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Doing Business in the Netherlands
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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
. . . . . . . . . . . . . . . . . . . . 6. . . . . . . 27 Distributors . . . . . . . . . . . . . . . . .21 Legal forms of doing business . . . . . . . . . . International Distribution Centres / Customs Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 The Country . . . . . . . . . 13 VAT and excises . . . 4. . . Distribution and Production . . . . 4. 2. . . . . . . . . . . . . . . . . . . 9 Customs Warehouses . . . . . . . . . . . 1. 23 Subsidiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Authorization . . 8. . . . . . . . . . . . . . . . . . . . . .Table of Contents 1. . . . . . . . . . . . . . . . . . . . . . . . 21 Production . 5. . . . . 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Group Financing and Group Licensing. .8 Customs value and applicable customs rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Branch v. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sales Support. . . . . . . . . . . . . . . . . . . . . 2. . . . . . . . . . . 15 Tax Ruling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 i . . . .23 1. . . . . . . . 22 III. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Sales Support. . 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Authorized Economic Operator . . . . . 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. . 24 Societas Europaea (SE) . . . . . . . 14 General Advantages . . . . . . . . . . . . . . . . . . . . . . . 26 Formal Foreign Companies . . . . . . . . . . . . 3. . . . . . . . . . . . . . . 3. . . . . . . . . . . . . . 1. . . . . . . . . . . . . . . . . . . . Regional Headquarters / Coordination Centers . . . . . . . . . . . . . . . . . . . . 1. . . . . . . . . . . . Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . .ix I The Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Other International Customs Facilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. . . . . . . . .V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Holding of Shares. . . . . . . . . 26 Agents . . . . . . . 5 II. . . . . . . . . . . . . . . Branch . . . . . . . . . . 2. . . . . . . . . . . . . . . . . . . . . . . V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Partnership. . . . . . . . . . . . .15 IV. 5. . . .vii Baker & McKenzie Amsterdam N. . 3. . . . . . . . . 2 The Government. . . . . . 3 The Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. . . . . 4 Culture and the Arts. . . . . . . . . . . . . . . . . . Doing Business in the Netherlands Introduction . . . . . . . . . . 18 Liaison Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. . . . . . . . . . . . . . . . . . . . . . . . 2 Cities and Infrastructure . . . . . . . . . . . . . .
. . . . . . . . . . . . . . 31 Issuance of new shares. . . . . . . . . . . . . . . . . . . . . VII. . . . . . . . . . . . . . . . . 37 Auditing requirements . . . . . . . . 6. 46 2001 Personal Income Tax Act. . . . 38 Act on Formal Foreign Companies . . . . . . . . 1. . . . . . . . . . . . . . 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Substantial Interest . 36 Exemption for group companies . . . . . . . . . . . Reporting. . . 33 Financial statements . . . . . . . . . . . . . . . . . . 11. . . . . . . . . . . . . . . . . . 3. . . . . . . . . 30 Shareholders’ register . . . . . . . . . . . 32 Single-member companies . . . 2. . . . . . . . . . . . . . . . . . . . . . . 40 Five Chapters . . . . . . . . . . . . . . 37 Consolidated accounts . . . . . . . . . . . . . 6. . . . . . . . . . . . . 5. . . . . . . . . . . . . 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate Governance Code (Code Tabaksblat) . . 2. . . . . . . . . . . 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. . . . 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Language . . The Subsidiary . . . . . . . . . . . . . . . . 30 Transfer of shares and membership interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Supervisory directors. . . . . . . . . . . . . . . 48 Levy of Taxes . . . . . . 9. . . . . . . . . . . 41 Supervisory Board . 51 VIII. . . . . . . . . . . . . . . . . . . . 42 Shareholders and General Meeting of Shareholders . . . .34 1. . . . . . . . . . . . . . . . . . . 29 Capitalization . . . . . . . . . . . . . . . . . . . 46 Income from Employment . . . . . . . . 5. . . . . .40 IX. . . . . . 49 Income Tax Rates. . . . . . . . . . . . . . 2. . . . . . . . . 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Monitoring of the Code . . . . . . . . . . . . . . . . . . . . . . . . . . 5. . .46 . . . . . . . . . . . 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Management Board . . . . . . . . . . . . . . . 34 Director’s report. 35 Other information. . . . Personal Income Tax . . . . . 4. 44 Financial Reporting . . . . .Baker & McKenzie VI. . . 41 Compliance and Enforcement. . . . . Auditing. . . . . . . . . . . . . . . . 8. . . . . ii 1. 31 Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. . . . . . . . . . . . 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Classification . . 5. . . . . 47 Income Tax Ruling . . . . . . . . . . . . . . . . . . 3. . . .29 1. . . . . . . . . . . . . . . 35 Accounting principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . Incorporation of Dutch NV and BV . . . . . . . . . . . . . . . . . . 6. . 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . and Publication Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. . . . . . . . . . . . . . . . . . . . . . . 32 Large Companies Regime . 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Principles and Best Practice Provisions. . . . 45 General . . . . . . . . . 7. . . . . . 29 Incorporation cooperative . . . . . . . . . . . . . . . . . . . 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 EU Interest and Royalty Directive . . . . . . . . . . . . . . . . Other Taxes . . . . . . . . . . . . . 2. . . . . . . . . . . Financial Regulations . . . . . . . . . . . . . . . . . . . . 21. . . . . . 7. . . . 56 Branch v. . . . . 69 Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 Exchange Control Regulations . . . . . . . . . . . 92 Regulated financial activities . . . . 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Residence Permit. . . . . . . . . . . . . . . . . . . . . . . . . . . Visa. . . . . . . . . . . 103 Knowledge Migrant Workers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. 6. . . . . . . . . . . . . Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Dividend Stripping . . . . . . . . . . . 77 Transfer pricing regime . . . . . . . . . . . . . . . . 72 Fiscal Unity . XI. . . . . . . . 8. 81 EU Parent-Subsidiary Directive . . . . . . . . . . . . . . . . . . . 3. . . . . . . . . . . . . . . . . . . . . . 3. . . 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Tax Incentives. . . . . . . . . . . . . . . . . . . . . . . .102 1. . . . . . 58 Capital Gains . . 53 Branches . . . . . . . . . . . . . . . . . . . . . . . . . . 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 Visit to the Netherlands Not Exceeding . 82 Summary of the Netherlands’ Bilateral Tax Treaties . . . . . . . . . . . . . . . . . . 90 Withholding Tax Dividends . . . . 58 Participation Exemptions . . . and Work Permit for Non-EU Nationals . . . . . . . . . . . . . . . . . . . 64 Flow-Through Entities . . . . . . . . . 11. . . . . . . . . . . . . . 16. . . . . . . 104 iii Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 Residence permit . . . . . . . . . . . . . . . . 103 Work permit . . . . . . . . . . . . . . . . . . . . . . . . 63 Limitations on Deductions of Interest . . . . . . . . . . . . . . . . . . . 92 Capital/Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20. . . . . . . . . . . .92 XIII. . . . . . . . . . . . . . . . . . . . . 14. . . . . . . . . . 22. . . . . 12. . . . . . . 15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 Visit to the Netherlands Exceeding Three Months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Real Estate Transfer Tax . . . . . . . . . . . . . . . . 70 Liquidation . . . . . . . . . . 2. . . . . . . . . . . . . . . . . . . . . . 81 EU Savings Directive . . . . . . 75 Exempt Investment Fund (VBI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. . . . . . . . . . . . . . . . . . . . . . 3. . . . . . . . . . . . . 3. . . . . 18. . . . . . . .87 Value-added Tax (VAT) . . 17. . . . . . . . . . . . . . . . 79 European Economic Interest Grouping and Societas Europaea . . . . . 1. . . . . 13. .53 1. . . . . . . . . 19. . . . Corporate Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. . . . . . . . . . . 82 XII. . . .Doing Business in the Netherlands X. . . . . . . . . . . . . . . . . . . . . . . . . . 74 Investment Companies (FBI). . . . . . . . . . . . . . 2. . . . . 81 EU Merger Directive. . . . . . . . . . . . 71 Mergers and Demergers . . . . . . . . . . . . . . . . 1. . . . 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . 1. . . . . . . . . . . . . . . . . . . . . . . . . .124 XVII. . . . . . . . 128 Import and Export: Free Movement of Goods . . . . . . . . . . . . . . . 2. . . . . . . . . . . 1. . . . . . 106 Termination . . . . . . . . . . 143 Advertising and freedom of expression . . . . . . . . Competition Rules and Free Movement of Goods . . . . . . . . . . . 134 The European Economic Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. . . . . 5. . . . . . . . . . . . XVIII. . . . . . . . . . 135 Standardization . . . . . . . . . . . . . . . . . . . . . . 138 Designs and Models . . . . . . . . . . . . . . . . . . . . . . . . Intellectual Property . . . . . . 8. . . . . . . . . . . . . . . . . . . . . . . . 142 Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . and Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146 Trade Secrets . . . . . . . . . . . . . 146 Assignment. . . . . . . . . . . . . . 142 Anti-counterfeit Measures. . . . . . . . . . . . . 105 Non-Competition Clause . . . 138 Protection of Databases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147 Market Situation . . . . . . . . . . .148 Patents . . . . . . . . . . . 2. . 148 Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 Trade Names . . . . . .Telecommunications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142 IP Enforcement Directive 2004/48/EC . . . . . . . Labor Law . . . . . . . . 148 Numbers. . . . . . . . . . . . 138 Trademarks . . . . . 15. . . . . . 113 Employees’ Insurance . . . . . . . . . . . . . . .136 1. . . . . . . . . 14. . . . . . . . . 2. . . 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 Public Procurement Rules . . . . . . . . . . . . . . . . . . . . . . . . .113 National Insurance . . . . . . . . . . . . . . 3. . . . . . . .105 1. . . 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. . . . . . . . . . . . . . . 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 Copyright . . . . . . . . . . . 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 Significant Market Power . . . . . . . . . . . . . . . 7. . . . . . . . XV. . . . . . 135 Term . . . . . . . . . . . . . . . 145 Unfair Competition. . . . . . . . . . . . . . . . . . . . . . .Baker & McKenzie XIV. . . . . . . Social Security and Pensions . . . . 11. . . . . . . . . . . . . . 2. . . . . . 13. . . . . . . . . . . . . . 5. . 6. . 2. . . 3. . . . . . . . . 147 Treaties and General European Legislation. . . . . 149 Rights of Way . . . . . . . . . . . . . . . . . 114 Sickness and Disability . . . 6. . . . 6. . . . . . 10. . . . . . . . . . . . . . . . . . . . 137 Neighbouring Rights . . . . . . . . . . 4. . . . . . . . . . . . . . . . . . . . . . . 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. . . . . . 106 XVI. . . . . . . . . . . . 148 Basic Legislation and Regulatory Authorities . . . . . . . . . . . . 124 Dutch Competition Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. . . . . . . . 117 Competition Rules . . . . . . . . . . . . . . . . . . . 3. . . . . . . . . . . . . . . . . Licensing. . . . . . . . . . . . . 116 Dutch Pension System . . . . . . . . . . . . . . . . . . . . . . . 151 iv . . . . . . . . . . . . . . . . . .
161 Pre-contractual liability . . . . . . . . . . . . . . . . . . . . . . . . 159 Data Protection . . . . 11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liability . . . . 3. . . . . . 171 International Enforcement. . . . . . . . . . . . . . . . . . 173 Inspection or taking copies of certain identifiable documents instead of full discovery . . . . . . . . . . . . . . . . . . . 6. . . . . . 173 Class actions . . . . . . 171 International payment orders . . . . . . . . . . . . . . . . . . 8. . . . . . . . 157 Encryption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 Summary Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . 165 7. . . . . . . . . . . . . . 155 ICT Agreements and Standard Terms .161 XXI. . 157 Source Code Escrow . . . . . . . . . . . . . . . 1. . . . . . . . . . . . . . . . . . . . . . . 161 Noncontractual Liability (Wrongful Act) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 Technology Transfer. . . 11. . . . . . . . . . . . . . 9. . 170 Mediation . . . . . . . . . . . . . . . Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Doing Business in the Netherlands XIX. . . . . . . . . . . . . . . . . . . . . 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. . . . . . . . . . . . 163 Compensation of Damages . . . . . 153 XX. . . . . 8. . . . . . . 7. . . . . . . . . . . 167 Course of the Proceedings . 10. . . . . 160 General . . . . . . Information and Communication Technology (ICT) . 2. . . . . . . . . . . . . . . . . 159 Retention . . . . . . . . 4. . . . . . . . . . . . . . . 154 Databases . . . . 7. . . . . . . . . . . 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159 Computer Crime. . . . 168 Prejudgment Attachment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171 European enforcement order for uncontested claims . . . . . . . . . . . . . . 151 Universal Services . . . . . . . . . . . . . . . . . . . . . . . . . . . Interoperability . . . 172 Collective action. . 175 v . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12. . . 156 Shrink-Wrap License Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. . . . . . . . . . . . 152 Privacy and Legal Interception . . . . 169 Arbitration. . . . 155 Topographies of Semiconductors. . 9. . . . . . . . . . . .154 1. . . . . . . . . . . . . . . . . . 5. . . . . . . . . . . . . . . . . .167 1. . . . . . . . . . 10. . . . . . . . . 5. . . . . . . . . . . . . . 4. . . . . . . . . . . . . . . . . . . 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. . . . . . . 13. . . . . . . . . . . . . . . . . . . . . . 5. . . . . . . . . . . . 3. . . . . . . . . . . . . . . . . . . . . . . . . . . 157 The Internet and E-business. . . . . . . . . . . . . . . . . . 161 Contractual liability . . . . . . . . . . . . . . 159 Online Gambling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 Computer Software . . . . . . . . . . . . . . . . . . . . . . 14. . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real Estate . . . . . . . 177 Environmental Permits and Soil Pollution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. . . . . . . . . . . . . . . 5. . . . . . . 190 Qualifying companies column . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. . . . . . . . . . . . . . . . . . . . . . . . . 2. . . .Procedure for Incorporating a Dutch NV. . . . . . . . . . . . . 195 Interest column . . . . . . . . . .190 Appendix II . . . . . . . . . . . . . . . . . . . . . 8. . . . . . . . . . . . . . . . . . . . . . or a Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .196 Procedure . . . . . . . . . . . . . . . . . . . a BV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. . . . . . . . . . . . . . . . .176 1. . . . . . . . . . . . . . . . . . . . . . . . . . .192 Appendix VI . . . . . . . . . . . . . Ownership. . . . . . . . . . 180 Public Housing . . . . . . . . 190 Documentation . . . . . . . . . 178 Leases . . . . . . . . . . . . . . . . . . . . . . 177 Construction and Renovation . . . . . . . . . . . . . . . . . . . . . . .Baker & McKenzie XXII. .Overview of Tax Rates Inbound Income Under Dutch Tax Treaties . . . . . 195 vi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Contact Information . . . . . . . . . . . 181 Appendix I . . 195 Royalty column . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 Other Rights and Obligations . . . . 178 Modernization of regulation . . . . . . 176 Land Register . . . . . . . . . . . . . . .
It describes the legal and fiscal environment of the Netherlands and the rules and regulations that companies must consider when doing business here. which is clearly visible in various activities. including chambers of commerce. tax law and civil-law notary practice. 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. Also. Baker & McKenzie Amsterdam sends its Doing Business guide to more than a thousand clients and business associates. providing innovative solutions wherever our clients are and whatever their needs. tax consultants and civil-law notaries in Amsterdam all have the expertise and experience for a successful national and international legal practice. The Netherlands is an attractive country in which to do business. We hope this guide is helpful to you and your organization. and it was the first with a fully integrated civil law.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. They are sincere and intellectual professionals who understand and serve clients with a shared set of values and high quality standards. Mike Jansen Managing Partner vii . It has a favorable tax regime and has concluded more tax treaties with other countries around the globe than any other country. Our firm has had a presence in the Netherlands since 1945. Please contact our office if you have any questions or if you too would like help in doing business in the Netherlands. embassies. ministries and other governmental organizations. Our more than 180 attorneys. participation in pro bono and community service is one of our core values. It has an excellent logistics and technological infrastructure. Chapter one presents key facts and figures on these subjects. a highly skilled workforce and a stable economy. The Netherlands is also famous for its culture and arts.
Our sincere and intellectual professionals understand and serve clients with a shared set of values and high quality standards. We provide pro bono and community service including raising funds for the Ronald McDonald Centre Only Friends. Participation in pro bono and community service is one of Baker & McKenzie’s core values. focusing on providing innovative legal services to clients in the business community. tax law and civil-law notary practice. In this respect we acknowledge the importance of cultural heritage by sponsoring and providing legal services to the Rijksmuseum in Amsterdam. Baker & McKenzie is known for having a deep understanding of the language and culture of business. tax consultants and civil-law notaries. an uncompromising commitment to excellence.V. Baker & McKenzie Amsterdam has the specialist expertise and experience required for the successful national and international legal practice we offer our clients. Doing Business in the Netherlands Baker & McKenzie Amsterdam is a leading Dutch law firm consisting of attorneys. 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. work and behave. The office was established in 1945 and joined the Baker & McKenzie global network in 1957. providing innovative solutions wherever our clients are and whatever their needs. 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. and world-class fluency in the way we think. Baker & McKenzie provides high-quality advice and legal services to a large number of the world’s most dynamic and successful organizations.Baker & McKenzie Amsterdam N. which stimulates the practice of sports by handicapped children. ix . tax consultants and civil-law notaries. With more than 180 attorneys.
and motivated workforce.500 km² 33. the Port of Rotterdam. and Schiphol Airport. As the gateway to Western and Eastern Europe. recognized as one of the major aviation hubs in Europe. American. enabling them to operate successfully in companies in any industry.700 km² 26% The country’s central geographical position. Dutch professionals are internationally oriented and are among the most multilingual in the world. 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 latest global business environment rankings published by the Economist Intelligence Unit (EIU) put the Netherlands among the top five. The Netherlands Doing Business in the Netherlands Why do companies prefer the Netherlands? One of the most important reasons is its highly educated. one of the world’s largest seaports.046 Amsterdam Den Haag 41. This is why more than 400 of the 500 largest companies in the world have offices in the Netherlands. and Africa. the Middle East. serving customers across the globe. 1 . and a growing number of Asian companies have established their European head offices in the Netherlands. flexible. Consider for example.I.410. the Netherlands enables companies to serve markets in the current and future Member States of the European Union. combined with its accessibility and excellent infrastructure and logistic services are other reasons why numerous European. making it one of the best places in Europe to do business in from 2006 to 2010.800 km² 7.
flat stretches of land. on 41. And since controlling water requires many parties to meet and plan together. It owes its existence to feats of hydraulic engineering. The Country The Netherlands is a kingdom. Cities and Infrastructure 2 . 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. taking part as a dynamic force in electronic commerce. They live. where the water table is controlled artificially. The Netherlands is thus one of the world’s most densely populated countries. windmills were used not just to keep the land dry. the biggest seaport in Europe. with good roads and world-class public transport services. It consists of the Netherlands itself and six islands in the Caribbean Sea: Aruba and the Netherlands Antilles.Baker & McKenzie The Dutch themselves are a surprising people. it has forced them to learn how to work as a team. The low-lying areas consist mainly of “polders”. Due to its excellent logistics and technological infrastructure. the Netherlands is also classified as one of the most “wired” countries in the world. North and South Holland. communications. officially known as the Kingdom of the Netherlands. The Amsterdam 2. but even to drain entire inland lakes. From the 16th century. The Dutch are proud of their management skills. The Netherlands lies on the delta of three major rivers—the Rhine. 1. The Netherlands has excellent infrastructure and logistics services. The Netherlands is also sometimes called “Holland”. and Amsterdam Schiphol Airport. surrounded by dikes. thanks to its close-knit network of trains and buses. all 16 million of them. A quarter of the Netherlands’ land area lies below sea level. one of the largest airports in the continent. Their struggle to keep the land dry has helped them develop a can-do attitude. and outsourcing. which have played a dominant role in the country’s history.500 square kilometers. little more than half the size of Scotland. The Netherlands is an important gateway to Europe because of Rotterdam. The Dutch themselves like to get around by bike. The word is featured in the names of the two western coastal provinces. Meuse. and Scheldt.
