions are fixed and minimum resale price maintenance.

the prohibition contained in Article 6 of the Act will not apply if (i) the combined market share of the companies involved is not more than 5% on any of the relevant markets which is influenced by the agreement. Any agreement benefiting from exemption under an EC Block Exemption Regulation is automatically exempt. Generally. promotional pricing campaigns of a limited duration. In addition. decision or concerted practice. present and future EC Block Exemption Regulations apply directly in the Netherlands. the European Commission has provided guidance for this self-assessment through a set of notices. Moreover. under certain conditions. The Competition Act further prohibits abuse of a dominant position by one or more undertakings. and for certain joint tender arrangements. Present and future EC Block Exemption Regulations also apply to purely Dutch restrictive agreements.Baker & McKenzie prohibition are void.5 million in the case of goods and EUR 1.1 million in all other cases. as is similarly outlined in Article 82 of the EC Treaty. Similar to Article 81 of the EC Treaty. there are specific Dutch block exemptions for certain exclusivity arrangements relating to shopping malls. and (ii) the combined turnover of the companies with regard to the relevant goods or services was not more than EUR 40 million in the previous calendar year. as a practical result of which the EC Block Exemption Regulations have remained the most relevant documents to scrutinize any and all commercial agreements. be exempt. 126 .000 or 10% of the worldwide group turnover of the undertakings concerned. such as the provision of services. The general prohibition contained in Article 6 of the Act will not apply to cases involving a maximum of eight companies with a combined turnover of not more than EUR 5. this principle also applies to undertakings or governmental bodies entrusted with the operation of services of a general economic interest. whichever is higher. Under the Competition Act. parties to such an agreement or practice run the risk of fines of up to EUR 450. Similarly. agreements or practices prohibited under Article 6(1) of the Competition Act may. The Competition Act contains a de minimis exception. Whether a certain agreement or practice satisfies these conditions for exemption has to be determined by means of self-assessment. As previously stated in paragraph 1 above.

the proposed concentration (i. 127 . the NMa does not have to be notified of a concentration if it falls within the jurisdiction of the European Commission (the “one-stop-shopping” principle). The Dutch Minister of Economic Affairs has the power to ultimately decide whether to approve a concentration. The NMa may decide that a license is required if it has reason to believe that the concentration will significantly restrict effective competition on the Dutch market or a part thereof. merger. joint venture. and upon closer examination. Different thresholds apply to the banking and the insurance sectors. the proposed concentration will be deemed approved. generate a total worldwide turnover of at least EUR 113. The parties to the concentration are free to decide when to notify a merger. If the transaction has to be notified in three or more Member States. the concentration may not be realized and the parties will need to file a separate notification (Phase 2). thereby overruling the NMa’s refusal. If the NMa fails to notify the parties within this period. In order to fall within the ambit of the Dutch merger control provisions. the NMa will inform the notifying parties as to whether a license is required. it is possible for the parties involved to request that only the Commission reviews the transaction. parties are free to implement the transaction. or takeover) must meet the following threshold: the undertakings concerned must together. The EC Merger Regulation enables firms that are involved in a concentration over which the Commission does not have automatic jurisdiction to benefit from one-stop shopping. Within the four-week period. If the NMa decides within the four-week period that no license is required. Within 13 weeks. The license will not be granted if the concentration is seen to significantly restrict effective competition on the Dutch market or a part thereof. Without that license.. and not the individual national competition authorities. especially as a result of the creation or strengthening of a dominant position. However. the NMa will either grant or refuse the license.45 million in the previous calendar year. if he believes that overriding social interests are involved. especially as a result of the creation or strengthening of a dominant position.e. but the proposed merger is not allowed to be implemented until four weeks after formal notification (Phase 1).Doing Business in the Netherlands The Competition Act also provides for a system of prior merger control. of which at least EUR 30 million must have been generated in the Netherlands by each of at least two of the undertakings concerned in the previous calendar year.

by which EC public procurement legislation is implemented. 128 . Public Procurement Rules To a large extent. 3. In order to cover the entire EC public procurement legislation. whichever is higher. At present. the result being that the Dutch government complied with its obligation to implement the two Procurement Directives before 31 January 2006. Legislation only existed with regard to public works contracts. the NMa has the power to impose fines of up to EUR 450. substantial Dutch legislation regarding public procurement did not exist. Since 1 October 2007. The maximum fine that can be imposed on a natural person is EUR 450. works. Aside from this. Two Royal Decrees came into force on 1 December 2005. the Framework Procurement Act (Raamwet EEG-voorschriften aanbestedingen) was enacted in 1993. several regulations exist which contracting authorities are either allowed or obliged to apply. the Dutch Public Procurement Law consists of legislation and rules in which the EC Public Procurement Directives are converted.000 or 10% of a company’s worldwide group turnover (whichever is higher). the NMa can also fine natural persons for giving instructions or exercising de facto leadership with regard to an infringement of the Dutch Competition Act. The first is the Decree Public Procurement Special Sectors (Besluit Aanbestedingen Speciale Sectoren). and supplies). the Framework Procurement Act functions as a legal basis for Royal Decrees. The fine for withholding information or providing inaccurate or misleading information to the authorities will amount to a maximum of EUR 450. Prior to 1993. if parties fail to notify a notifiable concentration.Baker & McKenzie The NMa has the power to impose fines of up to EUR 450. This act constitutes a framework law on EC procurement rules.000. which implements the other “Classic” Directive (regarding services.000 or 10% of the worldwide group turnover of the undertakings concerned. which implements the Utilities Directive. The second is the Decree Public Procurement (Besluit Aanbestedingsregels voor Overheidsopdrachten).000 or to 1% of the company’s worldwide group turnover. For infringements of the prohibition against restrictive agreements or abuse of a dominant position.

The only references made to the Directives are there to implement the models for announcements and to the financial threshold values. the Procurement Act is intended to serve as a tool for the Dutch government for a more accurate execution of European and international procurement obligations. The adoption of the new Royal Decrees resulted in a full text implementation with which the legislator has kept as close as possible to the original text of the Directives. Despite the full text implementation. developments in case law. ____________________ 8 9 EC Court of Justice. known as the Procurement Act (Aanbestedingswet). was passed by the Dutch Lower Chamber and is currently being considered by the Dutch Upper Chamber. contrary to the Directives. C-399/98 La Scala. the main rule of the La Scala9 case will apply. the Alcatel8 jurisprudence of the EC Court of Justice has been included. unlike in the Directives. Another addition was put in the Royal Decrees to comply with the Dutch obligations under the Agreement concerning the European Economic Area and the Government Procurement Agreement. being that the Directive must be interpreted in such a way as to ensure that it is given full effect. and specific national additions to the Directives. Naturally. the rules on the scope of enforcement of the Directives have been bundled in the Royal Decrees and some of the longer articles of the Directives have been shortened to several paragraphs to enhance the legibility.Doing Business in the Netherlands Before 1 December 2005. C-81/98 Alcatel Austria. Most optional procedural provisions of the Directives have been taken over and specifically implemented in the Royal Decrees. For instance. 129 . the EC Directives on public procurement were implemented under Dutch law by means of a mere reference to these Directives. Aside from implementing the Directives. This bill. Before the end of 2008. if there is room for debate on the scope of the definitions or clauses in the Royal Decrees. EC Court of Justice. Furthermore. The two Royal Decrees will remain in force when this new framework law is adopted in order to timely implement any modifications of the Directives. 12 July 2001. the Dutch government is planning to enact a bill that is to replace the Framework Procurement Act. the text and order of the Royal Decrees have been slightly modified with regard to the Directives. any international obligations regarding public procurement. 28 October 1999.

12 The regulation can also be voluntarily used by all other contracting authorities for European and national procurement procedures. the general principles of procurement law (such as the principles of nondiscrimination objectivity and transparency) should also be complied with in cases where the Directives do not apply.ARW 2005) for contracts both within the scope of the Directive and national procurement procedures. Contracting authorities Contracting authorities are the state. The application of this Regulation is not mandatory for noncentral authorities. procurement disputes can no longer be settled before the Court of Arbitrators. for instance. municipalities. or associations formed by one or several of such authorities (jointly referred to as “public authorities”). due to developments in both European and national case law. with the adoption of the new Procurement Act. the UAR 2001 or the UAR EG-1991). for instance. and refer disputes to the Court of Arbitrators. If there is any discrepancy between the different regulations. The Directives do not have a direct effect on the residents of the EU member states. Ministry of Agriculture. the Works Procurement Regulation 2005 could help the contracting authorities to put up work in accordance with these principles. In these cases. bodies governed by public law. regional or local authorities. Some municipalities might still use the old Uniform Procurement of Works Regulations (Uniforme Aanbestedingsreglementen.Baker & McKenzie The Works Procurement Regulation 2005 In the Dutch system. However. The national public procurement procedures do not have a statutory basis within the Dutch legal system. the Royal Decree prevails. The definition of “state” is given a functional ____________________ 10 11 12 Ministry of Defense. However. The regulation provides for two different sets of rules: one for European procurement procedures and one for national procurement procedures. 130 . Spatial Planning and Environment. those below the respective threshold value.11 The Works Procurement Regulation 2005 is fully compliant with the Directive and the Royal Decree. the four “building” ministries10 are obliged to apply the Works Procurement Regulation 2005 (Aanbestedingsreglement Werken. say. which are based on the old Directives. Ministry of Transportation and Ministry of Housing.

as far as the utilities sector is concerned. regardless of its legal status. so that companies have the opportunity to compete for the award of the contracts. rather than a formal approach. Moreover. tramway. gas. or inland waterway. the provision of airport. the exploitation of a geographical area for the purpose of: 1. Main principles • Dutch public procurement law that implements the EC Directives is based on four principles: adequate advertising of the intention of the contracting authorities to place public procurement contracts. trolley bus. and the provision or operation of postal services. The Framework Procurement Act refers to the various threshold values. there are more than a thousand entities that can qualify as public authorities that have to adhere to the Framework Procurement Act. 131 . Apart from certain important exemptions. or cable. sea. or heat (or their supply). exercises relevant activities on the basis of special or exclusive rights granted by a competent authority. In the Netherlands.Doing Business in the Netherlands interpretation. contracting authorities are defined as public authorities or public undertakings that exercise relevant activities. relevant activities for the purpose of the Utilities Directive are as follows: • • the provision (in short) of services to the public in connection with the production. which are stated in the Directives. exploring for or extracting oil. As a consequence. the Framework Procurement Act can also be applicable to private companies. or other solid fuels. it is also regarded as a contracting authority. electricity. automated systems. if an entity which is not a public undertaking. gas. coal. and • • the operation of networks providing a service to the public in the field of transport by railway. or distribution of drinking water. The Framework Procurement Act does not apply to contracts that the contracting authorities award for purposes other than the pursuit of relevant activities. or other terminal facilities to carriers by air. Besides. 2. transport. maritime or inland port.

design contest notices. that the contracting authority should always exercise a proper level of transparency while procuring contracts. and transparency. As stated above. This entails. The Dutch government promotes electronic procurement. the general principles of proper government. call for tender. Notices can or must take the form of indicative notices after the beginning of the budgetary year. contracting authorities should always comply with the general principles of proper government and the general principles of procurement law. Voluntary use of advertising possibilities for contracts. a newspaper for the construction industry. which fall outside the scope of the Framework Procurement Act. .Baker & McKenzie • • • a ban on the use of technical specifications which favor or eliminate certain undertakings. Advertising Advertising rules oblige contracting authorities to send notices to the Office for Official Publications of the EC in Luxembourg. objectivity. is allowed. regardless of whether or not the Framework Procurement Act applies. Dutch and EC case laws require compliance with the general principles of procurement law and proper government. objective criteria for the participation to and the award of public contracts. The content of notices may differ. through the Internet. the restricted procedure. It is determined by various publication requirements. and The first three principles are corollary to the general principles of procurement law. notices on the existence of a qualification system. notices are also published in the Official Gazette (Staatscourant) and Cobouw. inter alia. for instance. or notices on contracts awarded. such as nondiscrimination. Award procedures • • 132 Award procedures include the following: the open procedure. On a regular basis. According to Dutch and EC case laws.

By not defining these criteria. they may be reduced. suppliers. If one is not invited. and the competitive dialogue. all interested contractors. suppliers. for instance. In cases where urgency renders the time limits impracticable. a request to participate in the procedure can be made. Time limits for the receipt of requests or tenders may be fixed by contracting authorities. contracting authorities may consult contractors. the possibility to use the negotiated procedure is more limited than before. If the restricted procedure is followed. If the open procedure is followed. Selection criteria Criteria for qualitative selection consider the company (and not the contract). suppliers. 133 . or service providers may submit tenders. a separate category of criteria is allowed by the use of additional specific conditions. Contracting authorities who wish to execute a complex project are often unable to ascertain their specific needs to consequently set those down in specifications for the project. which is also implemented by the Royal Decree in the Dutch legal system. Time limits For those projects. the Directives have introduced a more flexible procedure for a contracting authority to assess its needs and to organize the procurement procedure in a regulated dialogue with the preselected tenderers. uncertainty has been created as to what extent public procurement can be used by governments as an instrument to execute a social or economic policy. If the negotiated procedure is followed. but may not be less than indicated in the EC Directives. This is not allowed when the open or restricted procedure is followed.Doing Business in the Netherlands • • the negotiated procedure. the capability of a company to hire long-term unemployed workers. being the competitive dialogue. The Directives have introduced a new procedure. or service providers of their choice and negotiate the terms of contract with one or more of them. With the introduction of the competitive dialogue procedure. only those contractors. or service providers that have been invited may submit tenders. In some cases.

Regional preference schemes..g. the European Commission’s import and export regulations for trade with non-EU countries must be observed. for reasons of public security. all customs duties have been abolished. but are likely to be prohibited if as a result. Depending on the 134 . The common EU customs tariff rate applies to trade between the Netherlands and non-EU countries. e. Articles 28 to 31 of the EC Treaty provide that all measures that tend to restrict imports from or exports to other EU Member States are prohibited. Such restrictions can be justified only in exceptional cases. Registration in an official list of recognized companies may be used as an alternative evidence to prove suitability. Award criteria Public contracts are awarded on the basis of one of two possible criteria. may still exist in practice. such as running costs and technical merit. Articles 28 to 31 of the EC Treaty have a direct effect in the Netherlands and can be invoked before Dutch courts. In addition. animals or plants. Contracts are either awarded to the tender with the lowest price only or to the one that is economically most advantageous. Trade to and from the Netherlands (like trade to and from any other EU Member State) is subject to the rules on the free movement of goods. the protection of health and lives of human beings. Import and Export: Free Movement of Goods The general rule is that any product that has been legally manufactured and marketed in another EU Member State should be allowed to circulate freely within the Netherlands. 4. With regard to trade between the Netherlands and other EU Member States. and for the evidence of the company’s technical knowledge or ability on the other. a percentage of the contracts is restricted to certain companies established in a certain area of the Netherlands. The Framework Procurement Act does not address the application of the EC state aid regime. or the protection of industrial and commercial property. and vice versa. used when awarding public procurement contracts. When the award is given to the economically most advantageous tender.Baker & McKenzie Criteria for qualitative selection are divided into criteria for the evidence of the company’s financial and economic standing on one hand. are taken into account. including the price. various criteria.

Norway. The EEA Agreement provides for a set of competition rules. Hungary. as well. 135 . In addition. dual-use. In furtherance of this aim. Products that are produced in conformity with European standards are presumed to be in conformity with the EC Directives on Technical Harmonization. Latvia. toys. textiles. Ireland. and have been implemented in the Netherlands and in other Member States. Lithuania. the Netherlands.Doing Business in the Netherlands country of origin or the destination of a product or the type of goods (e. Slovenia. or strategic goods). Denmark. Standardization One of the objectives of the Community is to eliminate technical barriers to trade and to promote the use of European standards. France. the free movement of goods rules mentioned above also apply to goods of EEA origin. Bulgaria. such as livestock or chemicals. a considerable number of EC Directives have been enacted to harmonize technical and safety requirements. The European Economic Area (EEA) Agreement took effect on 1 January 1994. import or export licenses may be required. Estonia. Czech Republic. Italy. Cyprus. Portugal. The European Economic Area 6. Luxembourg. ____________________ 13 Member States: Austria. which are virtually identical to the EC competition rules. and medical devices. These Directives relate to the lawful marketability of a variety of products. Finland. Poland. Spain. Malta.. 5. and Liechtenstein.g. Products that comply with those Directives are required to carry the CE mark and can be freely marketed throughout the European Union. Additional controls exist for certain goods. such as machinery. Greece. and the United Kingdom. Germany. The EEA consists of the 27 EU Member States13 plus Iceland. Romania. Slovak Republic. Belgium. Sweden.

the description of the patent application may be filed in the English language. The Court of Appeal in The Hague in its decision of 1998 EGP/Boston Scientific required the Dutch defendant to be the “the spider-in-the-web.Baker & McKenzie XVII. the owner can be compelled to grant a license. As of June 2008. Recent European case laws (European Court of Justice in 2006 in its decisions Gat/Luk and Roche/Primus) have further restricted the possibilities to obtain crossborder injunctions. Applications for a Dutch patent must be submitted to the Industrial Property Office (Bureau voor de Industriële Eigendom) in Rijswijk. the company determining the policy with respect to all companies involved in the allegedly infringing act in other EU countries where the cross border injunctions was sought. it is no longer possible to file for shortterm patents (with a validity of six years). Since then.. The owner of a patent may grant licenses to third parties for the use of its patent. the (1970) Patent Cooperation Treaty. the Netherlands. or if the patent is not adequately used in the Netherlands within three years after its rights are granted. the (1973) European Patent Convention. The Dutch Supreme Court gave way to cross border relief in multi-jurisdictional patent infringement cases in 1989 in its Lincoln v. Compulsory licensing can also be enforced if there is a certain level of dependency between an existing patent and the application for which the license has been requested. Interlas judgment. as these patents create too many legal insecurities due to the lack of an extensive research as part of the application procedure. If it is considered necessary for the public interest. The possibilities for obtaining cross border injunctions have been restricted lately. Intellectual Property 1. Dutch courts have allowed for cross border injunctions in numerous instances. The conclusion thereof.” i. As of June 2008. if it contains an important new technology.e. Patents Patents filed on the basis of extensive research can be registered in the Netherlands for a period of 20 years. 136 . The Netherlands is a party to the (1975) Treaty of Paris for the Protection of Industrial Property. and the (1963) Strasbourg Convention. however. still needs to be filed in the Dutch language.

the Netherlands. copyrightable works made or published in most countries of the world will likewise be protected under the Dutch 1912 Copyright Act (Auteurswet 1912).Therefore. Furthermore. However. The amended Dutch Copyright Act entered into force on 1 September 2004. a right of communication to the public. There are no formalities required to obtain copyright protection. Copyright The Dutch 1912 Copyright Act has been amended to implement the European Directive of 22 May 2001 on the harmonization of certain aspects of copyrights and related rights in the Information Society (the “Copyright Directive”). Copyright protection continues for 70 years after the death of the author or.Doing Business in the Netherlands Applications for a European patent can be filed with the European Patent Office in Munich. The Netherlands is one of the few European Union Member States likewise. or with its subdivision in Rijswijk. such as phone books. As a result of Directive (EC) 2001/84 of 27 September 2001 on “droit de suite. and other collections of data. A work qualifies for copyright protection if it has an “original and personal character”. provided that they are meant to be made available to the public. Further to the implementation of the Copyright Directive. in some cases.” the Dutch Copyright Act has recently been amended to introduce a right of remuneration for the original author on further sale of an original work (“droit the suite”). the scope of protection is limited. parody. to protect non-original works. and a distribution right. The Netherlands is a party to the 1886 Bern Convention on the protection of literary and artistic works and the 1952 Universal Copyright Convention. new provisions with respect to the protection of technological measures and rights management information have been included in the amended Dutch 1912 Copyright Act. timetables. or pastiche. Germany. after the publication of the work. 137 . such as the exception of use for purposes of caricature. 2. The Copyright Directive introduces a reproduction right. the Dutch 1912 Copyright Act has introduced new exceptions and limitations.

Furthermore. 138 5. The producer of a database is granted exclusive rights to prevent extraction and/or reutilization of the whole or of a substantial part. 3. producers of sound recordings and broadcasting companies can claim neighbouring rights that are related to copyrights under the Dutch 1993 Neighbouring Rights Act (Wet op de naburige rechten). forming together the Benelux region. Neighbouring Rights 4. Protection of Databases Apart from protection under Dutch copyright law. if the database shows that there has been a qualitatively and/or quantitatively substantial investment in obtaining. or presenting the contents. verifying. the European Court of Justice decided that with respect to the scope of database protection. the Dutch 1993 Neighbouring Rights Act has also been amended. the costs involved with the mere creation of data are not relevant. Registration is not required. databases have obtained sui generis protection further to the implementation into Dutch law of the European Directive 96/9 of 11 March 1996 on the legal protection of databases. On 1 September 2006 the Benelux Trademarks Act and the Benelux Designs and Models Act have been merged into the Benelux Treaty for Intellectual Property. Neighbouring rights may be exercised for a period of 50 years after the first of January of the year following the year of the initial performance.William Hill case. have had a uniform trademark protection law since 1971. the Netherlands. The rights run from the date of completion of the database and will expire 15 years from the first of January of the year following the date of completion. Trademarks .Baker & McKenzie Performing artists. the economic value of the extracted or reutilized data is of no importance with regard to the infringement question. the European Court of Justice has limited the scope of costs involved that can contribute to qualifying an investment as substantial. The EC Trademarks Directive 89/104 of 21 December 1988 has been implemented in the Benelux Trademarks Act. Further to the implementation of the Copyright Directive. Belgium. and Luxembourg. For instance. In its judgment in 2004 of the British Horseracing Board v.

Furthermore. oppositions may be lodged against new trademarks filed for goods and services in all classes. the Benelux countries have introduced an opposition procedure.The Benelux Office for Intellectual Property may refuse signs that are not distinctive. colors.g. three-dimensional shapes (of a product or packaging). Since 1 January 2004. or are in violation of public order. The goal of the opposition is to obtain clarity at an early stage whether a trademark can be registered or not. the new rules are meant to encourage parties to reach an amicable settlement whenever possible. As of January 2006.Doing Business in the Netherlands In principle. a trademark owner can. not protected. trademark owners can oppose the use and/or registration of an identical or similar younger sign that is used for identical or similar goods or services if there exists a likelihood of confusion. in principle. misleading. symbols. Unregistered trademarks are. The said trademarks distinguish certain collective characteristics of goods and services (e. logos for the environment). To acquire protection. trademark owners can oppose the use or registration of a younger sign that is identical and is used for identical goods or services. without a valid reason. a trademark has to be registered with the Benelux Office for Intellectual Property in The Hague. that allows trademark owners to oppose an application for registration of a conflicting sign with the Benelux Office for Intellectual Property.. Furthermore. takes unfair advantage of. It is also possible to register collective trademarks. in principle. oppose the use of the younger sign if its existing registration is well known in the Benelux countries and if the use of the younger sign takes unfair advantage of. words. rather than to distinguish the goods and services themselves. or is detrimental to the distinctive character or reputation of the existing trademark. In principle. In addition. in accordance with the Benelux Treaty for Intellectual Property. seals of approval. and sounds that distinguish goods or services can be registered as trademarks. a trademark owner can oppose the use of a younger sign if it is used in any way other than to distinguish goods and such use. A trademark registration is valid for 10 years and can be renewed for another 10 years. or is detrimental to the distinctive character or reputation of the existing trademark. If an identical or similar trademark has been filed for similar or dissimilar goods or services. 139 .

the main advantage of international registration is that it is cheaper than filing individual national applications for registration. and for persons or legal entities with domicile or a registered seat in an EU Member State. lapses or is cancelled within five years after the international registration. On 1 May 2004 the Czech Republic. 140 . all IP matters being handled by Baker & McKenzie. Slovenia. Romania and Bulgaria joined the EU on 1 January 2007. Cyprus. which makes it possible for persons or legal entities with a real and effective industrial or commercial establishment in a country that is a party to the Madrid System. Latvia. In general. Malta. Trademark attorneys can file applications in any EU country. GIPM replaces the need for in-house attorneys to trace information on the status of pending applications or current contentious matters. Trademark protection of existing European Community Trademarks has been extended to these countries automatically and without cost. which covers all the Member States of the European Union.Baker & McKenzie It is also possible to apply for a European Community Trademark registration. Owners of older national trademark rights in one of the new Member States can file an opposition against an allegedly conflicting European Community Trademark but only if the same was filed between 1 November 2003 and 30 April 2004. Countries that are party to the Madrid System and/or the Paris Treaty can claim priority rights within six months after the application date of the first registration. GIPM enables our clients to review instantly online. legal action. With Global IP Manager (“GIPM”) Baker & McKenzie can provide web-based worldwide trademark portfolio management services. to extend a Benelux trademark registration to another Member State and vice versa. Hungary. Community trademark applications filed between 1 July 2006 and 1 December 2006 can be subject to oppositions based on earlier rights in these new Member States. Poland. Estonia. The Netherlands is also party to the Madrid Convention and the Madrid Protocol (“the Madrid System”). The disadvantage of international trademark registration is that it automatically lapses or is cancelled in all Member States if the national application/ registration on which the international registration is based. Organized by country. or structured according to brand categories. and the Slovak Republic joined the EU. Lithuania.