Doing Business in the Netherlands Internet Exchange is the largest internet hub in Europe. majestic buildings. Amsterdam. samen leven) and builds on cornerstones such as economic growth.526. traditions.The Hague is the seat of government. respect. Utrecht. Jan Peter Balkenende (CDA) is the Prime Minister. Haarlem. However. Rotterdam. Amsterdam attracts many tourists. For historical reasons. but Amsterdam is the capital.The Hague. while Queen Beatrix is the Head of state. After New York and London. 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). The highlights of the 2008 Budget Memorandum focus on six cornerstones: (1) Encouraging an active and constructive role of the Netherlands in Europe 3 .500 tonnes Rotterdam 377. in which the government consists of the queen and the ministers. and Utrecht all belong to the Randstad conurbation.The Hague.987. sustainability. Amsterdam is the next most connected city in terms of broadband capacity.000 tonnes Main internet hub Capacity Amsterdam Internet Exchange Largest hub of the European continent. and attractions. museums.000 1. The basic principle of the current coalition agreement is ‘working together. museums and a unique ring of canals. with a population of 7 million.000. Delft. 3. with its historic center. living together’ (samen werken. Groningen. and solidarity. Traffic and Transport Main airport Number of passengers Freight tonnage Main seaport Freight tonnage Amsterdam Schiphol Airport 45. and Maastricht also have their share of historic sites. even though they are all close to each other. Each of its major cities has a distinctive character. The Government The Netherlands is a constitutional monarchy with a parliamentary system.
and (6) Improving public services and strengthening the cultural sector. Due to its favourable location by the North Sea. mainly Turks. (5) Investing in safety. Dutch people are anti-authoritarian. According to the 2006-2007 report recently released by the World Economic Forum (WEF). and. stability and respect. and open-minded. high labour costs are not the decisive factor. Another distinctive fact is the attractive cultural climate. Moroccans. The port of Rotterdam handles some 377 million tones of goods every year. the government’s customized approach to tax facilities is a major advantage. The Dutch economy has a strong international focus. rules to admitting knowledge workers to the Netherlands are becoming more relaxed. the country being one of the European Union’s most dynamic centers of trade and industry. of which 10% are of non-western origin. 4 . while the Amsterdam Schiphol international airport is one of the biggest airports in Europe. (3) Reinforcement of a sustainable environment. and is one of the biggest ports in the world. Surinamese. (4) Reinforcement of social cohesion. with a large diversity of ethnic groups. the Netherlands moved up to 9th position in the Global Competitiveness Index (GCI). and enterprising economy. Antilleans. The Netherlands is a multicultural country. Although the strict legal protection against dismissal is an obstacle. Its global competitiveness position has strengthened. and Indonesians. That is why the Netherlands is often called the “Gateway to Europe”.Baker & McKenzie and in the world. there are numerous compensating factors. 4. (2) Encouraging an innovative. with a place in the top ten. competitive. innovative. last but not least. Nineteen percent of the habitants in the Netherlands are of foreign origin. up from its 11th position in 2005. it plays an important role as a main port and distribution centre for companies operating worldwide. The Economy Things are looking good in the Netherlands. These include the fact that employment contracts are becoming more flexible. In the decision on whether to locate in the Netherlands.
Some of the most famous are the Rijksmuseum and the Vincent van Gogh Museum in Amsterdam.5% 1.Doing Business in the Netherlands 5. the Mauritshuis in The Hague. Major international arts festivals are held annually. flourish in a country that has outstanding museums and an impressive variety of classical and innovative music and theatre.6% 7. and Het Loo Palace in Apeldoorn. and the Media There are many independent broadcasters and print media institutions in the Netherlands. The Media Act expressly provides that broadcasting organizations may decide the nature and content of their program. 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. The arts. and the Bonnefanten Museum in Maastricht.000 4. Outstanding collections of modern and contemporary art can be seen at the Stedelijk Museum in Amsterdam.606. Museums With almost 1. the Museum Boijmans-Van Beuningen in Rotterdam.300 3. 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. the Netherlands has the highest museum density in the world. 5 . Television. the Kröller-Müller Museum in Otterlo. in every form. The government is responsible for creating conditions that will enable them to fulfill their vital role in keeping the citizenry informed.000 museums.
Baker & McKenzie Dutch Creative Climate and Dutch Design Dutch design is famous around the world.000 buildings are listed as monuments. economical approach that characterizes Dutch design attracts many young designers. architects. and artists who come especially to Amsterdam to work in a climate of artistic freedom. No less than 50. The government protects them and helps pay for their maintenance. and innovation. dialogue. 6 . The minimalist. The Netherlands is also renowned for its architecture and exceptional urban development.
000 traditional working windmills? the Dutch are the tallest people in Europe? the Netherlands has at least 15. South Africa. because about 75% of the population speak English? people from almost 200 nationalities live in Amsterdam? 7 . the Netherlands Antilles.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.008% of the world’s area. and Aruba? the Netherlands still has about 1. 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. Suriname.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.
One of these customs procedures is the storing of goods in a customs bonded warehouse. if applicable. it may be beneficial to either postpone or avoid the levy of import duties for goods that are entering the Netherlands. 8 . in order to process imported goods. be beneficial for the pharmaceutical industry. 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 .PCC). If no measures are taken. import duties and import VAT (and. Using the customs transits procedure. Therefore. several customs warehousing arrangements are available by means of which the levying of import duties can be deferred. or when there are difficulties applying certain import licensing requirements. import duties are in principle non-refundable and thus become a cost. Once paid. The applicable tariff rate depends on the customs classification and the (preferential) origin of the goods. Using the Outward processing relief (OPR). postponement of the levying of import duties using the applicable customs procedures may present the possibility of a cash flow advantage. Import duties are calculated based on the customs value of the goods multiplied with the applicable tariff rate. these goods would first have to be brought into free circulation. these import duties paid cannot be refunded. 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). Upon importation of goods into the free circulation of the European Union. where base materials on the one hand are subject to a relative high import duty rate. but the processed goods on the other are generally subject to a zero rate.Baker & McKenzie II. In order to prevent the processing of goods shifting to countries outside the EU. This could mean payment of import duties. This arrangement can. Also. excise duties) in principle become due. 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 . for instance. International Distribution Centres / Customs Facilities In principle. 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.IPR). it is possible to transport goods under deferral of import duties between two places in the EU. Also. In the Netherlands.
quotas. anti-dumping or countervailing duties. The tariff classification number determines the customs duty rate assessed on the importation. quota. 2. several methods can be used. 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. the rules related to country of origin are diverse and often complex.. whether the good is eligible for special duty privileges and whether the good is subject to import restrictions (e. Certainty regarding the customs classification as well as the origin can be obtained by means of a “Binding Information”. The most common valuation method is the transaction value of the goods. which ruling is only valid in The Netherlands. This means that one is only allowed to use a subsequent customs valuation method if the previous method cannot be applied.VAT. which have to be applied in sequential order. building. Failure to correctly classify imported articles can result in fines or penalties. embargoes. In this respect. or produced. 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. manufactured. valid throughout the EU. or silo) or an inventory system authorized by and subject to the control of the customs authorities for the storage of non-Community goods. For valuation purposes. The country of origin may be defined as the country in which the imported product was grown.g. The applicable tariff rate depends on the customs classification and the (preferential) origin of the goods. In order to determine the customs value of goods imported into free circulation. and excise 9 . etc.1. a ruling can be obtained from the Dutch Customs authorities. Customs Warehouses A customs warehouse may either be a specific location (such as a tank. or specific licenses). Only upon removal of the goods from the customs warehouse will the applicable import duties.g. 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. 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.). While this may appear to be a simple concept.. anti-dumping or countervailing duties.
g. 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. The warehouse is intended primarily for the storage of goods. The warehouse keeper does not necessarily need to own the goods. The applicant is established in the European Community.g. Each of the different types of warehouses is subject to administrative regulations and has its individual advantages. Some customs warehousing arrangements also provide for a cash flow advantage for the payment of customs duties (e. b. repackaging). payment of customs duties on a monthly basis rather than at the moment of importation). and the goods stored. It is not allowed. but must be the depositor.Baker & McKenzie duties become due. A customs warehouse can be a public or a private warehouse. Customs warehousing arrangements in principle only allow the storage of goods. 3. d. to actively process or alter the goods while stored in under the customs warehouse arrangements. A public warehouse is authorized for use by warehouse keepers whose main business is the storage of goods deposited by other traders (depositors). 10 . different types of customs warehouses exist. In The Netherlands. c. These usual activities include actions to ensure reasonable conditions of the goods during storage and actions that prepare the goods for further distribution (e. it is necessary to obtain authorization from the Customs authorities. There is a genuine economic need for the facility. however. it is allowed to perform certain usual activities to the goods. Authorization In order to set up and operate a customs warehouse. A private warehouse is for the storage of goods deposited by an individual trader authorized to be a warehouse keeper. the records. If approved by the customs authorities. The Customs authorities may only authorize a customs warehouse under the following conditions: a.
the application may be rejected. If other Customs administrations submit objections within that period and no agreement is reached. In general. This upfront verification provides for certainty with respect to the application of the customs warehousing arrangements. the authorization will be issued and a copy of the agreed authorization will be sent to all the Customs authorities concerned. These Customs authorities will communicate the application and the draft authorization to the Customs authorities in the other EU Member States concerned. The other Member States are given one month to reply and provide their input. EU customs regulations provide for a special “single authorization”.Doing Business in the Netherlands Unlike Customs authorities in other countries. at one location) and only one Customs administration. In respect of customs warehousing. the Dutch Customs authorities will verify in advance whether or not the abovementioned conditions are met. 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. has to be dealt with. 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. 4. The requirements/conditions for domestic authorization as described above. this “single authorization” allows for the storage of goods in various EU Member States while only one warehouse authorization is needed. apply accordingly. the customs legislation applicable in the Netherlands has also other customs facilities under which the levy of customs duties can be postponed 11 . Once approved. Administrative records may be kept centrally (i. 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. Single (European) authorization Where entrepreneurs are established in several countries. Other International Customs Facilities As outlined above.e.
Processing under Customs Control In some cases. Strict (administrative) requirements have to be met in order for the relief to be granted. Upon return of the processed goods into EU.Baker & McKenzie or avoided. Outward Processing Relief Under the Outward Processing Relief.e. Below we have briefly addressed some of these customs facilities that can be of relevance when involved in international operations. As mentioned. while the other alternative provides for the duties to be initially paid then refunded at a later stage. 12 . Further. The advantage is that no or less import duties will have to be paid on the import of the treated goods. outside EU). the storage of goods under a customs warehousing arrangements in principle only allows the storage of goods. In case of processing under Customs control. The disadvantage of this method is that there are some economic conditions that have to be met. 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. There are two types of Inward Processing Relief: one allows the duty to be suspended.The administrative conditions are minor and cause a light compliance burden. goods which are already imported into free circulation in the EU can be exported for processing in a third country (i. goods are imported into the Netherlands in order to be processed while the goods are under Customs control. goods (e. 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. Again several (administrative) requirements have to be met in order for an Outward Processing Relief to be granted. a bank guarantee is required and interest must be compensated for refined goods which are released into “free circulation”. Inward Processing Relief Under the so-called Inward Processing Relief.g.
EU regulations now provide for the so called “Authorized Economic Operator” (AEO) concept. There is no legal obligation to become recognized as an AEO. Authorized Economic Operator In order to facilitate international trade and to enhance security. although being recognized as such may constitute an added value for the operator. In order to qualify as an AEO.Doing Business in the Netherlands Customs Bonded Transport It is also possible for goods to be transported through the EU under a customs bond. An AEO trader may benefit from more lenient administrative requirements in respect of the import and export of goods into and from the EU. 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. 13 . This will provide a competitive advantage to participating companies. however. 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. customs duties may become due as a result of irregularities during transportation. a trader has to demonstrate compliance with solid security criteria and controls as set by the EU regulations. Authorized AEO traders may also be allowed to submit less data with the Customs authorities. 5. that all goods that are transported under the customs bond are also declared to Customs upon arrival of the transport. It should be proven. Secure AEO traders may further be informed that their consignment has been selected for controls and will get priority treatment for these controls. no customs duties and import VAT have to be paid when the goods physically cross a border. as it demonstrates compliance with solid security criteria and controls. If not.
an import license can be obtained as a result of which the import VAT can be reported through the periodical VAT return. the excise goods remain under Customs supervision using special excise bonded arrangements. In principle. the deferral of import duties may also result in the deferral of excise duties and VAT on importation being levied. VAT on importation in principle becomes due at the actual moment of import of the goods. excise goods can also be brought into free circulation for excise purposes. shipped to another EU Member State. the levying of excises takes place in the EU Member State where the goods are used or consumed. Excise goods. and mineral oils. In the Netherlands. rather than actual payment upon physical importation. The taxable base for VAT is the customs value to which certain amounts are added. 14 . Provided that certain conditions are met. are in principle subject to Dutch excises upon importation into the Netherlands. the supply of goods which are placed under customs bond is subject to a zero rate for VAT purposes. 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). after importation. VAT and excises On importation of the goods. as a result of which excise duties become due as well. not only import duties are levied. the levying of excise goods can also be deferred. On importation. Under certain circumstances. which are levied with respect to the (deemed) consumption of alcoholic beverages. but also VAT on importation and (if applicable) excises. In the event the excise goods are. In that case. This license can thus create a cash-flow advantage. however.Baker & McKenzie 6. tobacco products. which are not transferred using a deferral arrangement. At the same time.
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.
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:
and 2. BV’s accounts are kept in the Netherlands. no longer possible to rely on the minimum spread of 1/8% for intercompany loans. a functional analysis must be made 19 . In order to determine the taxable spread to be reported. BV’s (main) bank account is maintained in the Netherlands. The directors residing in the Netherlands have the relevant professional knowledge and skills to be able to execute their obligations as directors.e. b. If more than one loan is provided to an entity. 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.. Please note that this equity should be at risk for the financing activities. The (main) directorial decisions are taken in the Netherlands. BV must have sufficient substance in the Netherlands. g. d. At least 50% of all authorized directors are tax residents of the Netherlands. According to the Dutch State Secretary for Finance. 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. 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. If the second requirement (i. no risk) is the only one that cannot be met. h. In order to determine an arm’s-length remuneration. and remuneration. the BV must have met all the requirements for the proper filing of various tax returns. risks. This safe harbor provision applies for each entity to which the company provides loans. but there is sufficient substance. the information that is spontaneously exchanged concerns structure. At the time conditions a to g above are verified. e. BV should have an appropriate level of equity that enables it to conduct its business. A BV is deemed to have sufficient substance if the following conditions are met: a. c. BV is a tax resident of the Netherlands and is not deemed a resident of any other country.Doing Business in the Netherlands 1. the safe harbor provision must be prorated. it is in principle. functions. f.
The interest and royalties received and paid are excluded from the taxable income in the Netherlands provided that: 1. 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. 2. This margin could also be lower than the 1/8% of the “old” ruling policy. 20 . 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. if desired. Even though the interest and royalty income as well as the expenses are excluded from the taxable income. The interest and royalties received and paid relate directly or indirectly to financing or royalty transactions that are closely connected. Currently. 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. the flow-through entity should still report arm’s-length remuneration with regard to the services relating to the loan or royalty transaction. 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. The Dutch entity receives and pays interest or royalties to and from an entity within the same group. it was not necessary to build up a file to defend the intercompany pricing. but there is no requirement to do so in order to start conduit financing and licensing activities in the Netherlands. an APA can be applied for. The flow-through company does not incur a genuine risk that could affect its equity. Under the situation previous to 1 April 2001. 3.
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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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.
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
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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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;
finance. and rendering of services may be carried out by both types of operations. a shareholder in principle. natural persons can become a shareholder of the SE after its incorporation. A branch is not a separate legal entity. two companies based in two different EU Member States. is liable only to the extent of its capital contribution. are better conducted by a subsidiary. Subsidiary The most important difference between a branch and a subsidiary is as to exposure to liability. and licensing operations. In addition. 25 . an NV) to an SE. 3. 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. 4. through incorporation of an SE as a subsidiary of: b. A subsidiary has limited liability. or 4. The circumstances and relevant factors must be considered each time before a final decision is made. Only legal entities can form an SE. through a change of corporation form from an eligible company (e. on the other hand. Holding. since SEs can opt for a one-tier or two-tier board system. As a result. since it is able to benefit from tax treaties. An SE can transfer its registered office from one EU Member State to another.Doing Business in the Netherlands 2. a group that has companies throughout the EU can now create a uniform management structure by forming an SE. Manufacturing. Branch v. the (foreign) company of which the branch forms part is fully liable for all the obligations of the latter. warehousing.. 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. a. an SE.g. thus.
as well the company’s equity is at least equal to EUR 18. its Articles of Association. however. which may comprise partnerships. the number under which the company is registered. Partnership A partnership. The formation of an EEIG requires at least two partners. and the details of the sole shareholder (if applicable). resident within the European Economic Area. The EEIG is a legal form based on a European Statute. 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. The partners in a general partnership (VOF) are jointly and severally liable for all obligations of the same. It is suitable for joint venture activities as well as specific intra-group purposes. Furthermore. According to the Formal Foreign Companies Act (“FFCA”). is considered a Formal Foreign Company. 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 limited or “silent” partner is liable only up to the amount of his capital contribution. its deed of incorporation. An EEIG formed under the Dutch law has a legal personality and enjoys fiscal transparency throughout the European Economic Area. Formal Foreign Companies . who may either be individuals or legal entities.Baker & McKenzie 5. Pursuant to a limited partnership (CV). There are no restrictions on foreign nationals entering into a partnership with Dutch residents. the management of such company is obliged to register with the Trade Register of the Chamber of Commerce in the Netherlands the company. A special partnership form is the European Economic Interest Grouping or EEIG (Europees Economisch Samenwerkingsverband or EESV) for the cooperation between entrepreneurs in Europe. The limited partner is not registered with the Trade Register.000. 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. provided that he does not in any way take part in the management of the partnership vis-à-vis third parties. Under the FFCA. whether general (Vennootschap Onder Firma or VOF) or limited (Commanditaire Vennootschap or CV). can be formed by at least two partners. Companies which are subject to the laws of an EU Member State or an EEA party. 26 6.