the Benelux Designs and Models Act was amended and came into force on 1 December 2003. Nevertheless. ornaments. The Netherlands is a party to the The Hague Agreement for the International Registration of Designs and Models. Countries that are a party to Novelty and having a “distinctive character” are conditions for protection. granted by law without formalities and free of charge. or patterns. whereas the Registered Community Design right entitles the owner to also oppose the use of designs that produce a similar impression. The term of protection (five years) can be extended four times. has been available since 6 March 2002.. but originality of design is not required. It only allows the owner to oppose the use of identical designs. Applications for registration are filed with the Benelux Office for Intellectual Property or with the International Bureau for the Protection of Industrial Property. 141 .6. This design right. The Benelux Designs and Models Act was merged into the Benelux Treaty for Intellectual Property on 1 September 2006. for a maximum total of 25 years. a design is still considered new if it has been made public for the first time within 12 months before the filing. This system also incorporates an Unregistered Community Design right. The OHIM began accepting applications on 1 January 2003. Designs and Models Doing Business in the Netherlands The provisions of the Benelux Treaty for Intellectual Property protect registered designs and models for functional products. i. The latter right provides protection for a five-year period. As a result. in the case of international applications. Registration is effected with the World Intellectual Property Organization in Geneva. the possibilities of taking action against design infringements on the basis of unfair competition (tort) have been broadened. features of shape.e. a new and separate system has been created for the protection of designs in the European Community. This agreement makes it possible to apply for “international registration” in all Member States. Pursuant to EC Directive 98/71 of 13 October 1998 (European Directive on the Legal Protection of Designs). As a result of EC Council Regulation 6/2002 of 12 December 2001 on Community Designs. Applications for this right are to be filed with the OHIM (Office for Harmonization in the Internal Market) of the EU. which can be renewed four times (a total of 25 years of protection). which provides protection for three years from the day the product incorporating the design is made available to the public in the EU.

Baker & McKenzie the Paris Treaty can claim priority rights. as of which the owner of the design or model can object to all identical and similar design or model applications and registrations. There is also a right of information allowing judges to order certain persons to reveal the names and addresses of those involved in distributing illegal goods or services. These measures provide an effective tool in protecting most IP rights against the counterfeit trade. injunctions and damages. if such use can cause confusion among the public. A company cannot acquire the right to a trade name merely by registering it with the Trade Register. Remedies available to intellectual property right holders include the destruction. 7. within six months. but must also use it. As of 1 May 2007 the provisions of the IP Enforcement Directive have been implemented into various Dutch IP laws. to acquire a priority date. along with details of the quantities and prices involved. 9. Council Regulation (EC) 1383/2003 lays down the measures concerning the importation into the European Community and the export or re-export of counterfeit goods from the same. Anti-counterfeit Measures As a member of the European Union. based on the European Commission’s view of best practice across the EU. The Directive’s provisions include procedures covering evidence and the protection of evidence and provisional measures such as ex parte injunctions and seizure. The Dutch 1921 Trade Name Act (Handelsnaamwet) prohibits the use of names that are identical or similar to those already being used by another enterprise. 142 . as well as financial compensation. Trade Names 8. the Netherlands has implemented measures to harmonize customs controls with respect to IP rights. recall or permanent removal from the market of illegal goods. IP Enforcement Directive 2004/48/EC The IP Enforcement Directive was adopted on 26 April 2004 by the EU member states in order to harmonise the enforcement of intellectual property rights within the EU.

Comparative advertising is permitted under Dutch law provided it gives an objective comparison of one or more material.Doing Business in the Netherlands Under the Council Regulation. preparing cease and desist letters. or price of a product. it is also possible to obtain the presumed agreement to the destruction of the goods. and dealing with initial responses from the adverse parties to reach a settlement. characteristics. or customs can take such action provided that the holder of these IP rights has filed an appropriate notice with customs. customs can either independently take action by detaining goods that are suspected of infringing certain IP rights. composition. Once customs has detained goods. With “BorderWatch” and “BorderResponse. in case the carrier.” Baker & McKenzie has introduced global web-enabled tools to (cost) effectively fight counterfeit on the customs level on a global basis. 10. contact details for customs. relevant. quantity. and local legal assistance. including information on filing customs notices. or to commence civil or criminal proceedings. BorderResponse is a pre-litigation enforcement service on a fixed fee basis. The process for filing a customs notice is relatively simple and straightforward. origin. BorderWatch features 55 country reports on customs procedures and enforcement options. Other trademarks may be used in such comparisons provided that the advertisement does not harm the reputation of the other trademark. customs registration forms. user possibilities. practical tips and advice. Practice shows that the goods are usually surrendered for destruction to avoid legal proceedings. Advertising Misleading advertising is primarily addressed under the tort law. Customs charges no administrative costs for processing the filing of such notice. consignor. acting on a detention or seizure. the right holder is given the opportunity to either settle the matter amicably by having the goods surrendered after which the counterfeit goods can be destroyed. BorderWatch is an online service offering tips on intellectual property protection through customs procedures in 55 countries. Aside from the voluntary surrender of the goods. and representative features or qualities of the products or services being compared. verifiable.The Dutch Civil Code declares it a tort to misrepresent the nature. or consignee does not oppose a request for surrender. 143 . quality. which includes customs recordation of intellectual property rights.

public order. Strict rules apply to comparative advertising for pharmaceuticals. a rectification. Although decisions of either group are not legally binding. or common decency. Specific regulations apply to advertising directed at children and to the advertising of products such as alcoholic beverages. The advertising of pharmaceuticals (including the grant of incentives to health professionals) is strictly regulated. Advertising that misleads the public. Public advertising of non-prescription pharmaceuticals is allowed under certain conditions. an injunction. pharmaceuticals. The Dutch Advertising Code (Nederlandse Reclame Code) is an example of such self-regulation and provides that advertising must be in accordance with the law.Baker & McKenzie In the case of misleading or unlawful advertising. but public advertising of prescription pharmaceuticals is prohibited. e. The advertising of pharmaceuticals is further regulated by the self-regulatory codes. a complaint can be filed with the Advertising Code Committee and its Board of Appeal. In addition to the option of taking legal action. and financial products. and good taste and that it may not be contrary to the public interest. negative decisions are normally respected by the affiliated media. the price or origin of a certain product is prohibited. Advertising to health professionals is allowed provided that certain requirements are complied with. Furthermore. The advertising of pharmaceuticals is regulated by the Pharmaceuticals Act (Geneesmiddelenwet). 144 .g. The Advertising Code Committee and its Board of Appeal can render an “individual recommendation” which is communicated only to the plaintiff and the offender in question.. or compensation for damages can be sought before the Dutch courts based on the relevant provisions of the Dutch Civil Code. advertising standards for specific industries are regulated by separate laws and the industry itself. such as the Code of Conduct for the Advertising of Pharmaceuticals of the Stichting Code Geneesmiddelenreclame and the Code for the Advertising of Medicinal Products to the General Public of the Stichting Keuringsraad Openlijke Aanprijzing Geneesmiddelen (KOAG). or it can render a “public recommendation” which is published in various media. The Dutch Tobacco Act also restricts the use of tobacco trademarks and distinguishing signs for non-tobacco products. which will refrain from publishing the advertisement in question. The advertisement of tobacco products has been banned in the Netherlands. the facts.

service. there must be no more than 13 prize draws in one promotional game of chance. the communication costs. the total value of the prizes may not exceed EUR 2. the corresponding Article 10 of the 145 . the promotional action will not qualify as a game of chance but as a prize contest. The price of the product or service may not be increased merely because of the prize draw. However.” where the total value of the prizes is less than EUR 4.000. Complaints on misconduct of the Code for the Advertising of Medicinal Products to the General Public can be filed with the Code Committee of the Stichting KOAG.Doing Business in the Netherlands Complaints on misconduct of the Code of Conduct for the Advertising of Pharmaceuticals can be filed with the Code Committee of the Stichting Code Geneesmiddelenreclame. In that case. a maximum of one promotional game of chance per product. Advertising and freedom of expression Article 7 of the Dutch constitution regarding the freedom of expression does not apply to commercial advertising. Appeals against the Code Committees decisions can be filed with the respective Boards of Appeal. Furthermore. or organization per year is allowed.60 per entry and must be clearly communicated before entry. the date of the prize draw.300. The total amount of any winnings must not exceed EUR 100. such costs of communication may not exceed EUR 0. the way that the tax on games of chance will be paid. A violation of these regulations is an economic offense. In addition. The organizer of a promotional game of chance must use general terms and conditions which include certain information. the period during which the prize draw is open. In case a promotional action consists of a performance that can be adjudicated. and the like.500. 11. such as the name and address of the organizer. No costs other than the costs of communication may be charged for participation in a prize draw. Under the code of conduct. The advertising through (promotional) games of chance is strictly regulated by the Act on Games of Chance (Wet op de kansspelen) and the Code of Conduct on Promotional Games of Chance (Gedragscode promotionele kansspelen). nature and value of the prizes. For “small promotional games of chance. It is also possible to initiate court proceedings against competitors based on unfair competition. the regulations are less strict. the number.

such as unfairly competing with one’s former employer. according to European law. the court will weigh the interests involved.Baker & McKenzie European Convention on Human Rights (ECHR). the commercial interest of advertising will not prevail over the interest of protection of intellectual property rights. This implies that. Trade Secrets Trade secrets are generally protected by contract rather than by law. 146 . In Dutch and European case laws. 13. Generally. also be protected by tort law under certain circumstances (see “Unfair Competition” above). Other unlawful acts. Furthermore. it will have to be demonstrated that the unlawful acts in question caused damages for the plaintiff. the scope of protection of Article 10 ECHR for commercial advertising seems limited. In practice. Unfair Competition Under certain conditions. theft of trade secrets. the possibilities to base legal action against design infringements on unfair competition became less restrictive. In December 2003. They may. 12. It does not provide advertisers an unrestricted right to advertise for their own benefit and at their competitor’s expense. does not exclude commercial advertising. it has been established that in case of a conflict between commercial advertising and. commercial advertising can fall under the scope of the right to freedom of expression. for instance. or misleading (comparative) advertising claims. To base a claim against unlawful reproduction or copying of goods on unfair competition. it will generally have to be demonstrated that the unlawful acts lead to (a danger of) confusion among the public which could have been avoided without hampering the reliability and usefulness of the goods concerned. which supersedes the national constitutions within the EU. the intellectual property rights of a competitor. recourse may be claimed against passing off or unfair competition under Dutch tort law. however. can also be redressed on the basis of unfair competition under Dutch tort law. by an amendment of the Benelux Design legislation.

Treaties and General European Legislation In addition to the treaties mentioned above. topographies. trademarks. No government approval is required. or plant breeders’ rights to be effective against third parties. and pledge of certain intellectual property rights are subject to the general provisions of Dutch property and contract law and European and Dutch competition law. and Pledge Doing Business in the Netherlands Further to the specific provisions under Dutch intellectual property law. Licensing. licenses. and pledges such as patents.14. However. the Netherlands is also party to inter alia. they must be registered with the applicable registration offices. licensing. Assignment. in order for certain assignments. the TRIPs agreement (effective since 1 January 1996) and the Paris Convention establishing the World Intellectual Property Organisation. design and models. 15. the assignment. 147 .

video-on-demand).g.g. In short. for management of numbering and for the registration of providers. this Policy Document strives for a less regulating attitude of the Dutch government with regard to the use of frequency. Registration In order to install or operate public electronic communications networks and to provide public electronic communications services and conditional access systems (e. affiliated with the Ministry of Economic Affairs. and also has significant jurisdiction with respect to the resolution of interconnection disputes. the TW is a framework act. governmental and ministerial decrees).. Currently. On 19 May 2004. proposed amendments to the TW are being discussed in parliament. The independent regulatory authority (OPTA) remains responsible for the general supervision of parties operating on the telecommunications market. Various operators are active in all sectors of the electronic communications industry.. the new Dutch Telecommunications Act (Telecommunicatiewet. It is designed to work more in line with general competition law. Basic Legislation and Regulatory Authorities The principal aim of the new TW is to encourage effective competition. The new TW is also more technologically neutral compared to the 1998 TW. Like its predecessor. OPTA is also 148 . 3. a party is required to register with OPTA.Baker & McKenzie XVIII. The distribution of frequencies will preferably take place by means of an auction. 2. replacing the TW of 19 November 1998 and implementing the 2002 EU Directives on electronic communications. OPTA and NMa have strengthened their cooperation since 2004.The Dutch Competition Authority (NMa). Telecommunications 1. Market Situation The Dutch telecommunications sector has been fully liberalized since 1 July 1997. Besides in the current proposal the so-called Policy Document on Frequency. many details of which are further specified in secondary legislation (e. The modification aims amongst other on the establishment of an antenna register and extension of the prohibition on undesired electronical communications. is empowered to monitor the electronic communications sector for anti-competitive activities and concentrations. or TW) took effect.

reserving numbers. Number plans have been drawn up for. An individual license under the TW is required. Numbers The designated use of numbers is indicated in a number plan. other than demonstrating to OPTA that the service/network is indeed offered to the general public. Under the revised TW. Details on the allocation and use of frequencies are set out in a National Frequency Plan. and (vi) transit network signaling point codes. (ii) by competitive assessment of applicants and applications (“beauty contests”). (2) telex services. inter alia: (1) telephone and ISDN services. auction. which as of 2006 has been tied to annual turnover. only for the use of frequencies. the number plans indicate what allocation method applies to a certain type of number (i. (ii) number blocks. Registration is intended primarily to give OPTA an overview of market players in order to ensure effective supervision and is not conditional on meeting any material qualifications. OPTA is charged with the task of granting. Parties can be excluded from a frequency allocation procedure. 149 . (4) international signaling point codes. licenses for the use of frequencies for commercial electronic communications are granted in accordance with one of the following procedures: (i) in the order in which applications are received (“first-comefirstserved” basis). The fees OPTA charges consist of a one-time registration fee and an annual “supervision” fee. and (6) identity numbers for international mobility (IMSI numbers).e. or (iii) by auction. which are available for: (i) information numbers for free services (0800) and paid services (0900 and 0906). Depending on the scarcity of the frequencies concerned. (5) transit network signaling point codes. (v) international signaling point codes. for mobile and satellite communications. which may include the requirement of a financial quotation. first served”). (3) packet and circuit-switched data services. (iv) carrier (pre)select numbers (a prefix of “16xx”). (iii) individual numbers. lottery. in principle. if this is necessary to guarantee genuine competition in the relevant market.Doing Business in the Netherlands responsible for certifying service providers for electronic signatures. There are standard registration forms available for this purpose (in Dutch and English).. 4. and supervising the use of such numbers. Numbers may be obtained or reserved by means of standard forms. or “first come.

and clearance of cables is extended to empty cable ducts. Rights of Way All providers of public electronic communications and broadcasting networks are accorded rights of way. Empty cable ducts that already situated in public grounds before 6 December 2006 will be allowed until 1 January 2018. Antennas and antenna sites are not regarded as cables. unless the number plan specifies the duration of the assignment. but the holder of numbers may allow third parties the use of its numbers provided this is done in a nondiscriminatory and transparent manner and on the basis of objective criteria. the provider of the network can be obliged to remove the empty ducts. short numbers) will be allocated by auction. maintenance. the TW provides that. maintenance. with the exception of enclosed gardens and other enclosed grounds that are integrally connected to private residential premises. Under the TW. For owners and supervisors of public grounds. After the expiration of these years.e. However. and clearance of cables in and on public grounds by these providers. the obligation to tolerate the installation. this obligation is limited to 10 years.. In 2004. In this respect. this obligation extends to all other land. 5.Baker & McKenzie Numbers with an exceptional economic value (i. the right to compensation of damages is limited to a compensation of actual costs incurred by the landowner in relation to the establishment or removal of the facilities and any additional maintenance costs. OPTA established guidelines on number portability requiring mobile providers to comply with any request for number portability received from end users within 10 working days. cannot rely on a landlord’s obligation to tolerate the installation of antennas or antenna sites. The basic regulation in the TW that the owner of public land does not acquire ownership of cables installed in or on the land by accession does not apply to empty 150 . Numbers may not be traded as a business activity. OPTA’s guidelines were regarded as unlawful. regardless of the contractual provisions between the provider and the end user (including notice terms and minimum contract periods). In the case of regional and international networks. notwithstanding a right to compensation of certain damages. Numbers allocated by auction will be assigned for an indefinite period. any party is obliged to tolerate the installation. A mobile network provider therefore. In summary proceedings before an administrative court.

7. which will mean that only few providers will remain. Therefore. meaning that a horizontal market structure with multiple providers will exist. Under the TW. maintenance.Doing Business in the Netherlands cable ducts. but successfully disputed this designation). At the moment. (i) public fixed telephony. OPTA completed its market analyses for the various electronic communications markets in the Netherlands. Also. OPTA is closely following KPN’s transition to providing all its services via the Internet Protocol ( All IP -strategy) in order to make sure that the envisaged competition on the market for broadband will continue.. 6. OPTA will have to stay alert to protect the customer. OPTA has conducted new market analyses on broadband. already currently happening and if it continues. Interoperability Save for certain specified exemptions. and (iii) public mobile telephony (Vodafone was designated as party with SMP in the public mobile telephony market. all providers of electronic communications networks and services within the Netherlands that control end-user access to network termination points are generally obliged to enter into negotiations to 151 . an operator that wishes to install empty cable ducts must make arrangements with the landowner in order to prevent the ducts from becoming the property of the landowner. KPN’s designation as a party with SMP on the market for public fixed telephony continues for 12 months after the TW was enforced. In this scenario parties with significant market power are less probable. In 2006. i. This subjects KPN Telecom to the full range of ONP obligations. thus less regulatory intervention.e. (ii) leased lines. As a result. broadcasting. with the exceptions of lines with a capacity greater than 2 Mb/s. KPN Telecom has been designated a party with significant market power (SMP) in various communications markets. and (ii) consolidation. and mobile telephony. and clearance of cables within their jurisdictions. as described in the following paragraphs. Significant Market Power In its Vision on the market OPTA has set forth two extremes: (i) convergence. The municipal authorities are charged with coordinating the work relating to the laying. an Act concerning improvement of exchange of information regarding underground networks is being prepared.

on the grounds of general and social interest (universal service). KPN Telecom) are obliged to (i) offer interconnection to their networks on nondiscriminatory conditions. other parties will be invited to provide a competitive offer.Baker & McKenzie achieve interoperability between their respective end users. Through a notification published in the Dutch State Gazette (Staatscourant). The “dominant” providers (i. if the Minister believes that the provision of services at affordable prices or at a certain quality level is not guaranteed under normal market conditions. The Minister will inform the party having the largest end-user database in a specific service area that he intends to assign to this party the obligation to provide the universal service. These services and provisions currently include fixed voice telephony service. and (iv) offer interconnection at costoriented and sufficiently unbundled rates.. The Minister will assign the universal service obligation to the party that can provide the services at the lowest net cost. and access to a telephone directory information service. Universal Services The Minister may oblige a party to provide universal services in a designated area for five years. 8. (ii) provide other operators with all necessary information.e. access to public phone booths (one for every five thousand inhabitants). The TW contains a description of net cost. (iii) publicise a reference interconnection offer which described the interconnection facilities and services and which is subject to OPTA’s review and approval. certain services and provisions must be available to everyone at affordable prices and at a specified quality. Pursuant to the TW. OPTA may set a term within which an interconnection agreement must be concluded. All providers of the services concerned that possess SMP within the designated area must participate in the competitive test procedure. including all changes in that information scheduled to be introduced in the next six months. More onerous interconnection obligations apply to providers who have been designated by OPTA as having SMP in the market sector concerned. 152 . access to a comprehensive and complete telephone directory of fixed and mobile telephony subscribers. The distinction between direct and indirect interconnection was left out of the new TW. The Minister will assign the universal services obligation by conducting a competitive test between qualified applicants to the party that can provide the services at lowest net costs.

In order to enable the authorities to make use of interception. which includes e-mail and SMS SPAM. The opt-in regime does not apply to unsolicited e-mail sent for products or services similar to those already purchased by a customer. the subscribers’ personal data. These can be found on OPTA’s web site. In general. In addition to the general rules for the protection of privacy under Dutch privacy regulation. dialed phone numbers.Doing Business in the Netherlands In 2006. OPTA has issued new guidelines for providers on how to abide by these new regulations. 9. providers must take appropriate organisational and technical measures to protect the privacy of their subscribers. provided that the customer is given the opportunity to object to such use of electronic contact details when they are collected and on the occasion of each message. taking into account the level of technology and the costs involved. OPTA has for the first time imposed a penalty of EUR 1. Privacy and Legal Interception 153 . the TW has been altered recently to the extent that providers of public telecommunications networks and public telecommunications services are now obliged to store specific user data for a period of twelve months.The TW contains an opt-in regime for SPAM. if the customer has not initially refused such use. payment options. the universal services regulation was amended concerning the duty to inform the customers on the tariffs used.000 because of unwanted distribution of software. Location data may be processed only when rendered anonymous to the extent necessary to provide the services. The TW contains specific obligations regarding the processing of location data (data processed in an electronic communications network. the TW lays down specific privacy rules with respect to providers of public electronic communications networks and services. and the users of their network or services. In 2007. indicating the geographic position of the terminal equipment of a user). or with consent of the end user. All providers of public electronic communications networks and/or services are also obliged to enable the legal interception of their network or services at their own cost.000. and the like. At the end of 2006.

screens. The regulatory body provides a basis for IT companies seeking IP protection for their products and services (see also Chapter XVII). Unless the parties agree otherwise. there is no equivalent to the “work for hire” doctrine as may be applicable in other jurisdictions. icons. The protection granted under the Copyright Act covers. provided it satisfies the originality requirement (see also Chapter XVII). Unless the software is developed within the framework of an employer-employee relationship (in which case the employer will normally hold the copyright). These changes have not affected the protection granted under the Copyright Act to computer software. software suppliers will thus retain the copyright to their software.Baker & McKenzie XIX. This chapter contains an overview of specific IP protection available for ICT products and addresses a number of contractual and topical issues in the field of ICT. In general. General The Netherlands takes a pragmatic approach to ICT legal issues. To safeguard 154 2. Computer software can be protected under the Dutch Copyright Act (Auteurswet). Information and Communication Technology (ICT) 1. In 2004. the Copyright Act contains a special section dealing with computer software. even if it was specifically developed for a customer. among other things. No formalities are required in order to obtain copyright protection for computer software. much is left to the agreement between the parties. preparatory materials. Following the (late) implementation of the 1991 EC Directive on Copyright Protection for Computer Programs. Computer Software . The Copyright Act offers the owner of a copyright to software both civil and criminal recourse against third-party infringement. object codes. the Dutch Copyright Act was amended to reflect Directive 2001/29/EG. displays and interfaces. the court decided on whether all data and data carriers of an alleged software infringer needed to be disclosed to the requesting party. source codes. enabling the claiming party to verify whether the infringing party has forfeited any penalties by breaking a previous court order. generally. In a recent court decision in summary proceedings.

or presentation of the content must be the result of a qualitatively or quantitatively substantial investment. pursuant to the Dutch Original Topographies of Semiconductor Products Legal Protection Act (Wet houdende regelen inzake de bescherming van oorspronkelijke topographieën van halfgeleiderprodukten). the court limited the type data to be disclosed to the source code and only to an independent party. The possibility of protecting software by means of a patent is still under discussion.The Dutch legislature adhered to the two-tier regime prescribed by the EU Directive. whether a copy of which is printed. It is concerned mainly with competition law aspects of technology transfer (see also chapter XVI). even at the European level. Technology Transfer The 2002 EU Technology Transfer Regulation has a direct effect in the Netherlands.Doing Business in the Netherlands the alleged infringer’s trade secrets and know-how. a database is a collection of works. 5. or other independent materials arranged in a systematic or methodical way. Recent European and Dutch case laws provide an indication as to how the principles of qualitatively and quantitatively substantial investment can be interpreted. or electronically. will qualify for either copyright or sui generis protection.There is not much Dutch case law on patent protection for computer software. Furthermore. It concerns a national right only. The Dutch Database Act (Databankenwet) took effect on 21 July 1999. Databases 4.Within the meaning of the Act. verification. or stored using another medium. data. 155 . in 2004.The Database Act is based on the EU Directive on the Legal Protection of Databases. Original databases. provided certain requirements are met. Topographies of Semiconductors Chips and their topography may be protected against unlawful exploitation by third parties. are allowed for a competition law perspective. The acquisition. the Commission has issued an additional/ specific Regulation ([EC] No 772/2004) containing certain categories of technology transfer agreements which. Registration with the Office of Industrial Property is required and will remain valid for 10 years. 3. Foreign companies should at least verify whether their computer software qualifies for patent protection in the Netherlands (see Chapter XVII). individually accessible by electronic or other means.