This subject is thoroughly elaborated in Chapter XVI. 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.e. Consequently. However. possibly.To date. including the termination provisions thereof. however. For example. 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. particularly those provisions that aim at protecting the agent. Finally. a choice for foreign law will not set aside the so-called Dutch “overriding mandatory rules”.7. 27 .The parties are thus in principle bound by their agreement. distribution agreements are governed by the general principles of Dutch contract law. A Dutch court may. Parties are free to determine the governing law of their agreement. 8. mandatory notice periods apply and an agent is in principle entitled to receive a goodwill compensation upon termination. 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. set aside a contractual provision if such a provision is deemed unacceptable in view of the principles of reasonableness and fairness. Dutch law does not provide for specific provisions on distribution agreements. 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. the rules regarding goodwill compensation and the special termination protection applying to “small” agents have been considered as such overriding mandatory rules. These principles are rather liberal and allow for substantial freedom for the contracting parties. concludes those contracts in the name and for the account of the principal. an individual who acts as agent for not more than two principals and who does not employ more than two assistants).
Baker & McKenzie When a distribution agreement is silent on termination. be the case if the manufacturer has given the impression that the contract would be continued. As a general rule. notice periods may vary from one month to more than one year. for example. such agreement may be terminated by giving reasonable notice if such infers from the principles of reasonableness and fairness. it should be noted that EU and Dutch competition rules have a significant effect on distribution agreements. the duration of the relationship.This subject is thoroughly elaborated in Chapter XVI. Finally. a distributor shall not be entitled to compensation if a reasonable notice period has been granted.g.This may. 28 . and the distributor has made investments that cannot be earned back. 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. the dependence of the distributor. As an exception to this rule. All relevant factual circumstances need to be taken into account in order to determine the reasonableness of a notice period (e. investments recently made etc.). Depending on the circumstances.
No Ministry of Justice approval 29 . are personally liable until the NV or the BV has ratified the actions performed on its behalf during the pre-incorporation period.o.o. 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. can be registered with the Trade Register of the Chamber of Commerce. Prior to incorporation. or the BV i.o.o. managing directors. or ultimate beneficial owners. An NV or a BV is allowed to do business during the pre-incorporation period and the NV i. 2. The notarial deed of incorporation must be executed in the Dutch language before a Dutch civil law notary in the Netherlands. confirms that the incorporation capital has been transferred to a bank account in the name of the NV or the BV in incorporation.” in the process of being incorporated) is added after the name. The Subsidiary Doing Business in the Netherlands 1. Incorporation cooperative A Cooperative is incorporated by the execution of a notarial deed in the Dutch Language by a Dutch notary in the Netherlands. 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.VI.” (“in oprichting. a statement of no objection from the Ministry of Justice as well as a bank statement must be obtained. or the BV i.o. The persons acting on behalf of the NV i. The bank statement. 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.
subject to any restrictions that may be contained in the company’s Articles of Association. A Dutch NV and a BV must have an authorized and issued capital.A. which indicates the level of liability of members.A. Shares without a par value are not permitted. or U..The minimum issued share capital is EUR 45. Registered shares issued by an NV may be freely transferred. preferred.Baker & McKenzie and bank statement are required. Upon incorporation. 3. or priority shares. 30 . B. the Cooperative is registered with the Trade Register of the Chamber of Commerce.There is no statutory requirement for a Cooperative to maintain a minimum amount of capital. Managing or supervisory directors are required to hold shares in the NV or the BV. Bearer shares are freely transferable upon delivery of the related share certificates. 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. 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. 4. 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.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.A. The word ‘coöperatie’ or ‘coöperatief’ must be included in the name of the Cooperative as well as the reference W. Upon the formation.000 for an NV and EUR 18. divided into a number of shares with a par value expressed in euros. The Articles of Association of a BV must stipulate limitations on their transferability. Unless the deed of incorporation explicitly states otherwise.000 for a BV. the incorporators become automatically members of the Cooperative upon incorporation. Transfer of shares and membership interest An NV can issue bearer or registered shares and a BV can only issue registered shares. Registered shares can be either ordinary.
or usufruct on the shares. Any amendment or adjustment of the shareholders’ register requires the signature of one of the managing directors. such as prior consent of the management board. provided that a Dutch registered accountant’s statement is obtained. at least 25% must be paid up. 5.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. pledgor. Issuance of new shares Upon issuance of registered shares. The transfer of shares is recorded in the shareholders’ register. and usufructuary. Shares may also be paid in kind. the extent to which the par value of the shares has been paid up as well as the particulars of any transfer. NV or BV number. pledge. Membership interests in the Cooperative can be held by (foreign) private individuals. The amount exceeding the total value is considered as non-stipulated share premium. The register contains the company name. pledgor. attachment. authorized and issued share capital the numbers of all registered shares. the names and (electronic) addresses of the shareholder. or the meeting of a certain class of membership interests. The Articles of Association may provide that the membership interests are freely transferable or make transfers subject to certain restrictions. Shareholders’ register Each shareholder. 31 . Bearer shares must be paid in full upon issuance. 6. (foreign) legal entities. and partnerships. 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. The managing directors of an NV and BV with registered shares must keep a shareholders’ register at the registered office of the company. confirming that the value of the contribution in kind is equal to or exceeds the total par value of the issued shares. the general meeting of members.
in three consecutive years. together with reserves as reflected in the balance sheet. consisting of one or more managing directors who are appointed and dismissed by the shareholders. The NV. none of the managing directors needs to be a Dutch resident. 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. unless they are aware of this provision and have not acted in good faith. Only a (foreign) private individual can be appointed as a supervisory director. From a Dutch corporate law point of view. meets the following criteria: The issued capital of the company.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. A managing director can be a (foreign) private individual or a (foreign) legal entity. A provision to this effect can be invoked against third parties. No person may serve as managing director and supervisory director at the same time. 8. 7. or another corporate body. and the Cooperative are managed by a board of managing directors. Large Companies Regime • An NV and a BV are subjected to the Large Companies Regime if the company. These cannot be invoked against third parties. and a Cooperative may institute a supervisory board to advise and supervise the managing directors. 32 . The Articles of Association may provide that a number of specified acts of the board of managing directors require prior approval of the shareholders. the board of supervisory directors. but do not participate in the management. the BV. 9. The registration with the Trade Register of the Chamber of Commerce is updated accordingly. amounts to at least EUR 16 million. They are appointed and dismissed from their position through the general meeting of shareholders and general meeting of members respectively. a BV. Supervisory directors An NV.
a mitigated Large Companies Regime is available. who is also the company’s managing director. work outside the Netherlands. 10. provided that the majority of their employees.e. and Together. A company may voluntarily apply to be subjected to the Large Companies Regime. employed by the company and by the legal persons with which it forms one group. 33 . 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 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. the NV or the BV should institute a supervisory board and the board of managing directors is to be appointed by the supervisory board. an enterprise of which the company owns at least 50% of the shares) has installed a Works Council. As a consequence hereof. the company and its affiliate(s) employ an average of at least 100 employees in the Netherlands..Doing Business in the Netherlands • • The company and/or an affiliated company (i. 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.
If one or more of their signatures are missing. 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. Financial statements The annual accounts of a Dutch NV. In the event that the annual accounts are not adopted within two months after the period permitted by law. a BV.e. The board of managing directors must file the adopted annual accounts within eight days with the Trade Register of the Chamber of Commerce.Baker & McKenzie VII. this shall be stated giving the reason therefor. and Publication Requirements 1. annual accounts are prepared by the board of managing directors. In case the NV or the BV is subjected to the Large Companies Regime.. the general meeting of shareholders or members may provide for an extension of six months. In certain circumstances the annual accounts must be accompanied by a director’s report an auditor’s report. and explanatory notes and the consolidated annual accounts if applicable. The annual accounts shall be signed by all managing directors and supervisory directors. the annual accounts are also to be submitted to the company’s Works Council. has to be appointed annually by the general meeting. The annual accounts are submitted to the shareholders’ meeting or general meeting for adoption within five months following the end of the financial year. within 13 months (5 months + extension of 6 months + 2 months) after the financial year. 34 . the profit and loss account. 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. Each year within five months after the end of the financial year of the company. which will report on the annual financial documents provided by the board of managing directors. none of whom can be a managing director. In special circumstances. Auditing. The adoption should take place within two months after the preparation. Cooperatives shall substitute the profit and loss account for a statement of operating income and expenses. Reporting. i. or a Cooperative consist of the balance sheet.
important events that occurred after the balance sheet date and a list of branches. the annual accounts may be prepared in accordance with generally accepted accounting principles in one of the member states of the European Communities. Pursuant to the Dutch Corporate Governance Code. Other information . 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). and the development of turnover and profitability as well as information about research and development activities. and the countries where those branches 35 4. If the company makes use of the aforementioned possibility. an explanation of those circumstances must be provided. The director’s report may not conflict with the annual accounts. The director’s report contains information on expected future business. 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. to the compliance with the corporate governance code. 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. financing. 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.2. of its solvency and liquidity. insofar as the nature of annual accounts permit. particularly (unless this conflicts with legitimate interests) on investments. it shall make a statement in the explanatory notes of its annual accounts. If extraordinary circumstances that would not normally need to be addressed in the annual accounts influenced the expectations of future business. a summary of profit-sharing certificates or comparable securities. as well as to the non-application of any best practice provisions. If so justified by the international structure of its group. 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. 3. personnel.
A company qualifies as small. A small company does not need to publish its profit and loss accounts and other information.Baker & McKenzie are located. However. the valuation principles. auditing. or English prior to the filing with the Trade Register of the Chamber of Commerce. auditing. and publication requirements depend on the size of the company. If justified by the activity of the company or the international structure of its group.4 M < EUR 8.5 M > EUR 35 M > 250 . Currency The sums quoted in the annual accounts must be expressed in euros.8 M < 50 Medium-sized < EUR 17.The annual accounts and director’s report must be translated into Dutch. unless it is exempt from group consolidation requirements. German. Furthermore. medium-sized companies must publish an abridged version of their profit and loss account. unless the shareholders have resolved to use another language. Classification Small < EUR 4. mediumsized. The minimum reporting. 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. and publication requirements. It may suffice for small and medium-sized companies to publish an abridged balance sheet and explanatory notes. and group companies whose accounts are included in the consolidated accounts of another company are subjected to less stringent reporting.5 M < EUR 35 M < 250 Large > EUR 17. and determination of the results. Dutch law contains detailed requirements for the composition of the balance sheet. its annual accounts may be prepared in a foreign currency. Financial information on subsidiaries is used to determine the size of a company as if the company were required to consolidate. 6. 5. Language The annual accounts and the director’s report must be written in Dutch. as well as the profit and loss statement and the explanatory notes. or large if it meets certain criteria. medium-sized. French. Small.
the required information of which can only be obtained or estimated at disproportionate expense or with great delay. The consolidated accounts. and The declarations and documents are to be filed for deposit with the Chamber of Commerce. Consolidated accounts The company solely or jointly with another company as the holding company of a group. 37 . showing its own financial information and of its subsidiaries in the group and other group companies. the combined significance of which is not material to the group. the director’s report. a group company may be exempt from its reporting. the following requirements must be fulfilled: • • • • • The exempt company’s financial information has been consolidated by another company whose accounts have been drawn up. and publication requirements. 9. is required to include consolidated annual accounts in the explanatory notes to its annual accounts. or as part of a group. auditing. it does not need to prepare a director’s report. consisting solely of its individual annual accounts. 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. 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. group companies. French. Exemption for group companies Doing Business in the Netherlands Subject to strict requirements. and the auditor’s report have been drawn up in or translated into Dutch. German or English. In order to make use of the exemption. nor does it have to comply with certain auditing and publication requirements. The obligation to consolidate is not required for information concerning: • • group companies.8. The exempt group company has the right to prepare an abridged version.
Auditing requirements The consolidated accounts. or English and submitted with the Trade Register of the Chamber of Commerce. French. No company to be involved in the consolidation has securities in issue officially listed on an exchange. Medium-sized and large companies are required to have their annual accounts audited. 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. 38 . On consolidation. It should also be verified that the director’s report does not conflict with the annual accounts. 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. 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. provided: • • • • 10. and The financial information which the company should consolidate has been included in the consolidated annual accounts of a larger entity. A part of a group may be excluded from the consolidation. the interest in which is only held for disposal. the company qualifies as a small company. other respective corporate bodies may be authorized to appoint the accountant. 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.Baker & McKenzie • • • • Consolidation may be omitted if: group companies. and the auditor’s reports are drawn up in or translated into Dutch. the director’s report. German. If the shareholders fail to do so. the director’s report. The external auditor must examine whether the annual accounts provide the requisite legal disclosures and whether the annual accounts. The consolidated accounts and the director’s report are prepared in accordance with the Seventh EC Directive or similar principles. and other information comply with the statutory requirements.
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. and was amended on 1 June 2005. The purpose of this Act is to prevent abuse in respect of certain foreign companies (i. companies that are formally incorporated under domestic law but that have their actual management in the Netherlands). The advantage for the incorporators of such companies is that the preventative supervision is avoided and. These exemptions merely relate to the minimum capital requirements. in particular. For companies not formally governed by the laws of the European Union or the European Economical Space. Since the last amendment. the regulation in respect of the protection of capital is more flexible.11.e. 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. The normal reporting and publication requirements described above apply to all formal foreign companies. 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 managing directors of the foreign companies are to be registered the company with the Trade Register of the Chamber of Commerce. 39 .
It is up to the General Meeting of Shareholders whether the explanation of the company is satisfactory or not. 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”). applies to Dutch NV companies with an official listing in the Netherlands and/or abroad. or does not intend to comply therewith during the current or subsequent financial year. 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. However. In principle. composed of individual Supervisory Board members. in case a company fails to comply with the principles or best practice provisions. who will be appointed by the Supervisory Board and whose duty will be to assist the same. an explanation must be given in the annual report. 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. 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. Listed companies are to comply with each principle and provision. will play an active role in supervising the functioning of the internal accounting department and the risk management and control systems in general. 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. Principles and Best Practice Provisions The Code sets forth general principles. they are not required to provide details in relation to each provision of the Code. The audit committee. Considerable attention is given to the companies’ financial reporting. VIII. Corporate Governance Code (Code Tabaksblat) 1. The Code also proposes to legally formalize the position of the Company Secretary.Baker & McKenzie The Dutch Corporate Governance Code (the “Code”). each of which are followed by specific best practice provisions. also known as the Code Tabaksblat named after the Chairman of the Dutch Corporate Governance Committee. 40 .
the Supervisory Board and its committees. 4. the Management Board. the shareholders and General Meeting of Shareholders. and Below are the main recommendations from each of the chapters. Five Chapters • • • • • Doing Business in the Netherlands The Code is subdivided into several chapters. 3.commissiecorporategovernance. 41 . Any deviations from the principles and best practice provisions should be specifically disclosed. including significant changes and planned improvements in that respect. The full text and further information (though limited in English) can be found on the Committee’s website: www. containing recommendations in relation to: the compliance with and enforcement of the Code itself. discussed. the audit of the financial reporting and the position of the internal auditor function and of the external auditor. 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.nl. Management Board • • • A Management Board member is appointed for a maximum term of four years. 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 Management Board reports annually on the functioning of the internal risk management and control systems.2. and approved during the General Meeting of Shareholders. The Management Board is responsible for managing the company’s business risks and drafting a risk control policy. renewable for a maximum of four years at a time.
operational. A Management Board member shall give periodic notice of changes in his holding of securities in Dutch listed companies to the compliance officer. • 42 All Supervisory Board members must actively seek to obtain sufficient information in order to form a sound and well-informed opinion. • • • 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. Each Supervisory Board member must be capable of assessing the company’s general policy. must be disclosed. unless this would be manifestly unreasonable. and financial nature to the chairperson of said board or to a designated official (“whistleblower protection”). including the level of prearranged compensation upon dismissal (“golden parachutes” and severance packages). unless said Management Board member has transferred the discretionary management of his securities portfolio to an independent third party. The compensation upon dismissal of Management Board members should normally not exceed their salary for one year (based on the “fixed” remuneration component). .Baker & McKenzie • • The Management Board must ensure that there is a way for employees to report alleged company irregularities of a general. Membership of the Supervisory Board of other companies within the group to which the company belongs does not count for this purpose. Supervisory Board • The most important elements of the remuneration package. or at least until termination of employment with the company. • • 5. Shares granted to the Management Board members without consideration must be retained for a period of at least five years. 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. 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.
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. each of which has specific detailed responsibilities. No one may simultaneously serve on more than five boards of listed companies (being the Chairman of a board counts as double). 43 .Doing Business in the Netherlands • • • • • • • • • • • Upon their appointment. 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. This report is submitted for approval to the shareholders’ meeting. specific aspects that are unique to the company in question and their responsibilities. Each Supervisory Board with four or more members must have an audit committee. The same applies to the remuneration committee. a remuneration committee. with the additional exclusion of any Supervisory Board member who is a Management Board member of another listed company. The Code contains detailed provisions regarding the activities of the various Supervisory Board committees. The company secretary is appointed and dismissed by the Management Board. The Supervisory Board must prepare an annual remuneration report containing extensive information on the Management Board remuneration policy. after approval of the Supervisory Board has been obtained. and a selection and appointment committee. A Supervisory Board member may be appointed for a maximum of three successive four-year terms. In the event of (suspected) accounting irregularities. The Supervisory Board is assisted by the company secretary. the audit committee must be the external auditor’s primary contact. 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. Supervisory Board members follow an introduction program which deals with general financial and legal affairs.
without limitation and in all circumstances. The Code lays down instructions on the content of the external auditor’s report to the Management Board and the Supervisory Board. Shareholders must have access to the shareholders’ meeting by webcast or telephone. 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. Shareholders and General Meeting of Shareholders • • • • • The trust office holding shares on behalf of depositary receipt holders shall. how they have voted on specific cases. 44 .Baker & McKenzie 6. The profit retention/dividend policy will be placed on the agenda of the annual meeting and changes in this policy are submitted thereto. 7. Institutional investors must annually publish their policy on the exercise of voting rights ensuing from shares held in listed companies and disclose. Financial Reporting • • • • • The Management Board is responsible for the quality and completeness of publicly-disclosed financial reports. on request. The Supervisory Board supervises the monitoring of the internal procedures for the preparation and publication of all financial reports. The external auditor can be asked questions at the shareholders’ meeting in relation to his statement on the fairness of the annual accounts. issue proxies to such holders who so request. Decisions on important acquisitions or divestitures are subject to the approval of the shareholders meeting.
The Committee will publish its final report mid-2008. the Corporate Governance Code Monitoring Committee. 45 . and the remuneration of Management Board members.8. the Committee will make recommendations on possible amendments to the Code. In this report. a special committee. Monitoring of the Code Doing Business in the Netherlands Starting from 2005. The Committee particularly focused on: • • • the application of and compliance with the Code. has monitored the Code. the attendance rate of shareholders at General Meetings of Shareholders.
e. and benefits from a substantial interest (aanmerkelijk belang) in a company located in the Netherlands. income from employment in the Netherlands. and income deemed from residential home ownership. a non-resident may opt to be treated as a resident taxpayer for personal income tax purposes. Box II income includes income from shares in case of substantial interest of 5% or more. income from other activities.” “Box II. Each box has its own rules for determining the tax base and its own tax rate. 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. 46 . 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. An individual who does not live in the Netherlands (i. However. 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.” • • • Box I income includes profits. private individuals are subject to personal income tax. Box III income includes income from savings and investments.e. employment income.. Examples include income obtained from a Dutch business operated by a branch in the Netherlands. as stipulated by law.” and “Box III. directors’ fees. A tax treaty will be applicable only if the recipient of Dutch source income is a resident of one of the treaty countries. Please note that some articles are excluded by law for non-resident who have obtained resident status. a resident) is subject to taxation on his or her worldwide income. The Dutch tax authorities (Belastingdienst) may wish to tax recipients of Dutch source income. 2. General In the Netherlands.Baker & McKenzie IX. Personal Income Tax 1. a non-resident) is subject to taxation only on certain income from a Dutch source. income obtained from Dutch real estate. Every individual who lives in the Netherlands (i. Income from Box I is taxed at a progressive rate with a maximum of 52%..