156 . restrict warranties and liability. the conditions are more advantageous to the supplier. but a number of cases with respect to the IT industry have been published. suppliers and distributors of ICT products use a plethora of agreements to. which is based on the European standard. although their use is by no means mandatory. Generally. covering a range of topics. e. for instance.. and the provision of maintenance and computer services. A number of standard terms are mentioned below. ICT Agreements and Standard Terms As in many jurisdictions.Baker & McKenzie 6. which are freely available and which are sometimes used. from the purchase or lease of hardware to complex turnkey projects. A rule of thumb that may be deduced from those cases is that an IT supplier is under an obligation to inform its customers of both anticipated delays in delivery and of problems with respect to the delivery and installation. and (ii) disputes arising between the parties must be settled through arbitration in accordance with the Arbitration Regulations of the Foundation for the Settlement of Automation Disputes in The Hague. Both suppliers of computer products/services and end users draft standard terms. the sale of hardware.The main changes were that: (i) suppliers were better protected against the bankruptcy of their customers. EDI Model Agreement The Netherlands has a model EDI Agreement. These standard conditions are known as “BiZa” contracts. the industry organisation for suppliers of computer products and services has published standard conditions for. The FENIT conditions were updated in 2003. They are produced regularly in negotiations by prospective end users and are in their favor. the development and licensing of software. Purchase Conditions The Dutch Ministry of the Interior has published general terms and conditions.g. FENIT Conditions FENIT. The liability of suppliers of ICT goods and services is governed by the rules in the Dutch Civil Code on liability (see chapter XX).

but there is no specific legislation. the rightful owner of a trademark or a trade name should be able to act successfully against the use of that trademark or a trade name in a domain name. Shrink-Wrap License Agreements Many larger (mostly US) software manufacturers use shrink-wrap or even clickwrap licensing terms in the Netherlands. 9. a special dispute resolution forum for the settlement of IT disputes operates in the Netherlands: the Association for the Settlement of Automation Disputes (Stichting Geschillenoplossing Automatisering). In the Netherlands. 8. In 2006.eu domain name was successfully introduced. There is not much that case law in the Netherlands that governs the use and/or applicability of shrink-wrap or click-wrap licensing terms. if possible). The Internet and E-business Domain Names The basic principle regarding the Internet is “offline is online” (existing regulations for offline activities will be applied similarly to online activities. The applicability of such terms will mainly depend on the manner in which they have been brought to the attention of the end user. there is an association for the registration of domain names (“SIDN”). The principle rule is that an end user must be given a reasonable opportunity to become acquainted with these general terms prior to or at the moment that the agreement regarding the subject matter is entered into. 7. It is generally felt that. The SIDN has incorporated Alternative Dispute Resolution for . The new legislation implementing the ECommerce Directive (EC/2000/31) contains several requirements regarding the use and/or applicability of electronic general terms and conditions. Both active and passive escrow agents make use of tripartite agreements with the supplier and the end user. 157 .Doing Business in the Netherlands In addition to recourse to the courts and arbitration in accordance with the rules of the Netherlands Arbitration Institute (NAI).nl domain names only. the . Source Code Escrow Software source code escrow is fairly common in the Netherlands. irrespective of the level on which it is used. in principle.

a service provider was ordered to disclose the name and address of an anonymous web site holder to a third party. and (iii) the service provider has taken all reasonable measures to prevent further dissemination of the contentious information. including online. Consumer protection 158 . How this enforcement will crystallize in practice has yet to be seen. once a judicial inquiry is commenced. Internet service providers are exempt from criminal prosecution with respect to the disclosure or dissemination through their services of information that is punishable on the basis of its content. note that in a Supreme Court decision. effective 21 May 2003. various principles for civil law liability of Internet service providers have been introduced. Electronic Signatures The EU Electronic Signatures Directive (Wetsvoorstel elektronische handtekeningen) was implemented under Dutch law. In 2007. Under the new legislation implementing the EU E-Commerce Directive. Electronic Commerce Directive The Dutch government has implemented the EU E-Commerce Directive into Dutch law. transactions. Furthermore. and contains provisions protecting consumers in distance. it is revealed by the service provider upon first order by the judiciary. The EU Distance Contracts Directive has been implemented into Dutch law as well.Baker & McKenzie Liability of Service Providers Generally speaking. The new law establishes a legal regime for electronic signatures. a new authority (Consumentenautoriteit) for the protection of the collective interests of consumers was founded. All of the Directives mentioned determine some of the legal parameters for the development and operation of E-Commerce in the European Union market. (ii) the identity of the perpetrator is known or. if (i) they reveal their identity at the time of the disclosure or dissemination. The authority has announced that it will especially focus on internet trade. This new authority has been attributed with certain public powers to enforce consumer law.

At the end of 1996. Encryption Doing Business in the Netherlands Although in the past. that transfer outside the EU triggers specific requirements. to offer games of chance over the Internet in the Netherlands requires the government’s permit. 159 . The Act on Computer Crime is incorporated in the Dutch Criminal Code and the Dutch Code of Criminal Procedure. the long-debated new Act on Computer Crime II (Wet computercriminaliteit II) has entered into force. It is important to verify whether a notification with the Dutch Data Protection Authority should be filed. In 2006. Deletion of data and the addition of worms or viruses that lead to damage may be criminal offences (although the definition of a virus is somewhat unclear).10. It does not seem likely that legislative initiatives will ensue in this context in the near future. 12. the Dutch Supreme Court issued a judgment that held that computer data are not “goods” within the meaning of the Criminal Code. The Dutch 1993 Act on Computer Crime (Wet computercriminaliteit) contains criminal provisions related to computers. Data Protection The 2001 Data Protection Act (Wet bescherming persoonsgegevens) imposes a number of obligations on parties that collect and control personal data. In 2006. Computer Crime 13. Likewise. the Dutch government had expressed its intention to introduce a bill dealing with the use and availability of encrypted software. This Act expands the scope of certain computer crimes and also introduces new investigative powers for the enforcement agencies. no such bill has been introduced. the Ministry of Justice has successfully undertaken a crusade against illegal gambling sites. 11. What constitutes personal data is largely a question of fact. (a draft of such a bill already circulated in 1994 and which was heavily criticized and never made it as a bill) still. Most illegal gambling sites in the Netherlands have shut down. Online Gambling In principle.

This proposal is currently still under discussion. 160 . there has been a Dutch proposal to implement a retention period of 18 months for Dutch service providers for Internet traffic data.Baker & McKenzie 14. Retention Recently. the EU is currently considering a minimum retention period for Internet traffic data. Likewise.

This liability may be incurred if one of the parties to ongoing negotiations withdraws from such negotiations at a stage when the other party could. the party withdrawing from the negotiations may be liable for costs incurred by the other party. It is even possible that a court orders the party withdrawing from the negotiations to continue the negotiations in good faith. 2. The main provision is Article 6:74 of the Code. 3. dangerous substances. reasonably expect that an agreement will be entered into. damage caused by animals. The Code contains several strict liability provisions. or even for all lost profits.. and the like). Such a party may avoid liability if it can 161 . which stipulates as a basic rule that a party is liable for all damages resulting from its attributable nonperformance (breach of contract). All liabilities that may arise between parties in any contractual relationship are essentially governed by the same general provisions of the Code. Contractual liability Breach of contract A general section of the Code applies to all contractual liabilities. in a situation in which a party to a contract causes damage to another party and the event qualifies as a wrongful act if there has been no contractual relationship between the two.XX. liability may be based only on a wrongful act (or strict liability). Liability 1. for example. General Doing Business in the Netherlands The Dutch Civil Code (Burgerlijk Wetboek [BW] in this Chapter referred to as the “Code”) generally distinguishes between two types of liability: contractual liability and noncontractual liability.g. which form a separate category within liability based on wrongful acts (for instance. These two types of liability may coincide. e. Pre-contractual liability Dutch law is notorious for its pre-contractual liability. defective goods and premises. Depending on the exact stage of the negotiations. Outside of a contractual relationship. as if he had an agreement. regardless of the type of contract.

each party must return to the other what it has received under the dissolved agreement. but also to repair or replace a defective product. also those which result from the law. Limitation of liability The parties to an agreement may deviate from most liability provisions in the Code. which generally entails proving that the nonperformance cannot be attributed to it on the basis of its actions. in both situations. Alternatively. the concept of ‘good faith’ permeates contract law. This contractual right to invoke an exemption clause may be limited only by the court in exceptional cases. In some cases. the creditor is not only allowed to claim damages. In addition to those rare cases in which a contractual 162 . deviation from the Code is not allowed. the creditor is entitled to compensation for damages incurred as a result of the breach. Different to many other jurisdictions. or supply any missing part. In addition. the creditor may be allowed to dissolve the agreement.Baker & McKenzie prove that it acted under force majeure. or the requirements of reasonableness and fairness.. e. the law on contracts for the sale of goods contains several specific obligations on the part of the seller. the creditor may also claim specific performance (nakoming). if the buyer so desires. Under those obligations. contracts do not only have the effects expressly agreed upon. the law. Both parties to an obligation must behave in their relationship according to what is reasonable and fair. the seller of certain goods is obliged not only to compensate the buyer for any damages. Parties are free to exclude or limit their potential liability for damage caused by a breach of contract or a tort by agreeing on an exemption clause. Damage and performance Several types of contracts are governed by specific statutory provisions. or generally prevailing public opinion. In a contractual relationship. Good faith Furthermore. which may contain specific obligations. trade customs. For instance. according to the nature of the contract. but in all cases in which the debtor is still able to comply with its obligations. in the case of agreements with consumers.g. the contract. but. Upon dissolution.

damaged by the liable party. 4. liability is denied if the rule invoked by the injured party does not cover the interests of the injured party. First. whose act can be attributed to the party committing the wrongful act is liable for all damages incurred by the injured party. There are three forms of wrongful acts: (i) infringement of a subjective right. In principle. In product liability cases however.Doing Business in the Netherlands deviation is expressly prohibited in the Code. only the seller of the goods may be held liable by the end user if the goods are not in conformity to the agreement. although it is permitted to exonerate for damages intentionally caused or caused by gross negligence of employees other than senior management. In practice. since it is far more difficult to provide the evidence required to obtain damages from a manufacturer or distributor than the seller. this is different (see below). Strict liability Several types of strict liability apply with respect to goods. Second. “strict liability” means that liability is deemed to exist without the injured party having to prove more than the damage and the causal connection between the 163 . Noncontractual Liability (Wrongful Act) Wrongful act The basis of all types of liability outside of contractual relationships is Article 6:162 of the Code. a restriction is imposed by the principles of reasonableness and fairness. (ii) act or omission violating a statutory duty. the end user can claim damages from the manufacturer or from other parties in the distribution chain only if the parties are liable on the basis of some type of noncontractual liability (wrongful act). and far more important. in the case of a contract for the sale of goods. Generally. Nevertheless. which stipulates that any party that commits a “wrongful act” towards another party. provisions that limit or exclude liability for damage caused intentionally or caused by gross negligence of one of the parties are void. and (ii) conduct contrary to the general standard of conduct acceptable in society. several other restrictions apply to all contracts in general and liability provisions in particular. this means that it is usually difficult for the end user of defective goods to claim damages from any party other than the seller. Under Dutch law.

if a party brought a product into the market that had caused damages. Rockwool). the importer into the European Economic Area. Product liability Product liability is an important type of strict liability and was incorporated into the Code in 1988 as a result of the EC Directive of 25 July 1985. 159. the seller. The manufacturer is liable for all damages resulting from physical injury or death caused by its defective product. property damage.Baker & McKenzie wrongful act and the damages. Dutch law generally allows for a limitation of product liability between companies in a distribution chain.g. only some forms of damages may be claimed from the manufacturer on the basis of product liability legislation. and consumers. end users. that party would be liable for the damage. It is not possible to exclude product liability towards the injured party contractually. no. a product is defective if it does not provide the safety that one is entitled to expect. In a case heard by the Dutch Supreme Court in 1999 (in Hoge Raad. This type of liability exists towards professional buyers. However. the distinction between claims based on wrongful acts and claims based on product liability appears to have faded. Although there is still some uncertainty in this respect. or the party that has sold the product under its own brand name) or may obtain damages that are not recoverable under product liability legislation on other grounds (e. Nederlandse Jurisprudentie 2000. taking all circumstances into consideration. and (c) the time the product is brought into circulation. if it was used for a purpose that could reasonably have been anticipated.g. (a) the presentation of the product. and consequential damage). Essentially. Depending on the facts of the case. (b) the reasonably anticipated use of the product. This legislation created strict liability on which basis a consumer can hold a manufacturer liable if the latter’s defective (unsafe) product causes damages. The manufacturer may also be liable for damage to other goods that are normally used by consumers if such damage exceeds EUR 500. 164 . the injured party is not required to prove that the wrongful act or the damage may be attributed to the liable party on the basis of fault.. in particular. According to the Code. 22 October 1999. the general law on wrongful acts or a breach of warranty).. With this decision. and covers all types of damage (including physical injury. the injured party may also claim damages from a party other than the manufacturer (e. the Supreme Court held that as a general rule of law.

if that corresponds better to its nature. 5. Financial loss is the damage to pecuniary interests. such damages may include compensation for costs incurred as a result of a breach of contract or a wrongful act. Moreover. The liable party is obliged to compensate the injured party for all these damages incurred by the injured party as a result of. Although in principle the injured party has a right to claim compensation for the exact damages. safety. in the Consumer Goods Act the EU Directive 2001/95/EC on General Product Safety was implemented on 1 December 2005. Compensation of Damages Kinds of damage The sections of the Code that govern the compensation of damages apply to both contractual and noncontractual liabilities. This act is aimed especially at protecting further distribution of unsafe goods. and in case the injured party’s reputation has been damaged.Doing Business in the Netherlands For completeness’ sake. personal injury. the courts are free to assess the damage in a more abstract way. Two kinds of damage can be compensated: (i) financial loss (vermogensschade). Other disadvantages will be compensated only if these have a legal basis. Compensation of non-pecuniary loss (Article 6:106 of the Code) for instance. Kind of compensation Normally. the court may calculate the 165 . costs incurred for assessing and (out-of-court) collection of the amount of damages. lost profits. More specifically. and costs incurred in order to limit or reduce the damages. rules may be imposed regarding product safety in the interest of public health. is possible only in case of intentional damage. and (ii) other disadvantages (ander nadeel). but the injured party may demand compensation in any other form. fairness in trade. including damage to goods and economic loss. the event that has led to liability (“causal link”). and that may be attributed to. or proper information about the goods. Based on this act. if the liable party has made profits as a result of its breach of contract or wrongful act. pure or consequential. damages will be compensated in money. The Consumer Goods Act Decree on “general product safety” (of 29 June 1994) deals with the obligation to launch a product recall.