Employees who are residents of a treaty country. 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. In other words. but who work in the Netherlands are also subject to Dutch tax.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%. minus the amount of his or her outstanding debts and minus a basic allowance of EUR 20. even if they are nonresidents and perform their duties outside the Netherlands. and The employee spends fewer than 183 days per calendar year in the working country. minus debts and the basic allowance.315. 3. and the same applies to losses in Box II. against Box I income only.2% (4% of income x 30% tax rate). The taxable income in Box III is calculated at 4% of the fair market value of the taxpayer’s property. 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. Income from Employment Managing and Supervisory Directors In general. carried backward or forward. is 1. Box III income is set at a fixed notional yield of 4% of the taxpayer’s average equity. 47 . the tax burden on savings and investments that fall within the scope of Box III. i..e. In general – based on international tax treaties (if applicable) employment income is taxed in the country where the work is performed. However. Other Employees Employment income earned by Dutch resident employees is fully subject to personal income tax. remuneration received by managing directors and supervisory directors of companies located in the Netherlands is subject to income tax. The company paying the remuneration must withhold wage tax (as a pre-levy on income tax) on payments made to the directors. The remuneration is not charged to a branch of the employer in that working country. There are impermeable “walls” between the three Boxes: losses that the taxpayer incurs in Box I can be set off.
b. and the employee may. they have more than 2.. an addendum to the employment contract should be drafted to apply the 30% ruling in respect of the agreed-on wages. teachers at international schools. This may be particularly relevant with respect to directors’ fees. Consequently. benefit from treatment as a nonresident for tax purposes. at his or her request. Status of the Employer. The Employee’s Prior Employment or Stay in the Netherlands. and The Employee’s Professional Position There are two conditions with regard to the employee’s professional position: 1. As a rule. The Employee’s Professional Position. 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. he or she will not be taxed on passive income such as interest.e. 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. 2. Please note that in general. top-level managers of international groups. The employment contract does not necessarily have to be performed in the Netherlands. 30% of the employee’s salary may be paid out as tax-free compensation for costs. 48 .5 years of experience in the company).Baker & McKenzie 4. scientists. An employee assigned to the Netherlands (or hired from abroad by a Dutch company or branch) must have specific expertise. c. employees who are resident in the Netherlands. The specific expertise must be scarce or unavailable on the Dutch labor market. 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. i. The main conditions attached to the 30% ruling pertain to: a. the 30% ruling also applies to income earned in relation to employment performed outside the Netherlands. The specific expertise requirement should be understood in a broad sense.
or foreign withholding taxes already paid on personal income for the taxable year. there is no time frame in which the request for the 30% ruling should be filed. The 10-year period commences on the first day of employment or prior to arrival in 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. it is possible to file an objection to the tax inspector’s decision within six weeks. this may result in a refund or a payment of personal income tax. However. the employer and employee should file a joint application request with the Tax Inspector in Heerlen (the Netherlands). Levy of Taxes 49 . However. The only exception is the deduction for mortgage interest paid on a house located in the Netherlands.g. the 30% ruling will take effect starting on the first day of the month following the month in which the application form is filed.Wage tax. it must be filed before April 1 of the following calendar year. The 30% ruling is granted for a maximum period of 10 years. An extension of this period can be obtained by request. Taxpayers usually receive a tax return automatically. Standard application forms are available for this purpose. If the 30% ruling is not granted. Status of the Employer In order to be able to apply the 30% ruling. Dutch dividend tax. Non-residents are not eligible for personal deductions. Dutch personal income tax is levied by a personal income tax assessment based on a tax return submitted to the Dutch tax authorities. will be set off against the personal income tax due. e. Labor costs are deductible by means of a “Labor tax credit” for both resident and non-resident taxpayers. the employer is obliged to withhold wage tax in the Netherlands. 5. In order to apply for the 30% ruling.. for alimony payments or losses incurred on venture capital investments. 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. If that period has expired. On balance.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. In principle.
or III income.60% 41.Baker & McKenzie 6. 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. II.70% for income tax and 31. The rate in the first bracket (15. and III income.860 in excess of EUR 53.15% for social security contributions. The rate in the second bracket (23. some personal obligations or exceptional expenses are deducted by means of a reduction in Boxes I. Rate 33. The rates in the third and fourth brackets consist only of income tax.85%) consists of 10. Some specific expenses that are not related to one of the boxes. 50 .074 for individuals up to the age of 65 and EUR 970 for individuals aged 65 or older.15% for social security contributions. 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. The general tax credit is EUR 2..25% for social security contributions.579 up to EUR 31.589 up to EUR 53. The rate in the second bracket (41.25% for social security contributions.70%) consists of 2.45% for income tax and 13.70% for income tax and 13.95%) consists of 10.860 (ii) The following four tax rates apply in 2008 for individuals aged 65 or older and who are residents of the Netherlands. The rate in the first bracket (33.45% for income tax and 31.579 EUR 17. II.g. e. The rates in the third and fourth brackets consist only of income tax.85% 42% 52% Taxable Income up to EUR 17.589 EUR 31.60%) consists of 2.
the income has a profit-sharing note entitling him. A capital gain or loss consists of the transfer price minus the acquisition price. alone or together with his or her partner (spouse or registered partner). her. claims. An individual who owns a substantial interest is taxed on all the benefits derived from that holding. and other forms of profit participation will qualify as substantial interest and will be taxed as such in Box II. has the right to acquire 5% or more of the nominal paid-in capital of a company.579 EUR 17. 51 . including stock options.589 up to EUR 53. 7. all of his or her other holdings in the company. and/or If an individual holds less than 5% of the subscribed capital of a company.Doing Business in the Netherlands Special Rates Rate 15. A capital loss from a subscribed capital can be deducted only from income from substantial interests in Box II.589 EUR 31.70% 23. an individual has a substantial interest if he or she. If an individual holds a substantial interest. he or she may nevertheless have a substantial interest if certain relatives also hold a substantial interest in that capital. directly or indirectly: owns 5% or more of the nominal paid-in capital of a company.860 There are no special tax rates in the 2001 Personal Income Tax Act.860 in excess of EUR 53. such as dividends and capital gains received upon the disposal of shares in the company at the rate 25%.95% 42% 52% Taxable Income up to EUR 17. Notwithstanding the above. including regular periodic benefits. if the individual places an asset at a company’s disposal while that individual has a substantial interest in that same company. or them to 5% or more of the annual profits or liquidation revenue.579 up to EUR 31. Substantial Interest • • • Generally.
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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.
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.
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).
Corporate Income Tax
Doing Business in the Netherlands
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.
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
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
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.
Furthermore.e.Baker & McKenzie Through elimination of part of the income from patents from the taxable base. 2. 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. at least 5%). if the exemption is also allowed under Dutch domestic rules. Finally. 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. Dividend withholding tax The Dutch domestic dividend withholding tax rate is 15%.. As the Patent Box has already received the “no-state aid” declaration from the European Commission. dividend withholding tax is refunded to companies residing in the European Union and which are exempt from corporate income tax (such as pension funds). Branches Dutch branches of nonresident companies are regarded as nonresident taxpayers for corporate income tax purposes. Domestic Source Income • • • 56 Nonresident taxpayers are subject to corporate income tax only on their domestic source income. it is effective starting 1 January 2007. and net income from immovable property located in the Netherlands. income from a substantial shareholding as defined in Chapter 4 of the Individual Income Tax Law of 2001 in a resident company (i. . 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. For practical purposes. Such a percentage may be lowered by means of the application of tax treaties and the EU Parent/Subsidiary Directive. provided that the shares are not considered business assets. such income will effectively be taxed at a rate of 10%.
Foreign Branch Profits 57 . Since the allocation of profits is difficult. regardless what the rate might be. These agreements are confirmed in writing in the form of APAs and are strictly observed by the Dutch tax authorities. Branch Profit Remittances Branch profit remittances are not subject to withholding tax. 25. future profits are. Method of Taxation and Tax Rate The determination of domestic source income is basically the same for branches and subsidiaries. However.5% is applicable on the excess profits. neither do domestic sources include interest payments paid by Dutch branches.000 are subject to 23%.000 are subject to a 20% corporate income tax as of 1 January 2008. are exempt from Dutch corporate income tax if the branch is subject to foreign tax. set off by such losses for the purpose of applying the foreign corporate income tax exemption.000 and EUR 200. The branch is also subject to corporate income tax at the same rate as the subsidiary.5% (this is according to the rules that apply effective 1 January 2008).Doing Business in the Netherlands Domestic sources do not include royalties paid by domestic licensees. i.. based on arm’s-length allocation of income. In practice. and Intercompany transactions must be carried out on an arm’s-length basis. The tax rate of 25. in principle. the following principles govern the attribution: • • The branch is considered an independent entity for corporate income tax purposes.e. 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. Profits earned by foreign branches of a Dutch resident company. 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 between EUR 40. Foreign losses are deductible from domestic taxable profits. However. The nonresident company is regarded to be the taxpayer and not the Dutch branch of the company. profits up to EUR 40.
the participation exemption includes changes in the value of a right to installments of the sale or acquisition price of a participating interest. Participation Exemptions Basic Rule 3. The participation exemption includes amendments to the sale or acquisition price of a qualifying participating interest. 4. The participation exemption may also apply to results on financial instruments (including loans) covering currency exchange risks with respect to foreign participating interests. the participation exemption regime resulted in the establishment of thousands of holding companies in the Netherlands. Internal interest and royalty payments are not taken into account between a branch and its headquarters. Branch v. provided a ruling is obtained in advance from the Dutch tax authorities. 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. Historically. The profit from a Dutch branch may be transferred to its headquarters free from any withholding tax. branches and subsidiaries are taxed virtually on the same basis. This exception does not apply to Dutch subsidiaries. see Section 6). Dividends paid to a foreign parent company are. Most tax treaties provide that certain auxiliary activities carried out in the Netherlands do not constitute a branch for corporate income tax purposes and. the number and the amount of which installments were not fixed in the year of sale or acquisition. 2. 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 . or even to zero. Subsidiary As indicated above.Baker & McKenzie 3. subject to Dutch dividend withholding tax at the ordinary rate of 15% (reduced to a lower percentage. by virtue of a tax treaty or EU regulations). in general. Interest paid by a subsidiary on loans and royalties is. do not incur Dutch taxation. tax deductible if it is at arm’s length (however. as a result. Under the participation exemption regime. The main differences are described below: 1. Up to 31 December 2006. however. In addition.
and licensing activities. The reform is aimed. 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. the revised participation exemption applies to any shareholding of at least 5% in both (i) active companies (regardless of the level of taxation). leasing. double tax. The 2007 CIT Reform replaces the former requirements with a simple rule. recalculated according to Dutch tax standards (and without taking into account loss carryforward. This extends the possible application of the participation exemption regime to a number of new and very interesting scenarios. or group reliefs).. With regard to foreign participations.e. and (ii) Passive Investments that are subject to an effective tax rate of 10% or more. among other things. 2007 CIT Reform: amendments to the requirements As of 1 January 2007. there were two additional requirements. and b. that the subsidiary is subject to tax and that the subsidiary is not merely held as a portfolio investment. at simplifying the regulations applicable to the participation exemption and making this regime more “competitive” and fully compatible with EU rules. an investment qualifies as Passive Investment subject to less than 10% taxation if: a. consist of more than 50% of “free” portfolio investments1.This definition includes intra-group financing. On the other hand. directly or indirectly. the 2007 CIT Reform has amended the participation exemption regime. unless such activities qualify as ‘active’ pursuant to detailed safe-harbor rules. Pursuant to the new rules. i.Doing Business in the Netherlands held as inventory. The assets of the subsidiary/entity. 59 . pursuant to which the participation exemption which will apply to any participation of at least 5% in domestic and/or foreign subsidiaries or entities. In sum. as briefly indicated in item 5 below. The subsidiary is not subject to tax on profits which results in a tax levy of at least 10% on profits. 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.
all expenses incurred in connection with a subsidiary qualifying for the participation exemption are deductible. Where the Netherlands taxpayer owned.5%. when the Passive Investment is located within the EU and certain other conditions are met.Baker & McKenzie rate of 25. 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. as of 1 January 2007. provided that 90% of the assets of these subsidiaries consist of real estate (see item f below). no credit is granted. the participation exemption remains available for three more years on this participation. Furthermore. However. However. Expenses incurred in relation to Participating Interests Apart from certain provisions limiting the deduction of interest expenses (as indicated in Paragraph 6 below). If the passive investment itself is not taxed at all. the taxpayer can opt for a credit matching of the actual underlying tax paid. Currency losses realized on loans used to fund participations must be recognized as soon as they are incurred. capital gains/losses and dividends).. as of 31 December 2006. as a general rule. In addition to the foregoing. This credit is set at 5% of the gross benefits derived from the Passive Investment (i. no longer deductible. whereas a currency gain will normally be taxable upon 60 . no exemption is available in cases where the minimum shareholding requirement of 5% is not met. as of 1 January 2007. An important change for real estate investment subsidiaries is that the participation exemption will always apply to these subsidiaries. Generally.e. 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. a tax credit applies to such income. the following additional features have been implemented. Pursuant to the EU Parent-Subsidiary Directive. an interest in a subsidiary of less than 5% in relation to which the participation exemption applied on the basis of the old legislation. 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. Expenses incurred in connection with the disposal of a qualifying subsidiary are.
Deduction of losses incurred in the liquidation of an intermediate holding company may be denied in certain situations. the Dutch creditor realizes a gain upon conversion of a loan to its subsidiary if this loan has been written off by the creditor. capital losses and a decline in value of the shares in a qualifying participating interest are not deductible. 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. this gain is not taxed immediately. Losses incurred on a completed liquidation of the subsidiary are deductible. However. which might have reduced the losses that were eligible for setoff. which applies effective early 2006. Generally. Instead. As a general rule. However. In the new system. For companies that fund foreign participating interests with loans denominated in currencies other than the Euro. Capital Losses under the Participation Exemption Conversion of Loans In the recent past.Doing Business in the Netherlands redemption of the loan. 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. the participation exemption will. The difference between the book value of the loan and its fair market value would form taxable income for the debtor. the deductible amount is equal to the difference between the funds invested and the liquidation proceeds. subject to complex anti-abuse rules (which will not be discussed exhaustively here). a revaluation reserve is created upon conversion. a new way of taxing “conversion profits” was introduced. under certain circumstances. Liquidation losses may not be deducted if the activities of the liquidated subsidiary are continued elsewhere within the same group. since this provision was met with considerable resistance in the corporate market (especially due to its adverse consequences for internal reorganizations and acquisition structures). under certain circumstances. However. equal to the amount by which the loan has been written off. If a foreign branch is converted into a subsidiary. such a general rule is subject to the following exception. 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. apply only once losses of the branch incurred in the past have been recovered.
Below are certain significant examples. a taxable profit is recognized for the amount of the increase. The removal of such condition and the extension of the participation exemption regime to hybrid instruments with 62 . As this requirement was removed for active companies. This makes the Netherlands an excellent jurisdiction for feeder companies holding larger investments in certain mutual and private equity funds.” Mutual Investment Funds and Private Equity Funds In respect of mutual investment funds. 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. 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. a Dutch holding company may apply the participation exemption to such investments regardless of the jurisdiction in which the fund is located. Presently. depending on certain facts and circumstances. 5% or more investments in active operations that are completely exempt from local taxation are now eligible for the Dutch participation exemption. the participation exemption regime used to be available only to 5% quota holders in Dutch mutual investments funds. the application of the participation exemption may be extended to a number of interesting scenarios. The revaluation reserve is simultaneously written off for the same amount of profit. New Possible Tax Planning Opportunities as of 1 January 2007 Within the framework of the 2007 CIT Reform. provided that the active asset test is satisfied.Baker & McKenzie again after its conversion into equity. 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. 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.
5. provided the parent company holds at least five percent of the shares in the subsidiary. Capital Gains Capital gains are generally subject to corporate income tax at the ordinary rate. the amendments to the participation exemption regime are particularly favorable with respect to real estate companies. the acquired asset need not have the same economic function within the business as the replaced asset. meaning that they will not have any effect on the minimum real estate percentage. however. 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.Doing Business in the Netherlands certain characteristics (as indicated in Section 6. Under certain conditions. This “90% Test” must be considered on the basis of the subsidiary’s consolidated balance sheet. 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. If this is done properly. For assets with a maximum depreciation period of 10 years. but may be deducted in full from business profits. From 2007 onwards. both the investment activities (real estate investment) and the business activities would qualify for the participation exemption. as far as possible real estate investments from business activities such as property management. with intercompany receivables and debts being set off against each other. it is therefore important to separate. Capital losses need not be deducted from capital gains. 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”). Real Estate Companies Finally. The value of the assets must be determined on the basis of their fair market value. and (b) Capital gains earned when the capital asset is exchanged for another capital asset that has the same economic function in the business. the participation exemption applies.
g. business reasons.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).. 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. a capital contribution in a related entity (e. Limitations on Deductions of Interest The interest expense in relation to these tainted loans is not deductible. 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. 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. 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).. no compensatory tax will be deemed to exist). . the saving of taxes therefore will not qualify as a business reason) or. Tainted debt basically is debt which was incurred from a related company or individual (e.e. the shareholder) in order to fund a profit distribution. this “compensatory tax exception” does not apply any longer if the tax authorities can reasonably establish that the loan. or the transaction in connection with which the loan was given. 6. it can be demonstrated that the contribution of loan capital instead of equity is largely based on commercial motives (i. alternatively • As of 2008. 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 business reasons criterion is used to exclude tax-driven schemes from eligibility for interest deduction.g. unless: • This Section provides an overview of certain restrictions on the deduction of interest expenses considering certain peculiarities of hybrid loans..
the deductibility of interest on all related party loans that were until 1 January 2008 defended on the compensatory tax exception. the participation exemption regime applies to income and gains received on hybrid loans. As the law does not include a grandfathering rule for existing loans. or if it has a term of more than 50 years. As a result. provided that: • • • The loan has no term. and The remuneration on the loan depends (almost) entirely on the profit of the borrower.Doing Business in the Netherlands reasons. but can be reclaimed only in case of insolvency. Debt is re-qualified into equity for tax purposes. 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. and the issuer is a related company of the creditor. 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. if applicable). 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. liquidation of debtor. Conversely. may potentially be challenged by the Dutch tax authorities. 65 . if the following conditions are fulfilled: • • • The loan is subordinated to all creditors. Article 10. the creditor of the hybrid loan also has a shareholding in the issuer that qualifies for the application of the participation exemption regime. 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. 1.d CITA Hybrid Loans Debt is re-qualified into equity for tax purposes if the hybrid loan meets certain requirements.
Article 10b Corporate Income Tax Act 1969 • • • The interest paid and capital losses realized on a loan are not deductible. provided. 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. a de minimis rule is applicable.Baker & McKenzie Finally.000 of debt in excess of the ratio remains deductible. These “thin capitalization rules” can be summarized as follows: In principle. the following characteristics are present: Debtor and creditor of the loan are allied companies. Thin Capitalization Rules As of 1 January 2004. The loan has no term or a term of more than 10 years. In addition. Whereas debt is taken into account in establishing the D/E ratio. the thin capitalization rules provide for a fixed maximum 3:1 debt-toequity (D/E) ratio.e. whereby interest on the first EUR 500. or If the redemption date of the loan is postponed.. 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. although under certain circumstances third-party debt may be considered related-party debt if guaranteed by a related company. 66 . by 30% or more) from an arm’s-length interest rate. 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. interest on third-party debt will remain fully deductible. 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). the term of the loan will be deemed extended accordingly as of the date of issuance of the loan. The remuneration on the loan deviates considerably (i. This may lead to an opportunity to tax efficient double dip structures. 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. Consequently.
“equity” is the company’s equity for tax purposes. the flow-through entity should still report an arm’s-length remuneration with regard to the services relating to the loan or royalty transaction. 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. the denial of the credit is achieved by excluding the interest and royalties received and paid from the tax base in the Netherlands. and 800 loans receivable. for instance. excluding fiscal reserves and with a deemed minimum of EUR 1. 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.Doing Business in the Netherlands For the purpose of calculating this D/E ratio. the respective D/E ratios will be established on the basis of the respective statutory (consolidated) accounts. Technically. (c) the transactions are “closely connected. Furthermore. to the effect that the thin cap rules will not affect the mere borrowing and lending of funds within a group. 1400 debt. “debt” is defined as the balance of all loans payable and all loans receivable (e. 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. Flow-Through Entities 67 .000 and the taxpayer can prove that the equity capital will be affected if a risk arises. As of 1 January 2002. Unlike the fixed ratio for this purpose.g. 7. based on the same accounting principles. As an alternative to applying the fixed D/E ratio.000. companies active in a business with relatively high debt financing or with a high D/E ratio due to losses. (d) the flow-through company does not incur a genuine risk that can affect its equity.” and (b) the interest and royalties received and paid relate directly or indirectly to a loan or a royalty transaction.. The flow-through entity is in fact treated as an intermediary company. and hence 600 net debt-all interest remains deductible). if possible. 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. Even though the interest and royalty income and expenses are excluded from the taxable income. This alternative may serve. for a company with 200 equity.
Using so-called dividend stripping transactions. or 2. an individual or legal entity (again.Baker & McKenzie During informal discussions in 2005 between tax advisors and the Dutch revenue. A refund.. that person or entity has paid a consideration (in the broadest sense) within the framework of a combination of transactions. after the Dutch tax authorities lost a number of cases in court. directly or indirectly (for instance. due to the payment of the consideration). 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. e. 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. and 68 . by transferring shares temporarily to another party that would benefit from a full exemption from dividend withholding tax. 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. where it may be assumed that: (a) all or part of the dividend distributions that have been made. These attempts were however unsuccessful. an individual or legal entity with respect to whom or which no exemption may be granted from the withholding obligation.g. whereas such exemption may be granted with respect to the party paying the consideration. Dividend Stripping A natural person or a legal entity is not deemed to be the beneficial owner if. 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. in relation to becoming entitled to the dividend distribution. for the benefit of: 1. the legislator decided to introduce dividend stripping rules which basically set out when a party cannot be considered the beneficial owner of the dividends. reduction.000.000 and at least 50% of that amount is paid in advance to the licensor. usually the original shareholder) whose entitlement to a reduction or refund of dividend tax is lower than that of the party paying the consideration. exemption.
an investment allowance of 44% is available for energy-saving investments (EUR 2.000.100 to EUR 111..100 in assets for which an investment allowance was claimed is disposed of. more than EUR 2. or 40% is available for certain qualified environment investments (but not if an energy investment has already been applied for). an investment allowance of 15%. The Dutch tax authorities are responsible for providing proof of dividend stripping under the new provision. profit-sharing certificates. within five years after the beginning of the calendar year in which the investment took place. 69 . 10% instead of 15%). 9. if the conditions for dividend stripping have been established. the character of the dividend (regular. incidental. Withdrawal from an asset is Furthermore. profit-sharing certificates. 30%. In the event of a dividend stripping transaction. the Dutch company has to withhold 15% withholding tax on its dividend distribution. In addition. Certain factors reduce the chance of a dividend stripping situation arising.Doing Business in the Netherlands (b) that individual or legal entity.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.g. Regrettably. If. reduction. retains or acquires a position in stock. or profit-sharing bonds that is similar to its position in such stock.100 to EUR 236. or liquidation distribution) and the duration of the transfer. or profit-sharing bonds before the date on which the combination of transactions referred to above commenced. a proportionate percentage would be added to the company’s profit (divestment addition or desinvesteringsbijtelling). directly or indirectly. no reduction of the 15% withholding tax is provided even if the deemed economic owner would have been entitled to a certain credit. such as the period between the moment of the transfer and the dividend distribution.000). Tax Incentives Investment Allowance The following measures provide tax relief to taxpayers: The investment allowance (investeringsaftrek) is limited to small investments (EUR 2. or refund (e.
In sum. 70 . 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. and (ii) the change of control has occurred after the company terminated or largely reduced its former business activities.Baker & McKenzie deemed to be a disposal in this respect. The amount of tax losses that may be carried back or forward has to be determined by the Dutch tax authorities. provided that proper accounting records are maintained. 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. As a transitional rule. which they will do after the taxpayer files its annual corporate income tax return. 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. for example. the motion picture industry may also claim random depreciation or apply for an investment allowance..g. Random Depreciation Random accelerated depreciation (e. Tax-free Reserves A tax-free allocation of profits to a reserve is permitted in two instances. 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. Losses As of 1 January 2007. other assets on a list compiled by the Ministry of Economic Affairs are eligible for random depreciation. 10. subject to certain detailed anti-abuse provisions. 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. This means that tax losses incurred before 2003 will expire as of 2012. This means. a tax loss incurred during a fiscal year can be carried back to the preceding or carried forward to the nine subsequent years. In addition. Furthermore. and (b) for replacing tangible or intangible capital assets in case of voluntary or involuntary disposition (“reinvestment reserve”). Such reserves may be made (a) for the purpose of spreading intermittently recurring costs (“equalization reserve”).
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. This rule should prevent purelyholding companies from initiating active operations with the (exclusive) aim to set off their (holding) losses against operating profits. Capital gains arising from the liquidation of a company are subject to corporate income tax at normal rates. is tax-free (with certain exceptions). Dividend withholding tax will not be levied if the recipient is 11. and (b) Any other payment is deemed to be a dividend. Liquidation distributions to shareholders are treated as follows: (a) Repayment of paid-in capital.g. but excluding retained earnings. (i) a Dutch resident company that qualifies for the participation exemption.e. participation exemption to capital gain on qualifying shareholding). Liquidation In addition. and/or (iii) a recipient that may benefit from an exemption based upon a tax treaty. and therefore subject to dividend withholding tax. (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. including share premiums and capitalized profits.Doing Business in the Netherlands Losses incurred in years during which the taxpayer qualifies as a holding company (i. 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. 71 .. unless an exemption applies (e.. 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. during 90% of the year.
In principle. 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. This exemption is subject to the following conditions: (a) The only compensation received by the transferring company consists of shares in the receiving company. (c) None of the companies suffered losses eligible to be carried forward prior to the merger. mergers and demergers can be exempt from Dutch corporate income tax provided certain requirements are met. 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. (d) Both companies are subject to the same tax regime. (b) The future levy of corporate income tax is assured. This would not be the case if. the exemption is also applicable if a permanent establishment of a nonresident company is converted into a resident company. the transferee company must take the same basis in the assets and liabilities the transferring company had immediately prior to the transfer. In general. This exemption has undergone only technical changes as a result of the implementation of the EC Merger Directive. and (e) The shares acquired by the transferring company are not disposed of within three years.Baker & McKenzie 12. This condition implies that for tax purposes. For instance. Under Dutch tax law. Mergers and Demergers Business Merger Taxation of capital gains. 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. 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. 72 . the legal merger and demerger exemption does not apply if the merger/demerger is predominantly pursued with the aim of avoiding or deferring taxation.
e. The two companies are basically amalgamated into one. the (acquiring) corporation must acquire more than 50% of the voting shares in the Dutch corporation. an individual) holding shares in a Dutch corporation to exchange those shares for shares in another EU corporation without triggering Dutch corporate income tax. The Corporate Income Tax Act of 1969 also provides for the “legal merger” facility. interest. it is possible for a nonresident taxpayer (e. One of the most relevant conditions is the condition that both EU corporations involved in the merger must be qualified corporations.. two main types of demerger may be distinguished: • Demerger a full demerger whereby the property. the tax treatment of a legal merger will be similar to that of a business merger. In general. Alternatively. and liabilities of a legal entity that ceases to exist on completion of the demerger are acquired by two or more other legal entities. interests.e. In general. and liabilities of one legal entity to one or more other legal entities by means of a universal transfer of title. the legal demerger of companies allows the transfer of all or part of the property. Once again. whereby the assets and liabilities of the absorbed company are passed on to the absorbing company.. specific requirements must be fulfilled. In practice. i.Doing Business in the Netherlands Merger by Share-for-Share Exchange As a result of the implementation of the EC Merger Directive. and 73 .g. and the absorbed company itself ceases to exist. the acquiring company or companies). rights. a new third company can absorb the assets and liabilities of the two former companies. Furthermore. without the separate transfer of all of the assets and liabilities. The shareholders in the absorbed company receive shares in the absorbing company. The main principle is that the shareholders of the legal entity being demerged all become shareholders of the transferee-company (i. rights. Legal Merger One of the conditions for a legal merger is that both companies involved must be either NVs or BVs. without the necessity of liquidating the absorbed company..
Demergers can be effected without corporate income tax being incurred under certain conditions. a cooperative. Fiscal Unity a partial demerger involving a split whereby all or part of the property. companies that are tax residents of the Netherlands (an NV. The Dutch Corporate Income Tax Act of 1969 provides for a fiscal unity regime that. qualifying subsidiaries may enter into a fiscal unity with the parent company during the fiscal year (e. as of the date of acquisition of the subsidiary).g. and 74 . 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. or a mutual guarantee association) may form a fiscal unity with subsidiaries in which a participation of at least 95% is held..Baker & McKenzie • 13. 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). retain losses that have not yet been set off and that were incurred during the fiscal unity period. a parent company must own at least 95% of the shares of a subsidiary. permits companies that are members of a fiscal unity to file a consolidated tax return. Any income or expense at the level of the subsidiary company is automatically aggregated at the level of the parent company. which is quite similar to the condition for the transfer of assets. The most important characteristics of a fiscal unity are: (a) To opt for fiscal unity.. (b) Under certain conditions. subject to certain conditions. only the parent company is in fact recognized as a taxpayer for Dutch corporate income tax purposes. (d) A company leaving the fiscal unity may. interests. rights. as of the date of disposal of the subsidiary). provided that these losses were attributable to that company.g. (c) Fiscal unities may be ended towards one or more consolidated subsidiaries during the course of the fiscal year (e. After the formation of a fiscal unity. under certain conditions. BV. Upon request.
provided that there is a shareholding of at least 95% between the companies. certain requirements of the FBI regime (i. The changes were mainly intended to remove certain features from the regime that represent potential infringements to EU law. under the obligation to distribute the net investment income within eight months of the following financial year. 3. or any other Dutch resident entity established under the laws of the Netherlands Antilles.e. The (statutory and actual) activities are collective passive investments. Furthermore. unless reduced by an applicable tax treaty or the Parent Subsidiary Directive. Dutch permanent establishments of foreign companies may enter into fiscal unity with a Dutch (resident) company or another Dutch branch of a foreign company. 14. a European Union Member State or any other state in case a Double Tax Treaty has been concluded with that other state. 2. and real estate development activities) have been amended. 75 . the scope of the regime with respect to real estate development activities has been amended. hereinafter referred to as “FBI”) enjoy a beneficial tax regime if certain requirements are met. BV. Fund for Joint Account..” Please note that profit distributions (except for a distribution of the reinvestment reserve) will trigger the application of a 15% Dutch dividend withholding tax. Fund for Joint Account.Doing Business in the Netherlands (e) Under certain conditions. accessible to foreign legal entities. Furthermore. provided the legal form of these foreign entities is comparable to the NV. Investment Companies (Fiscale Beleggingsinstelling. Debt is maximized at 60% of the tax book value of real property investments and 20% of the tax book value of other investments. shareholders’ requirements. In order to qualify as an FBI. 4. The FBI must be set-up as a Naamloze vennootschap (“NV”). Investment Companies (FBI) Recently. The net investment income must be distributed within eight months of the following financial year. the following cumulative requirements must be met throughout the entire tax year: 1. Based on this regime. besloten vennootschap (“BV”). profits are not subject to tax. capital gains are not mandatorily distributed and can instead be transferred to a tax-free “reinvestment reserve.
income and accumulation shares). or by investment institutions quoted on a financial market under the Financial Supervision Act. and • individuals cannot hold an interest of 5% or more. However. 76 9.. The net investment income must be distributed pro rata to all participants. Fiscal reserves or goodwill will be taxed at the moment the FBI regime becomes applicable. If the vehicle is quoted on a financial market under the Financial Supervision Act. If the vehicle is not quoted on a financial market under the Financial Supervision Act. a member of the supervisory board. 6. 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. The interest in the vehicle is not held for 25% or more by Dutch resident companies via a nonresident corporate shareholder. we note that under certain conditions. With regard to the requirements (6) and (7).g. . 7. 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. or an employee of an entity which holds (alone or together with related entities) 25% or more of the shares in the vehicle. the Dutch tax authorities accept that these requirements are not yet fulfilled during the two years following the incorporation of the FBI. A director or more than half of the members of the supervisory board cannot be a director. and 8. unless this latter entity is quoted on a financial market under the Financial Supervision Act. there cannot be any differences in distribution rights (e. the regime cannot apply automatically. Furthermore. 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.
e.5% corporate income tax rate. Based on this credit mechanism. the profits (excluding capital gains) realized by the FBI must be distributed to the participants annually and. The main advantage of the FBI is that the proceeds from the investments are not subject to corporate income tax. • As from 1 January 2008. a new credit mechanism was introduced for FBI’s. 15. The result is a taxable development activity at the level of the subsidiary and exempt passive investment income at the level of the FBI. • Any taxpayer in the Netherlands that is subject to corporate income tax can opt for the application of this VBI regime. 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. provided the following requirements are met: The VBI must be set up as a Naamloze vennootschap (“NV”).Doing Business in the Netherlands Real estate development activities are now allowed by the FBI or by 100% subsidiaries of an FBI. Fund for Joint Account. In order to create a more favorable regime (i. no dividend withholding taxation in the Netherlands) a second investment vehicle (Vrijgestelde Beleggingsinstelling. investments are pooled via the FBI regime mentioned above. Such subsidiary will be taxed against the regular 25. or any other Dutch resident entity established under the laws of the Netherlands 77 . as long as the costs related to the renovation stay within 30% of the fair market value of the real estate. However. consequently. no mandatory distribution of dividends. or via a transparent entity. herein referred to as “VBI”) has been introduced as from 1 August 2007. The renovation of real estate by the FBI itself is also allowed. Exempt Investment Fund (VBI) Currently. the subsidiary may develop the real estate held by the FBI in exchange for an arm’s-length remuneration.. If the FBI wishes to develop its own real estate investments. The FBI is explicitly not allowed to develop real estate in the FBI itself. under the following limitations: • • The FBI is allowed to hold shares in a subsidiary that conducts real estate development activities.
meaning that the fund should allow the repurchase of shares at regular moments. It is allowed to invest in Dutch and foreign real estate indirectly. in order to meet the collective investments test. since inbound interest flows are usually not subject to 78 . swaps. since less countries levy interest withholding tax.. as a result of which the underlying (realized and unrealized) income will be taxable at the level of the Dutch shareholders. • The VBI regime is stricter towards the allowed activities. Conclusively. Note that the Dutch participation exemption does not apply to a shareholding in a VBI. bonds. However. a European Union Member State or any other state in case a Double Tax Treaty has been concluded with that other state.g. options. The VBI regime does not have any distribution obligations. BV. In addition. provided the legal form of these foreign entities is comparable to the NV. corporations. and The VBI should be diversifying risks. a VBI cannot credit withholding taxes incurred. It is only allowed to invest in so-called “financial instruments” as defined in the MiFID. withholding tax levied by the investor country will be actual costs for the investment fund. as it is not subject to tax. futures. shares.. Dutch (corporate and individual) investors do have to revaluate their interest to fair market value every year. the VBI is an attractive vehicle for structuring investments like interest bearing investments.Baker & McKenzie • • The VBI should be set up as an open-end investment fund. it is possible to invest in foreign real estate through a transparent or non-transparent entity or partnership. Interest bearing investments (instead of dividend generating investments) are therefore most interesting. the VBI regime may not be used as a portfolio investment company that was primarily set-up for one shareholder. thus individuals. Please note that due to the lack of tax treaty protection. Antilles. For the same reason. meaning it cannot invest in one asset only (apart from feeder funds). However. e.e. while the limitation is only focused at Dutch real estate.VBIs do not have access to the Double Tax Treaty network of the Netherlands. and institutional investors can invest via a VBI. i. Furthermore. • The VBI has no specific shareholders requirements. via a (non-transparent) Dutch or foreign entity or a real estate investment fund. Fund for Joint Account.
Most important are the decree IFZ2004/680M (which contains information on Group services and shareholder activities. 79 .. 16.g. “Support” services. 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. the proceeds derived from investments are received without any Dutch tax burden by the ultimate shareholder. European Economic Interest Grouping and Societas Europaea EEIG Since July 1989. Crediting or offsetting withholding taxes) and IFZ2004/126M on the former flow-through entities (FTE). as the income of the VBI is not taxed in the Netherlands and neither is a dividend distribution from the VBI to its shareholders. 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. it is possible to form a European Economic Interest Grouping or “EEIG” (in Dutch: Europees Economisch Samenwerkingsverband or EESV) in the Netherlands. An EEIG must be registered with the Trade Register of the Chamber of Commerce. (b) “Tax transparency” does not apply to other taxes (e. Cost Contribution Arrangements (CCA). Contract research. In such case. 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. An EEIG with official address in the Netherlands is considered a legal entity under Dutch law.Doing Business in the Netherlands withholding tax. wage tax). 17. Arm’s-length prices in case valuation is uncertain. A regulation has been published with respect to the taxation of EEIGs.