Therefore. the court is entitled to reduce the obligation to compensate the damages if it believes that full compensation will lead to clearly unacceptable results.Baker & McKenzie damages so as to include all or part of the profit. On the other hand. a penalty does not need to be a reasonable estimate of damage actually incurred. 166 . regardless of the size of the penalty. Penalty clauses Penalty clauses are allowed under Dutch law regardless of whether the penalties are a genuine estimate of damage incurred or serve as an incentive to perform. A party that is obliged to pay a penalty may always request the court to reduce the amount on the ground that payment of the full penalty will be unacceptable. the penalty is the only compensation that can be claimed. Unless otherwise agreed upon.

Courts of appeal decide on judgments given by a district court though most cantonal division judgments may be appealed before a court of appeal. regardless of the cause. With a few exceptions. On the other hand. A submission for cassation to the Supreme Court may be brought on the grounds of noncompliance with formal requirements (for instance. The cantonal divisions of the district courts also have jurisdiction over employment law issues. courts of appeal and the Supreme Court. the cantonal divisions of the courts are concerned with first instance claims that do not exceed EUR 5. for example. This chamber decides on disputes on first instance. 167 . One such chamber is the Enterprise Chamber of the Amsterdam Court of Appeal. The Supreme Court will. In civil and commercial cases. in principle. if a court fails to give adequate reasons for a judgment) or breach of the law. including any European Community legislation.XXI. (ii) mismanagement. therefore. have special chambers that deal with particular issues. The Dutch Supreme Court and lower courts have no authority to examine laws for compliance with the Constitution (Grondwet).The district courts have general jurisdiction over civil law disputes. Some cantonal divisions and district courts.The administration of justice in the Netherlands is essentially limited to two instances. but not the law of another country. concerning (i) annual accounts. agency and (real estate) lease disputes. A judgment given by the court of appeal may.000. (iv) the Dutch Works Councils Act and on In the Netherlands. district courts. Dispute Resolution 1. Administrative disputes are resolved by separate administrative branches of the district courts. be submitted for review or cassation before the Supreme Court of the Netherlands on issues of law only. (iii) buyouts of minority shareholders. not decide any factual issues. as well as certain courts of appeal. acts of law may be tested for compatibility with a provision of a treaty to which the Netherlands is a party. This prohibition on examining laws against the Constitution relates to the manner in which acts of law are established as well as to their substance. judges are professional judges and are appointed for life. Jurisdiction Doing Business in the Netherlands District courts essentially hear all other civil and commercial first instance claims. the civil and criminal judiciary comprises cantonal divisions.

the defendant must appear through an attorney of record.The writ requires that the defendant appears in court on a certain date. The opponent may file an answer. which is a district court session held specifically for that purpose. This first appearance is merely for administration and record purposes and does not take place physically. for example. which is often followed by a hearing for oral arguments. Summary proceedings have gained substantial importance in recent years. and (c) objections to a reduction of capital. the court customarily grants the defendant a six-week extension to submit a written answer. After the briefs have been exchanged. In district court proceedings. Today. by examining witnesses. Most civil and commercial proceedings are initiated by a writ of summons and take place before the district court. or the court may order the parties to appear in person in order to supply information to the court or to attempt to reach a settlement. the President of the district court may sit in summary proceedings to provide provisional relief. concerning (a) mandated departure or ejection of shareholders. There are far fewer restrictions on the type of dispute that may be heard than in almost all other jurisdictions. they are even used to obtain a payment order for essentially undisputed claims. (b) the revocation of responsibility for a group company. It is served on the defendant by a bailiff. legal merger or split. The appellant may contest the judgment by the district court in whole or in part. Summary proceedings have the 168 . In the appellant’s brief. 2. additional briefs may subsequently be exchanged. 3. The briefs are filed at a docket session. the party filing the appeal explains why it disagrees with the judgment passed in first instance. Unless the defendant makes no appearance. Summary Proceedings In urgent cases. a hearing for oral arguments before the court may be held if either of the parties so requires. Only two briefs are exchanged. Appeal proceedings are also initiated by the service of a writ (within three months after the judgment in first instance). After the statement of defense is submitted.The greater part of the proceedings is conducted in writing. for instance.Baker & McKenzie appeal. Course of the Proceedings The course of the proceedings may be complicated by accessory actions and orders to provide evidence.

often on the same day. the plaintiff may levy one or more prejudgment attachments. A decision by the court of appeal may be submitted for cassation to the Supreme Court. Although no sworn statements are taken. An attachment on movable property may be combined with judicial custody. The prejudgment attachment is levied by a bailiff. The President generally hands down his decision in summary proceedings within 14 days. It is also possible to lodge a summary appeal. but may do so earlier if the case is urgent. The plaintiff initiates the summary proceedings by serving a writ on the defendant. there is room for formal evidence gathering and witness examination. At the plaintiff’s request. The judgment may be appealed before the court of appeal (within four weeks after the judgment in first instance is rendered). In very urgent cases. the President will schedule a date for the summary hearing to take place within a few weeks. before or during legal proceedings.Doing Business in the Netherlands advantage of being fast. Such leave is generally easy to obtain. the President may hear “informants” if they are present at the hearing. Although witnesses cannot be heard in the context of summary proceedings. the interested party may start principal proceedings in which the case is judged on its full merits (since summary proceedings are basically a provisional remedy. On the date of the summary proceedings. This means that the bailiff turns 4. an indication of the generally good quality of the summary judgment decisions (and judges). After the summary proceedings. Parties rarely initiate principal proceedings after summary proceedings. The plaintiff must file an “ex parte” petition with the President in which the claim is prima facie demonstrated. To secure the claim. The President has a great degree of latitude to decide on the procedure at a hearing. the parties and their counsel (although a defendant may appear in person) appear before the President of the court to explain their positions by oral arguments. A summary judgment is immediately enforceable and is usually sanctioned often by a substantial penalty to be forfeited to the plaintiff if the judgment is not complied with. The leave of the President of the district court is required for a prejudgment attachment. so that the proceedings before this court are conducted as swiftly as possible. hearings can be scheduled even on the same day. the President usually takes the information provided into account when deciding the issue. They usually accept the judgment given in summary proceedings (whether or not on appeal). Prejudgment Attachment 169 . The court is in no way bound by a judgment given in summary proceedings.) In these proceedings.

the President may nevertheless assume jurisdiction if he believes the remedy provided in arbitration is inadequate. the President of the district court is competent to grant such relief in summary proceedings. The President will lift the attachment if the party subject to attachment demonstrates that the asserted claim is nonexistent or frivolous. The President will also lift the attachment if the party subject to attachment provides adequate security (generally. as well as in the event of noncompliance with formal requirements (which can result in a nullity). If the arbitrators are not authorized under the arbitration agreement to grant provisional relief for urgent cases. If proceedings before the district court are not yet pending at the time of filing the petition for the President’s leave. A Dutch court will usually accept this choice. 170 . Arbitration Parties may also choose to settle their disputes by arbitration. the attachment is wrongful. 5. the plaintiff is liable for damages caused by the attachment. rather than in court. the Dutch court will find that it has no jurisdiction over the case. Dutch arbitral decisions can easily be enforced in the Netherlands. This term may be extended at the request of the attaching party. which has its own arbitration rules that parties can adopt in their arbitration agreement. The NAI has a list of qualified and experienced arbitrators who are often attorneys. If judgment is eventually rendered against the plaintiff. arbitral awards given in the territory of these States can be enforced in the Netherlands and vice versa. If either party invokes the arbitration agreement.Baker & McKenzie over the attached property to a person appointed by the President to keep the property in his custody pending the proceedings. The NAI may appoint the arbitrators. The best known Dutch arbitration institute is the Netherlands Arbitration Institute (NAI) in Rotterdam. Thus. or that the attachment is unnecessary. The usual term is 14 days. or the parties may do so themselves. the Netherlands is a signatory to the New York Convention on the recognition and enforcement of foreign arbitral awards. In that case. a bank guarantee by a first-class Dutch bank). the President will set a term within which such proceedings must be initiated. The party subject to attachment may object to the attachment in summary proceedings. Like many European countries and the United States of America. and even if they are not.

This Council Regulation replaced the Brussels Convention. on the condition that the prior leave of the President of the district court is obtained. This entails the abolition of any intermediate proceedings or grounds for refusal of enforcement regarding judgments handed down in another Member State. The procedure to obtain leave generally takes no more than two or three weeks. if the judgment is passed by a court of a State with a well-developed court system.6. creating a European enforcement order for uncontested claims. European enforcement order for uncontested claims . Judgments issued by a court of a State with which the Netherlands has an enforcement convention are also enforceable in the Netherlands. The same holds true as regards judgments handed down in States that are a party to the Lugano Convention. 7. mediation was mainly used in family law cases. Similarly. International Enforcement Judgments passed by the courts of EU Member States can easily be enforced in the Netherlands. was implemented in the Netherlands on 21 October 2005. Today. Such cases must be retried in the Netherlands and settled anew. With the exception of Denmark. the leave to do so must be obtained from the President of the district court. the EU Member States are subject to the Council Regulation on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters. we see mediation being used with increasing frequency in other types of disputes. Mediation Doing Business in the Netherlands Mediation as an instrument for dispute resolution is becoming more popular in the Netherlands. Dutch courts tend to review the judgment only marginally. At the start. The European Parliament and Council Regulation of 21 April 2004. court settlements. Dutch judgments are easy to enforce in EU Member States. 171 8. Prior to enforcement of a judgment handed down by a court in an EU Member State. though. However. which now applies only to Denmark. It lays down minimum standards to ensure that judgments. and authentic instruments on uncontested claims can be enforced easily in the Member States. Judgments passed by courts in States with which the Netherlands has no enforcement convention cannot be enforced in the Netherlands.

a copy of the European enforcement order certificate. The procedure does not require presence before the court. On 30 December 2006. The claimant only has to submit its application. the summons to a court hearing) to ensure that the rights of the defendant are respected. It does not cover revenue. the European Parliament and the Council adopted a Regulation creating a European order for payment procedure.Baker & McKenzie The Regulation applies in civil and commercial matters. or administrative matters. A judgment on an uncontested claim is certified as a European enforcement order by the Member State of origin in accordance with certain conditions.” The Regulation lays down minimum standards with regard to the service of documents (the document instituting proceedings and. 172 . The certification may apply to only parts of the judgment. except Denmark according to a uniform procedure that operates on the basis of standard forms. It can even be started and handled in a purely electronic way. International payment orders where necessary. The creditor must supply the authorities of the other State responsible for enforcement with: • • a copy of the judgment. and • 9.This procedure will allow creditors to recover their uncontested civil and commercial claims before the courts of the Member States. in which case the order will be known as “partial European enforcement order. Only the document service methods listed in the Regulation are allowed if the judgment is to be certified as a European enforcement order. Certification is carried out by means of the standard form. customs. the need for creditors to familiarize themselves with foreign civil procedures will be reduced to a minimum. Due to the existence of a procedure that will be common to all Member States. where applicable. a transcription of the European enforcement order certificate or a translation thereof into the official language of the Member State of enforcement or into another language accepted by the Member State of enforcement. It is applicable in all Member States with the exception of Denmark.