An SE is able to transfer its registered office from one EU Member State to another. SEs are also eligible for the benefits of the EU Parent Subsidiary 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. There are four ways to incorporate an SE: (a) through a legal merger between two companies based in different EU Member States. In addition. it is possible to incorporate a European company or Societas Europaea (SE). anyone can become a shareholder. as it does not qualify as a Dutch resident. the EU Interest and Royalties Directive. 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. For Dutch tax purposes. Although there are rules restricting the way an SE may be incorporated. and (i) two companies based in two different EU Member States. The SE has legal personality and is in many respects comparable to a Dutch NV or BV. (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. an SE that has its registered office in the Netherlands is treated similarly to a Dutch NV (a public limited liability company). (d) The EEIG itself does not have access to the Dutch tax treaty network.. (e) No capital tax is due in the absence of any capital divided into shares.g. such as the fiscal unity facility and the participation exemption. an NV) to an SE. a group that has companies throughout the EU can now create a uniform 80 . (c) through incorporation of an SE as a subsidiary of: (ii) an SE. and Societas Europaea As of 8 October 2004. or (d) through a change of corporation form from an eligible company (e. and the EU Merger Directive.
and Luxembourg.Doing Business in the Netherlands management structure by forming an SE. As of 1 January 2007 (and in 2008). 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. However. In principle. Since the Netherlands does not levy a withholding tax on interest and royalty payments. 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. Referring to the Directive. 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. companies that are directly related and are able to meet certain conditions are no longer subject to withholding tax on interest and royalty payments. 19. participating interests in a parent-subsidiary relationship of 15% or more qualify for the provisions of the 81 . the effects of the implementation of the Directive in Dutch legislation are limited. 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. the income may be taxed in accordance with the laws of the latter Member State. 18. a transitional period is observed for Austria. since SEs can opt for a one-tier or two-tier board system. The EU Savings Directive took effect on 1 July 2005. The aim of the Directive is to enable taxation of savings income in the form of interest payments. a zero withholding tax rate applies for payments between Member States. Furthermore. 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. The Directive is effective for the EU Member States. EU Interest and Royalty Directive The EU Interest and Royalty Directive took effect on 1 January 2004. provided that the companies have a qualifying parentsubsidiary relationship. EU Savings Directive 20. Belgium.
Starting 1 January 2009. EU Merger Directive The EU Merger Directive is implemented in Dutch law and is described under Section 12. The treaties generally provide for substantial reductions of withholding tax on dividends. interest. (3) The parent and subsidiary are companies that. Summary of the Netherlands’ Bilateral Tax Treaties The Netherlands has one of the most extensive tax treaty networks in the EU. As of 1 January 2007. this percentage will be lowered to 10%. 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.Baker & McKenzie Directive. 21. and 1992-2000. are considered resident in their respective countries for tax purposes and under the terms of a double taxation agreement concluded with a third country. (1) The parent company holds a minimum of 15% of the capital of the subsidiary. 1977. without the possibility of being exempt or having an option to be exempt. Neither is considered to be a resident for tax purposes outside the EU. 82 . and royalties. Appendices II-V contain lists of the treaties currently in force and under negotiation as well as the treaty reductions for withholding taxes. 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. 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. (4) The parent and subsidiary are companies that are subject to one of the taxes listed in the Directive. 22. This means that the Dutch rules are more favorable than required by the EU participation exemption.
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. Treaty is not yet in force. 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. 84 . Republic) ** Signed on 8 December 2006. Republic) * Treaty unilaterally applied by the Netherlands.
) 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 .VAT is due in the country where that transport commences. taxable persons are all entities or individuals that perform taxable supplies of goods and services. Other Taxes Taxable Persons Doing Business in the Netherlands 1.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. Value-added Tax (VAT) In general. the intra-Community acquisition of new means of transport by anyone. in the course of a business. 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. a reverse charge mechanism generally applies. and the importation of goods from outside the EU by anyone. If a foreign business supplies goods and services within the Netherlands. Pursuant to the reverse charge mechanism. If the goods are transported in relation to the supply. 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. 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. Services are generally deemed supplied (and are therefore subject to VAT) in the country where the service provider is established. or intra-Community acquisitions. Dutch VAT is due if these transactions can be located in the Netherlands. the Dutch VAT due is levied on the taxable person or nontaxable entity receiving the goods or services.XI. in the Netherlands. it is considered a taxable person for Dutch VAT purposes.
g.The general rule for businessto-consumer services will not change. advisory services. and exemptions related to the supply of Dutch real estate. exemptions for public policy reasons in the fields of education. Building land can be described as undeveloped land intended for building purposes. Non-taxable legal persons are treated as taxable persons for their intra-Community acquisitions if such acquisitions exceed an annual threshold (EUR 10. banking. As of that date.Baker & McKenzie rule exist. or social welfare. Exceptions to the general rule for business-to-business services will continue to exist. 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 telecommunication services are deemed to take place (and are taxed) in the country where the (VAT-taxable) recipient of the service is located.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. (ii) the supply of “building land” is subject to VAT.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. As of 1 January 2010. the rules for the place of supply will change. the supply of Dutch real estate is exempt from VAT.The receiving taxable person performs a taxable intraCommunity acquisition in the EU country of arrival of the goods. financial services. and 88 . culture.000 in the Netherlands) in the current calendar year. or exceeded this threshold in the previous calendar year. In cross-border situations. 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. 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. the liability to pay VAT is shifted to the (VAT-taxable) recipient. In principle. and other financial transactions). e.
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. online or using a designated software program). 89 . works of art.VAT can be calculated on the profit margin. The general Dutch VAT rate is currently (2008) 19%.VAT returns must be filed monthly. A reduced rate of 6% applies to a number of essential goods and services. electricity. Taxable persons performing intra-Community supplies must also file quarterly EC Sales listings.Taxable persons established in the Netherlands must file their VAT returns electronically (i.e.000 (INTRASTAT filings). A special scheme exists for qualifying sales of used goods. 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. stating the names and the VAT identification numbers of their customers in other EU countries. pharmaceutical products. gas. antiques. 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). VAT Returns. and collectors’ items. and Administrative Requirements VAT is due on the aggregate value of the goods and services sold during the preceding period. and services connected to such supplies. intra-Community supplies.This request can be granted only if the purchaser uses the real estate for more than 90% of the taxable activities. Invoices have three functions in the VAT system: (i) They contain information as to which VAT regime is applicable. Payment. supplies of goods that are exported out of the EU. In addition.VAT returns must be submitted and the VAT due must be paid within one month after the filing period. Under this scheme. or annually. such as food. The VAT system is built around invoices and the obligation to issue them. and the like. quarterly. Depending on the amount of turnover.
The acquisition of Dutch immovable property. shares belonging to a substantial interest in a real estate company. 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. Under certain circumstances.The transfer tax is calculated on the purchase price or the market value. Reference is made to Sections 4 (0% under the participation exemption). and (iii) They enable taxpayers to prove. transfer tax is to be paid by the purchaser. their right to recover input VAT. Furthermore. including the acquisition of beneficial ownership. but it is customary for the buyer and the seller to agree on who will effectively bear the tax. 5%. the rate of 15% is reduced. an exemption may apply if the acquisition of the supply of immovable property is subject to VAT.Baker & McKenzie (ii) They enable the tax authorities to carry out audits. also subject to the 6% transfer tax. 90 3. There are several mandatory items that must appear on invoices.Taxable persons must have copies of all their sales invoices and originals of all purchase invoices in their records at all times. is subject to a real estate transfer tax of 6%. Under the law. and certain certificates entitling the holder to a proportionate share of immovable property are. whichever is higher. and 19 (the rate is reduced under bilateral tax treaties to usually 0%. or 10%). 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. Withholding Tax Dividends . 2. Real Estate Transfer Tax The acquisition of (the beneficial ownership of) rights to real estate. 17 (0% under the EU Parent Subsidiary Directive). under certain conditions. whenever necessary.
91 . Interest and Royalties There is no Dutch withholding tax on interest and royalties paid by companies that are resident in the Netherlands.The Tax Inspector may impose a penalty for late filing of a dividend tax return. and the dividend tax withheld must be paid to the Tax Collector within one month after the date on which the dividend becomes payable.Doing Business in the Netherlands A dividend tax return must be filed with the local Tax Inspector by the distributing company.
certain designated residents are required to report some payment information to the Dutch Central Bank (De Nederlandsche Bank. loans. dividends. Pursuant to the 2003 Reporting Provisions. interests.Baker & McKenzie XII. In total. Please also refer to section 3. the “FSA”) has come into effect on 1 January 2007. The FSA encompasses practically all the rules and conditions that apply to the Dutch financial markets and their supervision. royalties. Financial Regulations No license is required for payments in euros between residents and nonresidents.). which lists the information to be provided. Dutch Banking Act. as long as the requirements of the 2003 Reporting Provisions are observed.g. Capital/Loans No license is required for the repatriation of capital. and fees. e.. DNB has set specific profiles. Regulated financial activities . required to report their activities within two weeks of starting business operations in the Netherlands. in general. 1. and the like.. are met. 2. Some institutions may be designated as “reporting institutions” by DNB if certain criteria. pursuant to the 1994 Foreign Financial Relations Act (Wet financiële betrekkingen buitenland 1994) and the 2003 Reporting Provisions (Rapportagevoorschriften betalingsbalansrapportages 2003).The extensive system of supervision of financial institutions is therefore now regulated by one single act. regarding the scope or frequency of international payments. Under the 92 3. The Financial Supervision Act (Wet op het financieel toezicht. the FSA replaces eight former supervision acts (i. branch profits. However. Securities Trade Supervision Act. Exchange Control Regulations The information to be provided depends on the type of institution that has foreign financial relations. finance companies are. supplemented by implementing regulations based thereon.e. DNB may also request specific information from institutions that are not designated institutions. “DNB”) for statistical purposes. Finance companies established or active in the Netherlands are required to notify this to DNB within three weeks after they have been established. Insurance Undertakings Acts.1 Banking activities below.
such as to ensure that access to such group is not easily realizable.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. other than from so-called “professional market parties. the criteria of access to which are determined in advance. for whatever legal reason. Any company that in the conduct of its business or profession obtains “repayable funds” outside a restricted circle from (legal) persons. In addition. Professional market parties include. investment funds and large corporations. As the definition of “repayable funds” could entail more than just the borrowing of the monies. “Repayable funds” comprise any monies that must be repaid.” 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.” pursuant to section 1:1 of the FSA and grants loans for its own account qualifies as a “credit institution” (bank). Banking activities In order for any company to act as a credit institution in the Netherlands.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). An exception from the license requirement is available 93 . subject to a general exemption being applicable or an individual dispensation being granted by DNB. inter alia. “Non-banks” (such as certain finance companies and cash-pooling hubs) may also qualify as credit institutions. some caution is required when assuming that a company does not qualify as a “bank” as it is not attracting “repayable funds. 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. 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. a license requirement applies. A “restricted circle” is deemed to exist between persons and/or companies that belong to an objectively limited group. if it is clear beforehand what the nominal repayable amount is and in which manner any remuneration (such as interest) is to be calculated. licensed institutions such as banks.
A company may not operate as a bank or use the term “bank” without the proper license and registration. 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. in which case the supervision remains with the banking authorities in the bank’s country of origin. and bankers drafts). 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. and (e) transferable securities. (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. 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. exchanging foreign currency. travelers’ cheques. bills. and (xiv) safe custody services. (vii) trading for own account or for account of customers in: (a) money market instruments (cheques. brokering publicly-listed securities. and solvency of all Dutch banks.. (ix) advice to undertakings on capital structure. effecting domestic and international money transfers. 94 .e. certificates of deposit. (x) money broking. (xiii) credit reference services. (xii) safekeeping and administration of securities. (c) financial futures and options. liquidity. (viii) participation in securities issues and the provision of services related to such issues. Dutch banks are generally involved in a wide range of financial activities.” The “European Passport” can be relied upon once the relevant notification requirements have been fulfilled. Being the following activities: (i) acceptance of deposits and other repayable funds. They may rely on the license of their home state (“home state control”) pursuant to a socalled “European Passport.Baker & McKenzie for group finance companies that technically qualify as “banks” if the conditions of that exception can be met. (b) foreign exchange. i. (vi) guarantees and commitments.. (d) exchange and interest-rate instruments. (iii) financial leasing. credit cards. and the like). including: • • • • • granting loans.g. (iv) money transmission services. (ii) lending. and The FSA also regulates the activities of so-called “financial institutions” in the Netherlands. (xi) portfolio management and advice. DNB closely supervises the administration.
Doing Business in the Netherlands participating interests and that do not also qualify as “credit institution” (as defined above). offerings of securities with a consideration lower than EUR 2. 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.5 million. 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. For non-EU financial institutions.000). subject to prior notification to the DNB. offerings to less than 100 persons not being qualified investors in the Netherlands. Pursuant to current Dutch law. which must meet certain specific criteria. EU-based financial institutions that are authorized to act as such in their home state on the basis of a certificate of supervised status.g. (ii) tradable bonds or other forms of negotiable securitized debt. which limit shall be calculated over a period of 12 months). Once a prospectus has been approved by the competent authority of a Member State. Pursuant to the FSA.. 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 of securities with a minimum consideration per investor/minimum denomination per security of EUR 50. may rely on such certificate to provide the same services in the Netherlands (either via branch or cross-border). 95 . The legislative proposal implementing Directive 2004/25/EC. or (iii) other tradable securities issued by a legal person. a DNB license may be required. 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. depending on the specific nature of the services provided. has been made public by the bidder in the Netherlands prior to such public bid. which came ____________________ 3 Securities Being: (i) tradable shares or other tradable securities or rights equivalent to tradable shares. offerings targeting exclusively-qualified investors. The implementing regulations promulgated pursuant to the FSA contains several grounds for exemption from the prospectus requirement (e.
Furthermore. different regimes apply. administrative. investment firms are required to draft an execution policy describing. ____________________ 4 into effect in the Netherlands on 28 October 2007. The daily policy makers of such firms must also pass certain reliability and solidity tests.” 96 . brokers. Pursuant to the new best execution rules introduced by the MiFID. Clients can be classified as either “professional client. investment firms must comply with certain financial. prevent. “market-makers” and portfolio managers) must have a license to offer or render investment services in the Netherlands. Based on such classification. for each type of financial instruments. a notification to the AFM is sufficient for them to offer their services in the Netherlands. commodity derivative contracts now fall within the scope of the definition of “financial instruments” under the FSA. investment firms are obliged to classify4 their clients in accordance with the MiFID rules prior to any investment services being provided. subject to the aforesaid license requirement. For EU-based investment firms holding a permit to offer their services in another Member State.” “eligible counterparty. and manage conflicts of interest. either through a branch or “cross-border” (though several Dutch additional rules will still apply to branches). channel. including portfolio managers must implement (and regularly review) adequate measures and procedures to tackle. notably in respect of the level of protection and pre-contractual information due to clients.” or “nonprofessional client. As a result of the implementation of the Markets in Financial Instruments Directive (“MiFID”) in the Netherlands as of 1 November 2007. dealers. The requirements that securities institutions have to fulfill are quite elaborate and the institutions are closely monitored by the AFM for compliance. the procedures and arrangements they have in place with a view to providing best execution their clients. inter alia. They must inform their clients in respect of the measures they have taken in order to tackle conflicts of interest. acquires a participating interest of 30% in a public company the shares of which are admitted to trading on a Dutch stock exchange. investment firms. To obtain such license. and organizational requirements. Under the MiFID rules. introduced a compulsory bid requirement for any (legal) person who/which.. Intermediation activities relating to these “new” types of financial instruments are therefore. acting alone or in concert.e.Baker & McKenzie Investment firms (i.
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.. if published. Inside information is specific information about a company that has not been published and. Issuers are obliged to maintain and regularly update insider lists. NYSE Euronext (Holding) NV. which bring together multiple third-party buying and selling interests in financial instruments in the system in accordance with non-discretionary rules. Several Euronext entities. Licenses are granted by the Ministry of Finance. The Market Abuse Directive has been fully implemented in the Netherlands. Euronext NV. It is also forbidden to manipulate any regulated market (i.This is often referred to as ‘in-house matching’.e. Euronext (Holding) NV. NYSE Euronext (International) BV. 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. which is the only MTF currently active in the Netherlands. can be expected to influence significantly the price of the issued securities (or linked financial instruments). worldwide) on which securities are traded that are also admitted to a regulated market in the Netherlands. ____________________ 5 6 “Multilateral trading facilities” are trading platforms operated by an investment firm or a market operator. in a way that results in a contract. NYSE Euronext (International) BV. The AFM is responsible for the enforcement of the relevant provisions of the FSA. regardless of whether the price goes up or down. 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. As a result of the implementation of MiFID cross-EU/EER. In addition. along with the Public Prosecution Service. inter alia. the aforementioned Euronext entities also hold a license to operate Alternext Amsterdam.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. and NYSE Euronext (Holding) NV 97 .
30. the so-called NV’s) the shares of which are listed on an EU regulated market (“Issuing Institutions”). a parent company is deemed to hold both the participating interests and the voting rights held by its subsidiaries. 75. 50. Section 5:45 FSA lays down several general criteria based on which imputation of the participating interests and/or voting rights takes place. 10. and 95%. a subsidiary is deemed not to hold any participating interests or voting rights.. Pursuant to the FSA. 15.3 of the FSA contains amended7 reporting requirements in respect of major holdings in Dutch public companies (i. and (iii) ongoing reporting requirements for shareholders and other persons holding a right to vote in the shareholders’ meeting of an Issuing Institution.. 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. 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. reporting requirements for each change of 1% or more compared with previous notification made). 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. 20.e. (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”. 98 . 60. 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. Major disclosure reporting The scope of the below overview is limited to the above category under (iii). This includes: (i) reporting requirements applicable to Issuing Institutions themselves in respect of their issued share capital (e. 25. For example.Baker & McKenzie Chapter 5.g.. in general terms. The following thresholds are applicable: 5.e. The reporting requirements are applicable to changes in both the participating interest (i. 40.
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. and any monies or goods are obtained exclusively from qualified investors or if such offer does not exceed 100 investors. reliability. subject to change: Guernsey. The disclosure of major holdings in listed companies is enforced by the AFM. organizational. for more than one shareholders meeting) voting agreement with such third party (and vice-versa). The obligation to report changes also applies to indirect control held through (security) interests (e. Pursuant to the FSA. Luxembourg. not being qualified investors.Doing Business in the Netherlands subsidiaries. a person is deemed to indirectly hold the voting rights that a third party holds if such person has entered into a durable (i. 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. An exemption may also apply to venture capital companies (participatiemaatschappijen).g. right of usufruct). either cross-border or via a Netherlands branch. and solidity criteria are met. administrative. for example. 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.. 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. Jersey. (temporary) exemptions may apply. An exemption from the requirement to obtain a license may apply if. 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. the participation rights are exclusively offered to. The AFM maintains a special register of these UCITS. Malta..e. right of pledge. In certain cases. in principle. Ireland. Collective investment schemes (not being EU-based UCITS) having their seat in a country where adequate supervision is exercised (being currently. providing the AFM in due course with a socalled “certificate of supervised status” issued by the regulator of the relevant 99 . 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.
. the following activities/entities: (ii) the offering. any company that renders financial services on a professional basis (e. precious stones and metals. Other regulated activities In short. collective investment scheme management company. 10% or more) in a bank. The AFM maintains a register of these “adequately supervised” collective investment schemes. jewelry. jewels. antiquities. on a market in financial instruments and which indicate the essence of the performance in the latter contracts. among others. 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. and other precious objects to be designated by governmental decree 100 . banks and brokers) or other services involving the sale.e. investment firm or insurer established in the Netherlands..” 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. (iv) advertisements in respect of financial products in the Netherlands. objects of art. UCITS. (vii)the acquisition of a qualified holding (i. the FSA also regulates. or the mediation in the sale. advising on. (iii) the offering. advising on and intermediation in respect of financial products to consumers (in most cases) in the Netherlands. (vi) clearing institutions (i. of means of transport.g. 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.Baker & McKenzie “adequate supervision country. (v) the recognition and operation of securities exchanges in the Netherlands. (i) insurance and reinsurance activities (including (re)insurance intermediation and advising on insurance-related products). and Money Laundering Pursuant to the Disclosure of Unusual Transactions Act (Wet Melding Ongebruikelijke Transacties).e. and intermediation in respect of individual investment objects..