The represented parties will not be a party to the proceedings. Class actions A new Act on the Collective Settlement of Mass Damages took effect on 27 July 2005. Before filing a claim. 11.” The articles of association should stipulate that the foundation or association promote these interests. since no assistance by a lawyer is required. The individual will not be bound and it keeps the possibility of filing an individual claim.Doing Business in the Netherlands It does not require any further formalities or intervention on the part of the claimant. 173 . The creditor will not have to undertake intermediate steps to enforce the decision abroad. the procedure will keep the costs to a minimum. the foundation or association is obliged to make sufficient efforts to settle the dispute out of court. The foundation or association files the claim in its own name. The judicial decision obtained as a result of this procedure can be enforced easily in the other Member States. as well as public law entities. This will ensure a swift and efficient handling of the claim. Collective action Articles 3:305a and 305b of the Dutch Civil Code allow associations and foundations with full legal capacity. The Regulation will be applicable for 24 months from 30 December 2006. Possible remedies are declaratory judgments or injunctions. The act facilitates the court-endorsed collective out-of-court settlement agreements of mass damages between a representative organization and the party or parties responsible for the damages. The judgment is only binding between the foundation or association and the party or parties responsible for the damages. Language problems are minimized due to the availability of standard forms for the communication between the parties and the court that are available in all EU languages. to initiate action with the aim of protecting “interests similar in kind which are held by other persons. which should substantially reduce the length of traditional court proceedings. 10. Those remedies can be helpful to enable individuals claim damages. In addition. The most important limitation of the collective action is that damages may not be claimed.

These cases refer to pharmaceuticals and securities. The party responsible must provide sufficient security for its payment obligations under the settlement agreement. the settlement must then be published in one or more Dutch newspapers and be sent to all known affected parties. During the first phase. the amount of monetary compensation to each affected party. or a formula to calculate the monetary compensation on the basis of objective criteria must be specified. whether the compensation is reasonable. 174 . Dexia and Shell cases. namely in the DES. it must appear that it acts in the interest of the parties affected. Until now. against the settlement agreement. the representative organization and the responsible party file a joint request to the court of appeal in Amsterdam to declare the settlement agreement binding for all parties affected or a group of affected parties. to a certain extent. If the responsible party does not fulfill its payment obligations in a timely manner. After this hearing. The affected parties not opting out may collect their compensation within a time frame as specified in the settlement agreement. deny the request. The third phase concerns the execution of the settlement agreement.Baker & McKenzie The procedure to achieve a binding settlement agreement as described in the act is undertaken in three phases. be similar. From the articles of association of the representative organization. If the court of appeal declares the settlement agreement binding. three court endorsements of collective settlements have been applied for. the court of appeal must assess whether the settlement agreement meets the criteria as set out in the act. all affected parties known to the responsible party must be invited to a settlement hearing of the court of appeal in order to have the opportunity to file objections. The court of appeal may either declare the settlement agreement binding. all legal proceedings against the party involved are suspended. In the settlement agreement. The affected parties who do not want to be bound by the settlement agreement have the option to “opt out” within three months after the court decision. the representative organization and the responsible party negotiate as regards a possible settlement agreement. if there are any. In principle. and more specifically. In the second phase. the affected person may then dissolve the settlement agreement as far as it concerns that part of the settlement agreement relating to the compensation of this individual party. The claims of the affected parties must. Pending the request to the court of appeal. or order the parties to amend the settlement agreement.

because of its duties. A court order pursuant to Article 843a DCCP may be enforced by a penalty for noncompliance or attachment of the documents in question. does allow a party who is considered to have a justified interest to demand inspection or a copy or extract of identifiable documents that relate to a legal relationship to which it is a party.12. Inspection or taking copies of certain identifiable documents instead of full discovery Doing Business in the Netherlands Dutch law does not provide for full discovery of documents. In certain circumstances. Third. cannot be forced to comply with the demand if the documents are solely at its disposal or in its possession on that account. The legislator and the courts are wary of “fishing expeditions. First. Second. There are restrictions to the application of Article 843a DCCP. The party may demand this information from any party that has these documents at its disposal or in its possession. a party that. A contract or alleged wrongful act constitutes such a legal relationship. or copy must be furnished. 175 . profession.” it is meant that the party that asks for inspection must identify the documents or at least a specified category of documents. Bearers of those duties are inter alia attorneys-at-law. or occupation. the court will decide the manner in which inspection. however. The court will decide on the validity of these defenses. the confidentiality of the information may be a compelling reason not to comply with the demand. the interest of not divulging information outweighs the interest in obtaining it. the proper administration of justice is guaranteed even without providing the requested documents. extract. By “identifiable.” Article 843a Dutch Code of Civil Procedure (“DCCP”). such an attachment may be made even prior to filing the application of the court order. If necessary. is bound by secrecy. Finally.

since ownership is the most complete right to a piece of property. after which the delivery is complete and the buyer is the owner of the property. which are publicly accessible. The buyer (who is a private individual) has the option of dissolving the purchase and sale contract within three working days without specifying a reason by informing the seller thereof. Ownership A buyer of immovable property becomes the owner of that property after delivery. a new law has governed purchase and sale contracts for homes when the buyer is a private individual. which gives the buyer protection within the period that the purchase and sale contract and the deed of transfer are signed. Real Estate 1. including mortgages. easements and other in rem rights. 2. Since September 2003. 176 . Leases that do not grant in rem rights are not recorded in the land registers. as well as any court orders relating to real estate and administrative enforcement decisions. The same applies to the establishment and transfer of in rem rights in general. Land Register Real estate is registered in land registers. The owner can use the property at his or her own discretion. The only exception is if there are restrictions attached to ownership based on statutory provisions or unwritten law. which must be entered in the land register. The transfer of title of immovable property requires a notarial deed. The amendment of the law in September 2003 has also made it possible for the buyer (of any immovable property) to register the purchase contract in the land register.Baker & McKenzie XXII. The transfer of ownership of real estate requires the formal execution of a notarial deed by a civil law notary in the Netherlands. The information recorded includes ownership. Purchase and sale agreements can be made without specific formalities if these concern business or office space. Purchase and sale contracts must be in writing. mortgages.

the buyer can order the seller to have those rights cancelled or to pay him a lump sum. which the buyer of immovable property must file with the land register. An example of servitude is the obligation to tolerate water from the neighbor’s roof falling on one’s own yard. the buyer should investigate all legal aspects of the property by consulting the land register. This imposes on the seller the additional obligation to disclose all information on the immovable property. the rights that are known to him. This Act divides buildings into three types: those for which a regular building permit is required. A building ordinance includes regulations prohibiting building on polluted soil. the seller is. It is also sensible for the buyer to investigate whether the existing zoning plan can change adversely and to ask the seller whether he is aware of any of changes. regulations regarding building demolition and requirements regarding the external appearance of buildings. In the Netherlands. he must consult the Housing Act to determine whether a building permit is required. Article 8 of the Housing Act stipulates what issues must be regulated. Other Rights and Obligations Doing Business in the Netherlands In addition to formally executing the notarial deed. obliged to transfer the immovable property without any restrictions or burdens unless the buyer expressly accepts these restrictions and burdens. municipalities are obliged to adopt a building ordinance (bouwverordening) containing building and renovation regulations. Those regulations are included in the Building Decree (Bouwbesluit).. for instance. i. those for which a light building permit is required and those that do not require a permit. The buyer should first investigate whether a (light) permit is required as regards 177 4.e. The rights can be divided into rights attached to a certain capacity and servitude. Construction and Renovation . If the seller has not informed the buyer of such rights. Municipalities are not permitted to regulate any other matters.3. The seller must inform the buyer of all rights vested in the immovable property. by virtue of the law. and what issues may be regulated in the ordinance. If an owner of a plot of land wishes to build a house or a homeowner wishes to renovate his home. Rights attached to a certain capacity are those arising from an agreement and relate to immovable property. Under the Dutch Housing Act (Woningwet). A building ordinance does not include technical building regulations. an agreement with a neighbor to refrain from uprooting a tree.

Environmental Permits and Soil Pollution Both in asset (real estate) and share transactions. which have a wide range of instruments at their disposal to ensure observance. it was expected that the new Spatial Planning Act will come into force in July 2008. The Dutch Soil Protection Act (Wet bodembescherming) came into force on 1 January 1987.Baker & McKenzie the construction of the building. 5. it is of utmost importance to give sufficient attention to the possible presence of soil pollution. This means that the issuing of the two permits is harmonized. 6.” This permit is an important regulatory instrument linked to the setup. Consequently. In principle. all companies bear a general liability for maintenance. The Netherlands is a small and densely populated country. if appropriate. At the moment this book was edited. The coordination rule that applies to the building permit and the environmental permit plays a part in the establishment or expansion of a facility. Practice has shown that these and other environmental issues can be dealt with satisfactorily by means of timely due diligence combined with clear contract language and. Spatial Planning and the Environment (VROM) is currently in the process of modernizing regulations on Spatial Planning and those concerning various permits as regards the construction of structures. 178 . the use of space for residential and business purposes is tightly regulated. The zoning plan sets out specifically how land is to be used and developed. change and operations of an establishment. in particular as it relates to the zoning plan and the building permit.With regard to new pollution. In most cases a regular building permit will be required. an application for a building permit is assessed against the zoning plan. negotiations with the relevant authorities. is enforced by the authorities. The Soil Protection Act is based on the concept of “new” and “historic” pollution. One of the key elements of the Dutch Environmental Management Act (Wet milieubeheer) is the “integrated environmental permit. Modernization of regulation The Ministry of Housing. Zoning law. as well as to requirements regarding environmental permits.

regional plans (at the provincial level) and structure plans (at the regional and municipal level). Among other things. In the new Act. The present Spatial Planning Act came into force in 1965. Since then a large number of amendments have been passed. These new structural concepts replace the current key planning decision (at national level). reduced from over a year to 26 weeks. a clear difference has been made between spatial planning policy and its (legal) implementation. This has led to an increasing entrenchment of opposing interests. The zoning plan occupies a central position. become more businesslike. for example. renewed economic growth and technological developments have all affected the way in which decisions related to spatial planning are made. 179 .Doing Business in the Netherlands Spatial planning The relationships between the different layers of government have. which allows parties to quickly take advantage of new possibilities and opportunities. In addition. the Second Chamber of the Netherlands parliament concurs with this opinion and because of this. This has made the processes involved more complex. This often means that they have to be better. The Council of State has even compared it to a “patchwork quilt”. provincial authorities may no longer approve zoning plans. The same is true of the relationship between the government and the public. zoning plans must be digitalized. A new element is the structural concept in which authorities describe their spatial planning policy. it is not always clear as to who is responsible for doing what. It is becoming more and more common for disputes between government bodies to be settled in court. to have the responsibility shared properly among the various layers of government and to have government and provincial policy implemented throughout the system. The last major alteration involved changing Section 19 to include an independent project procedure for local authorities. Furthermore. the increase in the scale of spatial planning. the government has decided to fundamentally revise the act. One advantage of this is the shorter procedure. the Spatial Planning Act also means: • • • a shortened zoning plan procedure. more integrated and enforced more quickly. This has led to the establishment of a law that provides for many eventualities but has also become extremely complicated and confusing in practice. The aim of the revision is to simplify the system.

a complicated semi-restrictive system applies. of which 11 are decentralized. The rental price is often indexed on the basis of a price index figure. With respect to office space. due to legislative difficulties. These range from national regulations for building. Leases for retail business space usually have a five-year term with an option allowing the tenant to renew the contract for another five years. The system also allows the courts to control the rental price. However. housing and the environment to municipal demolition and tree-felling permits. Leases are subject to various statutory provisions and administrative regulations. the courts can grant protection from eviction to a tenant for a maximum of three years.Baker & McKenzie • • • • • provinces and the State can give indications in the zoning plan procedure. a nonrestrictive system applies. the permit-issuing body has the option of coordinating licensing procedures and of combining them into a single appeal/objection procedure (coordination scheme). which allows parties to freely negotiate the rent and other terms of their agreement on the basis of prevailing market conditions. Upon termination of a lease. With respect to retail business space. It involves the amalgamation of around 25 licensing systems. Permits The General Provisions for the Environment Act (Wabo) is an important element of the Cabinet’s desire to reduce the pressure of regulation on citizens and businesses. and zoning plans must be updated or extended every 10 years. a 2% excess for compensation for loss resulting from government planning decisions. a fast construction procedure (project decision). this Act is not expected to come into force any sooner than 2010. which reduces the freedom to execute contracts with respect to the term and termination of the lease (by providing protection from eviction and compulsory renewal). 7. Leases 180 .