Another proposal has been made to combine the two separate Acts into one coherent Act. which are partly or wholly paid in cash must be formally identified under the Services Identification Act. Furthermore. The identification requirements and reporting requirements also apply to other professionals.Doing Business in the Netherlands must report “unusual” transactions to the Unusual Transactions Disclosure Office (Meldpunt Ongebruikelijke Transacties) of the Ministry of Justice. the Dutch legislator has proposed to change the Disclosure of Unusual Transactions Act and the Service Identification Act. of means of transport. jewels. Financial institutions had indicated that the very specific requirements for customer identification were unnecessarily confining. which will be subject to their scrutiny. pursuant to the Services Identification Act (Wet Identificatie bij Dienstverlening). the responsibility to identify transactions of which the obvious objective is money laundering or terrorist financing and to refrain from facilitating such transactions. up to them. objects of art. rather than the means. In order to implement the Third Money Laundering Directive. relationship. Service providers must consider the client. Parties to transactions involving the sale. Instead of prescribing the exact process of gathering the relevant information. in theory. The new regulations will be ‘principles based’. including attorneys. jewelry. inter alia. How institutions will determine these factors is. The Dutch financial regulator has taken the view that institutions will develop their own policy in this regard. 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. 101 . and tax advisors. Both proposals are currently being debated in the House of Representatives (“Tweede Kamer”). or mediation in the sale. The Disclosure of Unusual Transactions Act will include. Customer identification requirements will be based on a ‘risk oriented approach’. the new rules will focus on the goal. product or transaction in order to determine the risk involved. antiquities. notaries. and other precious objects. precious stones and metals. The Ministry has established certain objective indicators to allow companies to judge whether a transaction is deemed unusual and should be reported. No expected implementation date has been published.
In this chapter. Greece. and (iii) Under certain conditions. Member States of the Schengen Area are: Austria. the Netherlands. Germany. Luxembourg. Norway. The visa is issued for a maximum period of 90 days. Canada. Belgium. Monaco. Slovakia. and Sweden. Spain. Iceland. which enables the holder to enter the Netherlands. the Czech Republic Denmark. Please note that an MVV is not required for citizens of the European Economic Area. and New Zealand. It is advisable to check with the Dutch Embassy or Consulate whether a visa is required. obtain three types of documents: (i) A temporary residence permit (Machtiging tot Voorlopig Verblijf or “MVV”). France. and is not extendible. Visa. the European Union and Switzerland. a residence permit for the purpose of work will be handled. Malta. Poland. Portugal. (ii) A residence permit. 2. Furthermore the holder of the visa may remain no longer than 90 days within half a year within the Schengen Area. usually. Latvia. Italy.Baker & McKenzie XIII. Estonia. 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. A foreign national intending to work and reside in the Netherlands must. a work permit. Lithuania. which enables the holder to work in the Netherlands. 102 . Finland. 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. which enables the holder to live in the Netherlands. Australia. Japan. Slovenia. and Work Permit for Non-EU Nationals 1. Residence Permit.The conditions for obtaining a residence permit depend entirely on the purpose of coming to the Netherlands.
There are different procedures for applying for a work permit. and if the Dutch employer applies by means of the expedited procedure. the foreign national may apply for a permanent residence permit.This permanent residence permit is renewable every five years. For employment purposes. After having been in the possession of a residence permit for five years. A foreign national who intends to stay in the Netherlands for more than three months and who has gained entrance to the Netherlands. An employer who wants to recruit an employee from outside the EU/EEA usually needs to apply for a work permit for that employee. is required to obtain a residence permit (verblijfsvergunning). the employer must prove that the 3. the foreign national is not allowed to enter or reside in the Netherlands.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. work permits are usually required. The residence permit is generally issued for a maximum of one year and if no changes of circumstances have occurred. the MVV will usually be granted within two to three weeks. Residence permit 4. obtaining an MVV can take between two weeks to six months. Please note that a residence permit will not be granted if the foreign national was first required to obtain an MVV. 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. it is extendible on a yearly basis. Work permit 103 . Please note that during the MVV procedure. For completeness’ sake. In this respect. Depending on the purposes of stay. for those nationals from Romania and Bulgaria. In this respect. please note that the Netherlands has (temporarily) opted out for the full mobility of the workforce in respect of two new EU members. the Dutch employer must prove that the labor market has been scanned for workers who have priority. Generally. 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.
As of 1 January 2008. 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). the company is advised to consult our office in advance. 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. or for those who want to work in a university. and must have engaged a recruitment office. Please note that application procedures for different types of employment require extensive preparation.Baker & McKenzie vacancy has been reported to the Centre for Work and Income and. and for this reason. usually. the field of sports. Consequently.881 (up to and including the age of 29). For completeness’ sake. Knowledge Migrant Workers Skilled and highly educated foreign workers do not require work permits to work in the Netherlands. to the European Employment Service (EURES) for at least five weeks prior to the work permit application. This regulation is applicable to those who hail from Romania and Bulgaria and those countries which are not members of the European Economic Area. but also for those who want to stay in the Netherlands as self-employed. 5. This decision will be taken within a short period (approximately two to three weeks) assuming that the IND receives a complete application. or elsewhere. The knowledge migrant worker must therefore apply for the required residence permit and the IND will decide whether to grant the residence permit. no contracts will be signed with entities established in a foreign country.565 (from the age of 30 onwards) or EUR 34. If a company is unsure whether it is subject to the said reporting obligation. 104 .This is not only necessary for the application as described above. a professional journal. companies should be cautious about assuming that a job does not need to be reported to the various authorities. 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. it is advisable to contact our office timely. a knowledge migrant worker is one employed in the Netherlands and receives an annual salary of at least EUR 47. the employer is required to advertise the job in a Dutch national newspaper. Furthermore. Several exceptions exist.
The statutory maximum probationary period for an employment contract for an indefinite term is two months. The information to be provided by the employer is based on peremptory law and must include.XIV. Deviations to the detriment of the employee are possible pursuant to a collective labor agreement. vacations. Labor Law 1. but is not limited to the following: • • • • • the parties’ identities and places of residence. without observing a notice period and without any liability 105 . the employer is obliged to inform the employee in writing of the conditions applicable to his or her employment. Term Doing Business in the Netherlands An employment contract may be concluded verbally or in writing. either party may terminate the contract at any time. the initial base salary and any other pay components. If the maximum period is exceeded. In either case. the contract will be deemed open-ended. and it is two months if the contract covers a period of two years or more. or for a specific task or project. for a specified term (as in a fixed-term contract). the length of the employee’s normal working day or week. whether a pension arrangement is in place. 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. Probationary Period Parties to a contract may agree on an initial probationary period in writing only. the place of work. and the notice period. the probationary period will be invalid altogether. The length of the probationary period must be the same for both parties. and An employment contract may be concluded for an indefinite term (as in an openended contract). During the probationary period. A written contract may take the form of an agreement or letter signed by both parties. If no term (or special task) is specified.
The mere reference to a non-competition clause in a collective labor agreement and/or internal rules and regulations will not suffice. depending on the circumstances of the case. applicable for a certain scope of activities. for discriminatory reasons. with due observance of the statutory or agreed-on notice period. 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. 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. After obtaining approval from the CWI. illness or pregnancy). Any dismissal by an employer without the approval of the CWI is void. At the employee’s request. Due to new legislation in 2006. 2. and for a certain number of years. A non competition clause may become invalid if the responsibilities ensuing from the employee’s position are substantially amended in the course of employment. In order to validly restrict an employee from accepting competing employment after termination of the employment contract. Non-competition clauses. A request for enforcement of the non-competition clause by the employer can be restricted or denied by the court. are quite common in the Netherlands. the employer must provide the causes for termination of the employment contract during the probation period. 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. This procedure usually takes about four to eight weeks. this approval of the CWI is no longer required. unless there is a ban on termination imposed by law (e.Baker & McKenzie for severance pay unless the termination is.. for instance. certain geographical area. 106 . Open-ended Contracts Under certain circumstances. Termination An employer must obtain approval from the Dutch Center for Work and Income (“CWI”) before terminating an employment contract.g. the employer may terminate the employment contract. Non-Competition Clause 3.
It is important for the employer to make sure that the employee’s consent to the agreement is unambiguous. with or without observance of the statutory or agreed-on notice period and with or without payment of compensation.. the last employment contract will be deemed to be a contract for an indefinite period. 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). 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). embezzlement. However. or crimes involving a breach of trust. Termination by Mutual Consent Immediate Termination for Urgent Cause 107 . The law sets forth a number of examples of “urgent causes.” such as gross negligence in the performance of duties. the employer is entitled to terminate the contract effective immediately. All employment contracts may be terminated at any time by mutual consent. Within three years. only the competent court can determine whether the facts of a given case actually constitute urgent cause.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. fraud. It is therefore recommended that the employee seeks legal advice in this respect before accepting it. 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. without giving any notice thereof. i. The employee has a similar right. If the employee causes the situation. divulging trade or professional secrets. 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. theft. an openended contract.e.
If the employee is to blame. the factor will be higher than one. are in principle not taken into account.. If the termination of the employment relationship can be blamed on the employer. In the case of termination on the ground of a change in circumstances. Whether compensation is awarded and how much is awarded depends on several circumstances (e. years of service between 40 and 50 are multiplied by 1. whether the contract is on a fixed term or open-ended. sick.g. such as pension premiums. number of years of employment. The employer must. Courts handle employment matters and operate quite independently of the CWI. the employee’s age.e. According to the commonly used “Cantonal Court Formula. 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.5 and years of service from the age of 50 and over are multiplied by two. the adjustment factor is set at one. An employer or an employee may request the Cantonal Division of the competent court to dissolve an employment contract.” Years of service up to the age of 40 are multiplied by one.Baker & McKenzie Termination by the Court Employers and employees have the right to file a petition for dissolution of an employment contract. and the like). In a “neutral” situation. be able to prove that dissolution of the employment contract is not in any way related to the employee’s illness.. A serious cause may be an “urgent cause” (i. 108 . however. Other perquisites.” severance pay is calculated by multiplying the number of weighed years of service by the gross monthly salary and an “adjustment factor. the competent court may decide to award compensation according to the principle of reasonableness. and even if the employee is pregnant. Case law. such as structural bonus payments. the factor will be less than one. or disabled. shows that under some circumstances. The Cantonal Division of the competent court will dissolve a contract only for serious cause. courts consider stock benefits to be part of the employee’s salary and for that reason. reasons such as those described in subsection  above or a “change of circumstances” that justifies termination of the contract on short notice. however. future prospects. Dissolution by court order may be requested at any time. position. The basis is the fixed (gross) monthly salary plus all fixed and agreed-on salary components.
The company may replace it by paying (at least) the equivalent of the salary due during the applicable notice period. awarded by the employer and the likelihood that the employee will find other types of suitable employment) compared with the interests of the employer. if any. because a Managing Director has a twofold relationship with the company: a corporate relationship and an employment contract.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. 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. 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. the termination may be deemed manifestly unreasonable. After the aforementioned requirements have Managing Director 109 . However. the dismissal may nevertheless be manifestly unreasonable. the consequences of termination are unreasonably harsh for the employee (in view of the severance payment. in most cases. In the case of dismissal. The employer may terminate the employment contract without the prior approval of the CWI. damages may be awarded. If no compensation is offered. in which case. he or she may petition the competent court for damages. 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. A dismissal is considered “manifestly unreasonable” if. Depending on the company’s Articles of Incorporation. for instance. this is not a legal requirement. authorized to dismiss a Managing Director from his or her corporate position as Managing Director. If an employee believes that his or her dismissal was manifestly unreasonable. The court rules in cases involving Managing Directors. whereas the Cantonal Division of the court is usually competent in labor cases. depending on the circumstances. the notice period should in principle be observed. a distinction must be made between the corporate and employment relationship of Managing Directors. the shareholders’ meeting is. As stated above.
During those meetings. the Works Council should be requested for its prior advice regarding the intended dismissal of the Director before seeking termination. if the Managing Director reported ill before having received the invitation for the shareholders’ meeting. as the Managing Director would be protected by the prohibition to give notice during illness. the meeting of shareholders could dismiss him from his position as Managing Director under corporate law. Works Council . The number varies from three to 25.Baker & McKenzie been met. however. in general. This is different. Under the Dutch Works Councils Act.e. As of 1 September 2006. depending on the number of employees in the company. The management of the company and the Works Council meet at least twice a year. in principle. In the event that the company has established a Works Council and the Managing Director is the consultation partner of the Works Council (i. the Managing Director’s corporate position and civil position (as an employee) will be terminated. also counted when determining the number of employees. The members of the Works Council are chosen directly by the employees from among their own ranks. In such cases. the employer is obliged to petition the competent Court to dissolve the civil law employment relationship. 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. 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. One of the members is appointed chairperson. may only advise management in connection with the company’s business. The Works Council has no executive power and. “bestuurder” within the meaning of the 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. A Managing Director cannot be a member of the Works Council. If a Managing Director were to become ill. discussions about subjects concerning the company that either management or the Works Council believes merit deliberation are held. Part-time employees and those who are hired in or out are. but termination of his employee status would not be permitted.
If an enterprise with at least ten but fewer than 50 employees has neither personnel representation committee nor a Works Council. major investments. and the development in relation to the previous year.The committee has the same facilities at its disposal as a personnel representation committee in an enterprise with ten to 50 employees.Doing Business in the Netherlands employment with respect to different groups of employees. significant reorganizations. 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. In principle. such as pension plans or in-house employment regulations. takeovers. termination of or a major change in the company’s activities. Small enterprises with fewer than ten employees may also set up personnel representation committee on a voluntary basis. its powers are more limited. the income development between the different groups of employees in the company. and dismissals. or shares joint authority with others. In principle. The management must furthermore consult the Works Council in connection with a number of important subjects. However. are required to set up a “personnel representation committee” if the majority of the personnel so requests. Enterprises with at least ten but fewer than 50 employees that do not have a Works Council. 111 . they cannot be dismissed from employment during their membership without the court’s permission. mergers. The Dutch Works Councils Act also provides the personnel with certain advisory powers. changes of location or major workforce layoffs. over the workforce. such as a transfer of control of the company. the Works Council must also be consulted on the appointment and dismissal of a Managing Director if the latter has sole authority. it is obliged to give its employees the opportunity to meet with the owner twice every calendar year. The management has an obligation to provide the Works Council with this information. Management must consult with the personnel representation committee on a number of subjects. Members of the Works Council are obliged to observe strict confidentiality with respect to what they learn during meetings with management. The Works Council has a power of veto over a limited number of decisions that directly affect employment conditions.
(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.
General Old Age Pensions Act (Algemene Ouderdomswet or AOW). 17. a distinction should be made between: With respect to social security system within the Netherlands. Doing Business in the Netherlands With respect to social security within the Netherlands. 113 . irrespective of their nationality. Premiums In general. all premiums paid within the national insurance system are levied with and part of the personal income tax rates.XV. Social Security and Pensions • • • • national insurance and employee insurance. The obligation to pay premiums ends at the age of 65.9% is levied for the AOW premiums. 1. General Child Benefit Act (Algemene Kinderbijslagwet or AKW). As of 1 January 2008. a distinction should be made between: national insurance and employee insurance. The AKW premium is 0% because it is funded by the government.15% for the AWBZ and 1% for the ANW premiums. The following Acts fall under this category: • • • • General Surviving Relatives Act (Algemene Nabestaandenwet or ANW). National Insurance The types of insurance in the national insurance system apply to all residents of the Netherlands. 12. Exceptional Medical Expenses (Compensation) Act (Algemene Wet bijzondere ziektekosten or AWBZ).
. WIA/WAO The NABW helps people to provide basic living standards for themselves when they are not entitled to any other benefit. Currently. • • • Unemployment Insurance Act (Werkloosheidswet orWW). leads to compulsory insurance in compliance with the following Acts: • Sickness Benefits Act (Ziektewet or ZW). The Work According to Labour Capacity Act (Wet Werk en Inkomen naar Arbeidsvermogen or WIA) (The amount of the premium paid varies. The WIA creates incentives for rehabilitation and reintegration into the workforce. This act.2% of the annual salary up to a maximum of EUR 2. Therefore. 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). the Disablement Insurance Act is merely applicable to employees who became or would become ill before 1 January 2004. employees who received WAO benefits before 1 January 2004 will still be covered by the WAO.Baker & McKenzie 2. depending on the type of work and the type of company) and Disablement Insurance Act: (Wet op de arbeidsongeschiktheidsverzekering or 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). The New Health Insurance Act (Nieuwe Zorgverzekeringswet) (The employer is obliged to compensate his employee for the mandatory income related contribution of 7. 114 The Disablement Insurance Act insures employees for a wage replacement benefit after 104 weeks of full or partial disability. The Disablement Insurance Act (WAO) is replaced by the Work According to Labour Capacity Act (WIA) on 1 January 2004.249 in 2008). The New National Assistance Act (Nieuwe Algemene Bijstandswet or NABW). Employees’ Insurance • Performing employment activities in the Netherlands in general.
individuals who were partially unemployed would receive income benefits equal to 70% of the minimum wage multiplied by the percentage of their disability. Employees. The premium was to be fully paid by the employer. After the wage-related benefit. PEMBA The purpose of PEMBA was to differentiate the disability premium on a companyby-company basis which depended on a company’s disablement risk. The duration of this benefit will be dependent on their employment history. those with several such employees pay a high premium. 115 . 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. 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. Companies having few employees falling under the disablement legislation would therefore pay a low premium. Companies could take out insurance to cover this risk. who in 2006 already received an IVA benefit. which must be at least six months to a maximum of five years. or pay contributions to a government agency (Authority for Employee Insurance. Conversely.The premium differentiation was valid for five years. UWV). have received a raise of 70% up to 75% with retroactive effect from 1 January 2007.Doing Business in the Netherlands Employers have the choice of self-funding the disability benefit and/or insuring this risk with private insurers. Full and permanent Disability (IVA) As of 1 January 2007. full and permanent disabled employees are entitled to 75% of their last salary (which is maximized to the maximum daily wage). Partial Disability (WGA) Partially disabled employees are entitled to 70% of their last salary (which is maximized to the maximum daily wage). However.
both the employer and the employee have far-reaching obligations with respect to reintegration. If the employer chooses to take the WGA risk himself (or insure the risk). Sickness and Disability Under present Dutch law (Article 7:629 of the Dutch Civil Code).Baker & McKenzie As of 1 January 2008. are not allowed to take the IVA risk upon themselves (or insure this risk). Please note that in November 2004. Research shows. Employers are currently allowed to take the WGA risk upon themselves for a period of four years. The differentiation of the premium will be applied on a company-by-company basis. as intended. As of January 2007. all the WGA benefits have been funded by a basic and a differentiated premium. Furthermore. Both parties are obliged to adopt an active approach 116 . social partners do not yet comply with this agreement and the 70% maximum is exceeded in most of the Collective Bargaining Agreements (CBAs). Moreover. employers are obliged to continue paying the salary of ill employees for a maximum of 104 weeks. the possibility of premium differentiation for the IVA is also not implemented. if earlier. that in practice. there is no obligation to pay the differentiated premium. Social Partners (bodies representing employers and employees or unions) and the Dutch Government reached an agreement. Employers will have the possibility to recover the WGA expenses on the employees to a maximum of 50%. 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. with the possibility of differentiation in premium. however. there are no more individual (for large employers) nor branch-wide (for small employers) differentiated premium obligation regarding the WAO. 3. 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. and employers therefore. During an employee’s period of illness. All the public insured employers are obliged a uniform premium for the WAO from that time on.