The government must ensure that there is sufficient housing for the various social population groups and must promote a suitable living environment. The Housing Act stipulates the obligations and powers of the different housing authorities and regulates the government’s housing policy. One of the effects of the decentralization of public housing is that the government provides new regulations under the Housing Act only if housing for a particular population group is under threat. The Housing Act is implemented primarily by municipalities and housing corporations, and to a lesser extent by provinces and the Ministry of Housing, Spatial Planning and the Environment (Ministerie van Volkshuisvesting, Ruimtelijke Ordening en Milieu). The supervision of public housing is assigned to the inspector general of housing, the provincial inspectors and their civil servants. Due to demographics and planning, the Netherlands suffers a general shortage of housing resources. It is therefore important that sparse housing be allocated in a just and fair manner. The government sees to this by issuing housing permits under certain circumstances. The regulations with respect to housing allocation are laid down in the Housing Allocation Decree (Huisvestingsbesluit), which is based on the Housing Allocation Act (Huisvestingswet), and on the Housing Allocation Act itself, according to which a person is free to decide where he wishes to reside. This right may only be restricted insofar as it is essential for the balanced and fair allocation of housing. Government interference as regards housing is justified only when housing for people with a relatively weak position on the housing market Municipalities may restrict the right to freedom of establishment on the basis of a municipal housing allocation ordinance that regulates the time and conditions for granting housing allocation permits. The Netherlands has one of the most extensive tax treaty networks in the EU. The treaties generally provide for substantial reductions of withholding tax on dividends, interest and royalties. Appendices II-V contain lists of the treaties currently in force and under negotiation, and the treaty reductions for withholding taxes. Most tax treaties negotiated by the Netherlands relating to income and capital are based on the draft models published by the Organisation for Economic Cooperation and Development (OECD) in 1963, 1977 and 1992-2000.

8. Public Housing

Doing Business in the Netherlands

Summary of the Netherlands’ Bilateral Tax Treaties

181

Baker & McKenzie

Tax treaties are currently in force in the following countries: • • • • • • • • • • • • • • • • • • • • • •
182

Albania

Argentina Armenia Aruba

• • • • • • • • • • • • • • • •

Germany Ghana Greece India

• • • • • • • • • • • • • • • •

Moldova

Mongolia Morocco Netherlands Antilles New Zealand Nigeria Norway

Australia Austria Bangladesh Barbados Belarus Brazil Belgium Bulgaria Canada China (excluding Hong Kong and Macau)

Hungary Indonesia Iceland Ireland Israel Italy

Pakistan Poland

Philippines Portugal Russia

Japan

Jersey

Jordan Korea

Romania Singapore Slovenia

Kazakhstan Kuwait Lithuania

Croatia

Slovak Republic South Africa Sri Lanka Sweden Taiwan Spain

Czech Republic Denmark Egypt Estonia

• • • • • • •

Latvia

• • • • • • •

Luxembourg Macedonia Malaysia Malta Mexico

Finland France Georgia

Suriname Switzerland

Doing Business in the Netherlands

• • • • •

Thailand Tunisia Turkey

• • • • •

Ukraine

United Kingdom United States Uzbekistan Venezuela

• • • •

Vietnam Zambia

(former) Yugoslavia Zimbabwe

Turkmenistan Uganda

Tax treaties are still in force in the following countries after split or separation from the (former) Soviet Union: • • • • • • • • Azerbaijan * Tajikistan * Kyrgyzstan * Turkmenistan

(former) Yugoslavia:

Bosnia-Herzegovina Slovenia

Montenegro (Fed. Republic) Serbia (Fed. Republic)

* Treaty unilaterally applied by the Netherlands.

** Signed on 8 December 2006. Treaty is not yet in force.

* See (b) for application treaties with the former Soviet Union and formerYugoslavia.

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Negotiations are underway or will be held regarding the conclusion of tax treaties with: • • • • • • • • • • Algeria Australia Brazil • • • • • • • • • • Germany Hong Kong Indonesia Iran • • • • • • • • Peru Saudi Arabia Slovakia Switzerland Tanzania Turkey Turkmenistan * United Kingdom

Azerbaijan * Canada China Cuba

Isle of Man Japan Kenya Libya

Cyprus France

Costa Rica

Kyrgyzstan Mexico

Tax treaties with regard to the profits from air and/or sea shipping are currently in force in the following countries: • • • • • • • • • •
184

Argentine Armenia Albania

air/sea air air

• • • • •

Croatia Cuba

air

Azerbaijan Barbados Belarus Brunei Canada Bahrain

air

Czech Republic Egypt Estonia

air air

air

air air air

air

• • • • • •

Georgia

Hong Kong Hungary Iran

air air air

air/sea air/sea

Cape Verde

air

China (People’s Rep.) air/sea

air

Korea

Latvia

sea

air/sea

Doing Business in the Netherlands • • • • • • • • • • • • • • Lithuania Macau Macedonia Malawi Maldives Mexico Oman Poland Qatar air air air/sea • • • • • • • • • • • • • Slovak Republic Slovenia Sudan Syria Togo South Africa Suriname air air air air air air air sea sea air air air air air Panama Russia air/sea sea Ukraine United Arab Emirates air Uruguay Uzbekistan Venezuela Vietnam air air Saudi Arabia Senegal Seychelles air air air air/sea air Negotiations are underway regarding the conclusion and/or amendment of tax treaties with regard to the profits from air and/or sea shipping with: • • • • • Angola Colombia Gabon • • • • • Guatemala Haiti Iran Faroe Islands Ghana Jamaica Ivory Coast 185 .

and par value of shares. or a Cooperative Procedure for the incorporation a Dutch NV (Naamloze Vennootschap met beperkte aansprakelijkheid or public limited liability company). (b) Execute a power of attorney by incorporation. and address of the new company. and a Cooperative (cooperatie). d. a BV (Besloten Vennootschap met beperkte aansprakelijkheid or private limited liability company). e. 2. a BV. Documentation The following information or documentation is required for the application procedure at the Ministry of Justice as described above: 1. 186 . (d) Open a separate bank account in the name of the company in incorporation. Three different names can be examined in one trade name research. Authorized and issued share capital.Baker & McKenzie Appendix I .Procedure for Incorporating a Dutch NV. (c) Submit questionnaires to the Ministry of Justice. Procedure (a) Perform trade name research at the Trade Register of the Chamber of Commerce to investigate whether the proposed or a similar name can be used. Proposed name. (e) Issue a bank statement to the notary confirming the payment of the incorporation capital. (g) Register the company’s managing directors and sole shareholder with the Trade Register of the Chamber of Commerce within eight days after the execution of the notarial deed. (f) Execute the notarial deed of incorporation including the Articles of Association. Description of the new company’s activities. 3. and f are not applicable to the incorporation of a Cooperative. Steps c. statutory seat. number.

marital status. should partly complete and sign a Ministry of Justice “form B” or “form C” respectively. either a private individual or a listed company. statutory seat. nationality. A completed and signed Ministry of Justice “form C” for the incorporator or managing director that is a legal entity (name.Doing Business in the Netherlands 4. financial figures. A completed and signed Ministry of Justice “form B” in case the incorporator or managing director is a private individual (full name. address. 6. 5. and employment details). The ultimate beneficial owner. and history). 187 . object. data of directors and shareholders. place and date of birth.

5% 0%/5% 10% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 10% 10% Dividends Interest Reduced rate under tax treaty 0%/5%/10% 0%/5% 0% 0% 0% 5% 0% 0% 0% 0% 0%/10% 0%/10% 0% 0% 0% 0% 8%/10% 0% 12% 0% Royalties Reduced rate under tax treaty 10% 12% 3%/5%/10%/15% 5% 0% 0% 10% 10% 10% 15% 15% 5% 0% 0% 5% 0%/10% 0%/5% 10% 7.i.f.5%/10% %5% 0%/10% 10%/15% 0%/10% 10% 0%/5% 3%/5%/10% 0% 0% 15%/25% 0% 0% 5% 5%/10% 0% 0% 0% 5%/7% 0% 0% 0% 12% 0% Bosnia and Herzegovina Bulgaria Canada China Croatia Egypt 15% 10% 5% 5% 0% 0% 0% 0% 5% 0% 5% 5% 5% 0% 0%/10% 10% Czech Rep. Denmark Estonia Finland France Georgia Greece 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% Germany Hungary Iceland 0%/5% 10% 188 .Baker & McKenzie Appendix II .Overview of Tax Rates Inbound Income Under Dutch Tax Treaties Country N. Means tax treaty signed but not in force yet Albania Argentina Armenia Aruba Austria Australia Azerbaijan Barbados Belarus Belgium Brazil Bangladesh Appendix Reduced rate Reduced rate under tax treaty under tax treaty for qualifying for individuals and participations companies 0%/5% 15% 5%/7.

5% 10% New Zealand Pakistan Portugal 15% 10% 10% 5% 0% 0% 12.Doing Business in the Netherlands Appendix Dividends Interest Reduced rate under tax treaty 10%/15% 10%/15% 10% 10% 10% 10%/15% 5% 0% 0% Royalties Reduced rate under tax treaty 10%20% 10% Country N.f.5% 10%/15%/20% 10% 0% 12. Means tax treaty signed but not in force yet India Indonesia Ireland Israel Italy Japan Korea Reduced rate Reduced rate under tax treaty under tax treaty for qualifying for individuals and participations companies 10%/15% 10%/15% 10% 0% 5% 5% 15% 15% 15% 15% 15% 15% 15% 15% 15% 10% 0% 5%/10% 0%/5% 0%/5% 5%/10% 10% 10% 10%/15% 5% 0% 5% 0% 0% 0% 0% 0%/10% 10% 2% 10% 10% 0% 0%/5% 8% 0% Jordan Kazakhstan Kuwait Latvia Kyrgyzstan Lithuania Malawi Malta Mexico Luxembourg Macedonia Malaysia Moldova 10% 0%/10% 15% 2.3% 12.i.5%/15% 0% 0% 10% 10% 10% 5%/10% 5%/10% 10% 0%/5% 0%/5% 15% 0%/5%/10%/15% Mongolia Morocco Montenegro Netherlands Antilles Nigeria Norway Poland 0%/10% 10%/25% 0% 0% 5% 8.5% 0% 5% 5% 0% 0% 5% 0% 5% 10% 15% 15% 15% 15% 15% 15% 15% 25% 15% 15% 15% 15% 20% 15% 15% 15% 10% 0% 10% 0%/2.5% 10% 0% 5% Philippines 0%/10%/15% 0%/5% 10% 5%/15% 15% 10% 189 .

Baker & McKenzie Appendix Dividends Interest Reduced rate under tax treaty 0% 0% 10% 0%/5% 10% 10% 0% 0% Royalties Reduced rate under tax treaty 0% 10% 0% 0% 5% 5% 0% 5%/10% 0% 0% 0% 10% 5%/15% 7.5% 10% 6% Country N.f.i.5%/15% 0% 0% 5% 0% 15% 0%/5% 0%/5% 0%/5% 5%/7% 5% 0% 5% 0% 5% 10% 10% 5% 15% 15% 15% 15% 15% 15% 20% 15% 15% 15% 25% 20% 20% 15%/5% 15% 15% 15% 15% 15% 15% 20% 15% 10% 15% 10% 10% Slovak Republic South Africa Sri Lanka Surinam Sweden Taiwan Switzerland Tajikistan Thailand Tunisia Turkey 5%/10% 5%/10% 0% 5% 0% 0%/10% 10%/25% 7.5% 15% Turkmenistan Uganda Ukraine United Kingdom United States Uzbekistan Venezuela Vietnam Zambia Zimbabwe 10%/15% 0%/2%/10% 0% 0% 5% 7% 0%/10% 10% 10% 0%/10% 0% 10% 10% 0% 0% 0% 0%/10% 0%/10% 10% 10% 5%/10%/15% 5%/7%/10% 10% 190 . Means tax treaty signed but not in force yet Romania Russia Serbia Singapore Slovenia Spain Reduced rate Reduced rate under tax treaty under tax treaty for qualifying for individuals and participations companies 0%/5% 15% 5% 5% 0% 0% 5% 5% 7.

Qualifying companies column Doing Business in the Netherlands The lower rate in the column generally applies if the recipient is a company that owns at least 25% of the capital or the voting power in the Netherlands company. There may be special conditions or exceptions. as the case may be.g.. and payments for the use of patents. or in relation to sales on credit.g. Royalty column Different rates in the columns generally refer to different types of withholding tax rates depending upon the type of royalty. e. Interest column Many treaties provide for an exemption for certain types of interest. copyright payments. trademarks. The lower rates generally refer to interest paid by banks or on government bonds. payments for the use of films and computer software. interest paid to the state. Such exemptions are not considered in this column. the central bank. and know-how. export credit institutions. local authorities. e.. 191 .

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