4. Please note that as of 1 January 2007 the new Pension Act has come into force. There are many ways in which the second-tier pension benefits can be arranged. supplementary to Dutch disability law (WIA). a compulsory Industry Wide Pension plan (Dutch: BPF) is effective. Similarly.Doing Business in the Netherlands in this respect. as of 1 January 2007. All these second-tier pensions are financed by contributions paid by the employer and/or the employee. The new Pension Act offers more clarity about responsibilities and liabilities between the employer. (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. there are some situations in which they do not have an option. even in case of one whose employment contract will end on short notice. a surviving-relatives pension. and supplementary to a governmental provision for surviving relatives (ANW). (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). In some branches (industries). employers who do not inform the new employee of the willingness 117 Second-tier Pension Benefits . This new Pension Act replaced the Dutch Pension and Savings Fund Act (Dutch: Pensioen. employers are not obliged to provide pension benefits. Although in principle. There is no relation between the amount of the AOW benefit and the amount of contributions paid. 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. the employee. In this light. and the pension funds/insurance companies. disability pension. Employees sometimes arrange for additional pension plans with their employer by concluding agreements with life insurance companies.” All residents of the Netherlands are entitled to an AOW pension when they reach the age of 65. We will explore this in further detail later on.en Spaarfondsenwet). the employer must make sufficient efforts to reintegrate the employee to the extent possible.
existing collective labor agreements. or some specific merger and acquisition situations might also lead to pension obligations for the employer. The second-tier pensions. temporary labor contracts/indefinite labor contracts.” A “B Policy” means setting up insurance entitlement between employer and an insurance company. 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). e. full-time/part-time. joining an industry-wide pension plan (this might be compulsory). In contrast to the former Pension and Savings Fund act.g. 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. the new Pension Law as of January 2007 no longer allows new pension plans to be based on a C-Policy.. are held by industry-wide pension funds. a “profit” or “gain” can be generated on the policies.Baker & McKenzie to offer a pension plan or not within one month after he starts his job. The following options apply: 1. Insuring a pension plan by a life insurance company as mentioned above. combined with risk insurance to provide pre-retirement and post-retirement death benefits and a waiver of premiums on disability. insuring employees with a life insurance company. Because investment returns tend to be higher. or by insurance companies. man/woman. 118 . The rates are mostly based on an interest discount rate of 3% a year. and who are already offering a pension plan to their other employees in the same line of business. a life insurance company that ensures the employees an individual or collective entitlement. and 3. and the like). will be considered to have offered the same pension plan to the new employee. company pension funds. 2. by law. Insurance companies use deferred annuity contracts as the funding instruments. various forms of legislation on equal treatment (age. can be done by means of a “B Policy. Three Insured Pension Plans As an alternative to an industry-wide pension plan or a company pension plan. 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). Furthermore. licensed by the Dutch Supervisory Authorities.
and b. the amount of the old-age pension depends on the employee’s salary on the pension date. Therefore. any salary increases lead to an ideal pension accrual. less the pension claims in relation to the period between the termination date and the pension date. Conversely. 119 . because the pension is based on the most recent salary. Advantage of the final pay system: • • • Under the final pay system.Doing Business in the Netherlands Several Ways to Finance and Arrange Supplementary Pension Benefits Defined Benefit system (DB) a. the years of employment and the franchise. The pension costs may increase out of control due to salary increases (thus increasing the pensionable base) at a later age. time-proportional pension claims must be paid up. upon a reduction of the pensionable base. There are several ways in which old-age pension benefits can be arranged and financed. A DB system can take the following forms: Final Pay System Under the Final Pay System. by a defined benefit system or a defined contribution system. With regard to future increases of the pensionable base. Disadvantages of the final pay system: If employment is terminated.. pension claims are allocated to the previous years of service from the commencement date of employment or of the plan. 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.e. i.e. Final Pay System.. i. the pension costs will also be progressively lower. the total pension claims on the basis of the employee’s most recent salary. Average Pay System.
but only the usual periodical salary increases. In this way. Employers have to be aware that these kinds of stipulations might be in conflict with Dutch equal treatment law. because pension increases following major salary increases are granted only for future years of service (average). the pension loss will be smaller. it may be determined that promotions after the employee reaches a certain age (55 or 60 years) no longer count for pension increases. Pension accrual is not ideal. If the pensionable base decreases due to a lower salary. particularly if a major salary increase occurs at a later age. 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. Average Pay System In this system. Upon each consecutive increase of the pensionable base. and Disadvantage of the average pay system: Upon termination of the employment contract. Alternatively. as salary decrease occurs later in the employee’s career. This can be compensated to some extent by indexing the pension claims 120 . there will be no need to pay up any time-proportional pension claims. 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. 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.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. a pension is accrued only for years of service yet to come. Advantages of the average pay system: • • • • The costs of an average pay system can generally be estimated easily and kept under control. the final pay system often includes provisions to limit the costs.
Defined Contribution System. Collective Defined Contribution System. rather than a pension commitment. The International Financial Reporting Standards (IFRS) will not lead to any records of pension obligations in the company books (balans). The pension premiums will be shown only in the profit and loss account (resultaten rekening). Defined Contribution System Under a 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. premiums can be used to accrue pension at the employee’s discretion. If the pensionable base decreases. it is still possible to accrue a full pension of 70% of the employee’s final pay. which means that less pension can be accrued. 121 . Thus. and Disadvantages of the defined contribution system: • • As pensions are partly the responsibility of the employee. a premium commitment is involved. it is not the final pension that is the standard. but the costs that form the basis of the pension commitment. and A DC system can take the following forms: b. the employee could insure only an old-age pension rather than an old-age pension in combination with a surviving relatives’ pension. 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. In a defined contribution system. the pension accrued by the employee in the past will not be affected. the employer need not pay up any time proportional pension claims. As the employee gets older. Upon termination of the employment. For instance.Doing Business in the Netherlands Defined Contribution System (DC) a.
• 122 Indexation might be paid by extra interest profits. Although most of the companies affected by IFRS do not wish to be confronted with the high liabilities in the company books. A CDC pension plan. The impact of IFRS on the company books. salary increases. International Financial Reporting Standards (IFRS) for companies quoted on the stock exchange has led companies to reconsider their existing DB pension plans. the employees will collectively carry the actuarial/investment risks and benefits. might show the following aspects: The pension fund will use the DB system to divide the pension accrual. inflation. if there is a mismatch in expectations and in the final result. based on the Average Pay System. most of them also wish to keep the advantages of the DB System. periods of service. and . leads to very high pension liabilities in the company books due to the fact that this method takes into account discount rates.Baker & McKenzie • • Upon marriage. interest. cohabitation. or expansion of the family at a later age. and other actuarial factors. and the like) is not as easy to forecast. provisions for surviving relatives have to be financed from the same premiums. • • • • The employer pays on a yearly base (within a few years). The Project Unit Credit (PUC) method based on IFRS used. a prefixed pension premium. is tremendous. Therefore. However. Extra risk insurance is already included in the pension premium. and The final pension. The basic assumption will be that the premium should provide for the expected pension. 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. making the yearly pension accrual flexible. when having a DB pension plan. Collective Defined Contribution system (CDC) As of 2005. The combination of the two leads to a so-called Collective Defined Contribution system.
123 . 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.Doing Business in the Netherlands The Dutch National Bank (DNB). has already been very critical on the socalled CDC pension plans and has interpreted some of these plans as a DB plan. This means that the CDC pension plan might not be IFRS-proof. however.
motor vehicle distribution. while allowing consumers a fair share of the resulting benefit. the Commission has adopted the so-called Block Exemption Regulations that automatically exempt certain categories of agreements. Such restrictive agreements or practices may. or promotes technical or economic progress. In principle. such as the insurance sector and the transport sector. EC Block Exemption Regulations currently exist in relation to. the Commission provides guidance through the “Modernization Package. research and development agreements. as well as other agreements in specific sectors. All Regulations have direct effect and are directly applicable in the Netherlands. specialization agreements. To facilitate this self-assessment.Baker & McKenzie XVI.” a set of notices and one procedural regulation. Competition Rules and Free Movement of Goods 1. nor afford the parties the opportunity to eliminate competition in respect of a substantial part of the products or service in question. An important EC Block Exemption Regulation is that for vertical agreements that took effect on 1 June 2000. 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. benefit from an exemption pursuant to Article 81(3). 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. technology transfer agreements. . inter alia. In addition. Competition Rules The EC competition rules provided in Articles 81 and 82 of the EC Treaty have direct effect in the Netherlands. Individuals can therefore invoke these articles before the Dutch courts and they are obliged to apply them. This exemption applies if the agreement or practice improves the production or distribution of goods or services. however. or distort competition in the European Union (EU) and which may affect trade between EU Member States. restrict. provided that the agreement neither imposes restrictions that are not indispensable to the attainment of these goals.
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. provided that the supplier’s market share does not exceed 30% and the agreement concerned does not contain any “hard core provision. Agreements exceeding the 30% market share threshold are not eligible for automatic exemption.” Typical hard core restrictions are fixed and minimum resale price maintenance. as well as certain types of joint ventures. a transaction is considered to have a Community dimension. which gives the European Commission control over mergers and acquisitions. The EC Merger Regulation. and prior notification and clearance of such transaction is mandatory in the EU. and absolute customer restrictions. 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. If certain monetary thresholds are met. absolute territorial restrictions. Non-competition restrictions imposed on a purchaser in a vertical agreement are generally required not to exceed five years. fidelity rebates. Upon infringement of the Article 81 or Article 82 prohibition. The Dutch Competition Act implements a prohibition system virtually identical to that of Articles 81 and 82 of the EC Treaty. Article 6(1) of the Competition Act contains a general prohibition against restrictive agreements or practices whether of a horizontal or a vertical nature. Agreements or practices that violate the 2. provided that the de minimis thresholds are exceeded. Dutch Competition Act 125 . Illustrations of possible abusive behavior are excessive pricing (whether low or high). the European Commission is empowered to impose fines of up to 10% of the worldwide group turnover of undertakings involved. and discriminatory practices. The Dutch Competition Act (Mededingingswet) took effect on 1 January 1998.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. but may still be exempt pursuant to Article 81(3) following an individual selfassessment. with a Community dimension is also directly applicable in the Netherlands.
Any agreement benefiting from exemption under an EC Block Exemption Regulation is automatically exempt. whichever is higher. be exempt. there are specific Dutch block exemptions for certain exclusivity arrangements relating to shopping malls. promotional pricing campaigns of a limited duration. decision or concerted practice. as is similarly outlined in Article 82 of the EC Treaty. such as the provision of services. Similarly. The Competition Act further prohibits abuse of a dominant position by one or more undertakings. and for certain joint tender arrangements. 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. the European Commission has provided guidance for this self-assessment through a set of notices. Generally. Under the Competition Act.5 million in the case of goods and EUR 1. Whether a certain agreement or practice satisfies these conditions for exemption has to be determined by means of self-assessment. Similar to Article 81 of the EC Treaty.000 or 10% of the worldwide group turnover of the undertakings concerned. As previously stated in paragraph 1 above. agreements or practices prohibited under Article 6(1) of the Competition Act may. The Competition Act contains a de minimis exception. Moreover. parties to such an agreement or practice run the risk of fines of up to EUR 450.1 million in all other cases.Baker & McKenzie prohibition are void. present and future EC Block Exemption Regulations apply directly in the Netherlands. In addition. 126 . this principle also applies to undertakings or governmental bodies entrusted with the operation of services of a general economic interest. Present and future EC Block Exemption Regulations also apply to purely Dutch restrictive agreements. 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. under certain conditions. 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. as a practical result of which the EC Block Exemption Regulations have remained the most relevant documents to scrutinize any and all commercial agreements.
In order to fall within the ambit of the Dutch merger control provisions. the NMa will either grant or refuse the license.e. especially as a result of the creation or strengthening of a dominant position. If the NMa fails to notify the parties within this period. 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. the NMa will inform the notifying parties as to whether a license is required. Within the four-week period.. especially as a result of the creation or strengthening of a dominant position. Without that license. or takeover) must meet the following threshold: the undertakings concerned must together. 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).45 million in the previous calendar year. The Dutch Minister of Economic Affairs has the power to ultimately decide whether to approve a concentration. if he believes that overriding social interests are involved. it is possible for the parties involved to request that only the Commission reviews the transaction. and upon closer examination. Within 13 weeks. If the transaction has to be notified in three or more Member States. 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. the proposed concentration will be deemed approved. If the NMa decides within the four-week period that no license is required. The license will not be granted if the concentration is seen to significantly restrict effective competition on the Dutch market or a part thereof. the proposed concentration (i. but the proposed merger is not allowed to be implemented until four weeks after formal notification (Phase 1). thereby overruling the NMa’s refusal.Doing Business in the Netherlands The Competition Act also provides for a system of prior merger control. 127 . merger. Different thresholds apply to the banking and the insurance sectors. parties are free to implement the transaction. joint venture. the concentration may not be realized and the parties will need to file a separate notification (Phase 2). generate a total worldwide turnover of at least EUR 113. and not the individual national competition authorities. 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. However. The parties to the concentration are free to decide when to notify a merger.
by which EC public procurement legislation is implemented. The first is the Decree Public Procurement Special Sectors (Besluit Aanbestedingen Speciale Sectoren).000. The second is the Decree Public Procurement (Besluit Aanbestedingsregels voor Overheidsopdrachten). 128 . whichever is higher.Baker & McKenzie The NMa has the power to impose fines of up to EUR 450. At present. the Framework Procurement Act (Raamwet EEG-voorschriften aanbestedingen) was enacted in 1993. works. the Dutch Public Procurement Law consists of legislation and rules in which the EC Public Procurement Directives are converted.000 or 10% of the worldwide group turnover of the undertakings concerned. the NMa has the power to impose fines of up to EUR 450. Since 1 October 2007. The fine for withholding information or providing inaccurate or misleading information to the authorities will amount to a maximum of EUR 450. several regulations exist which contracting authorities are either allowed or obliged to apply. Public Procurement Rules To a large extent. if parties fail to notify a notifiable concentration.000 or to 1% of the company’s worldwide group turnover. In order to cover the entire EC public procurement legislation. The maximum fine that can be imposed on a natural person is EUR 450. Aside from this. and supplies). For infringements of the prohibition against restrictive agreements or abuse of a dominant position. the Framework Procurement Act functions as a legal basis for Royal Decrees. Prior to 1993. Legislation only existed with regard to public works contracts. Two Royal Decrees came into force on 1 December 2005. substantial Dutch legislation regarding public procurement did not exist. This act constitutes a framework law on EC procurement rules.000 or 10% of a company’s worldwide group turnover (whichever is higher). 3. which implements the other “Classic” Directive (regarding services. the result being that the Dutch government complied with its obligation to implement the two Procurement Directives before 31 January 2006. which implements the Utilities Directive. 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.
This bill. Furthermore. was passed by the Dutch Lower Chamber and is currently being considered by the Dutch Upper Chamber. any international obligations regarding public procurement. the Dutch government is planning to enact a bill that is to replace the Framework Procurement Act. and specific national additions to the Directives. C-81/98 Alcatel Austria. known as the Procurement Act (Aanbestedingswet).Doing Business in the Netherlands Before 1 December 2005. Naturally. 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. Most optional procedural provisions of the Directives have been taken over and specifically implemented in the Royal Decrees. the Alcatel8 jurisprudence of the EC Court of Justice has been included. Aside from implementing the Directives. C-399/98 La Scala. ____________________ 8 9 EC Court of Justice. 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. contrary to the Directives. the main rule of the La Scala9 case will apply. 129 . 12 July 2001. 28 October 1999. EC Court of Justice. 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. unlike in the Directives. Despite the full text implementation. Before the end of 2008. The only references made to the Directives are there to implement the models for announcements and to the financial threshold values. 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. being that the Directive must be interpreted in such a way as to ensure that it is given full effect. 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. if there is room for debate on the scope of the definitions or clauses in the Royal Decrees. developments in case law. the text and order of the Royal Decrees have been slightly modified with regard to the Directives. For instance. the EC Directives on public procurement were implemented under Dutch law by means of a mere reference to these Directives.
In these cases. procurement disputes can no longer be settled before the Court of Arbitrators. for instance. Ministry of Agriculture.11 The Works Procurement Regulation 2005 is fully compliant with the Directive and the Royal Decree. The application of this Regulation is not mandatory for noncentral authorities. due to developments in both European and national case law.12 The regulation can also be voluntarily used by all other contracting authorities for European and national procurement procedures. bodies governed by public law.Baker & McKenzie The Works Procurement Regulation 2005 In the Dutch system. municipalities. with the adoption of the new Procurement Act. If there is any discrepancy between the different regulations. and refer disputes to the Court of Arbitrators. Contracting authorities Contracting authorities are the state. Ministry of Transportation and Ministry of Housing. The regulation provides for two different sets of rules: one for European procurement procedures and one for national procurement procedures. which are based on the old Directives. the UAR 2001 or the UAR EG-1991). for instance. regional or local authorities.ARW 2005) for contracts both within the scope of the Directive and national procurement procedures. say. The Directives do not have a direct effect on the residents of the EU member states. The definition of “state” is given a functional ____________________ 10 11 12 Ministry of Defense. Some municipalities might still use the old Uniform Procurement of Works Regulations (Uniforme Aanbestedingsreglementen. the Royal Decree prevails. However. The national public procurement procedures do not have a statutory basis within the Dutch legal system. those below the respective threshold value. or associations formed by one or several of such authorities (jointly referred to as “public authorities”). the four “building” ministries10 are obliged to apply the Works Procurement Regulation 2005 (Aanbestedingsreglement Werken. 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. the Works Procurement Regulation 2005 could help the contracting authorities to put up work in accordance with these principles. However. Spatial Planning and Environment. 130 .
it is also regarded as a contracting authority. The Framework Procurement Act does not apply to contracts that the contracting authorities award for purposes other than the pursuit of relevant activities. exploring for or extracting oil. or other solid fuels. 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.Doing Business in the Netherlands interpretation. tramway. contracting authorities are defined as public authorities or public undertakings that exercise relevant activities. electricity. which are stated in the Directives. or other terminal facilities to carriers by air. or inland waterway. The Framework Procurement Act refers to the various threshold values. Apart from certain important exemptions. Moreover. regardless of its legal status. and • • the operation of networks providing a service to the public in the field of transport by railway. so that companies have the opportunity to compete for the award of the contracts. as far as the utilities sector is concerned. As a consequence. there are more than a thousand entities that can qualify as public authorities that have to adhere to the Framework Procurement Act. rather than a formal approach. maritime or inland port. 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. or heat (or their supply). 131 . In the Netherlands. sea. and the provision or operation of postal services. coal. the provision of airport. gas. Besides. trolley bus. the exploitation of a geographical area for the purpose of: 1. exercises relevant activities on the basis of special or exclusive rights granted by a competent authority. transport. 2. gas. if an entity which is not a public undertaking. or distribution of drinking water. automated systems. the Framework Procurement Act can also be applicable to private companies. or cable.
The Dutch government promotes electronic procurement. contracting authorities should always comply with the general principles of proper government and the general principles of procurement law. objectivity. . Advertising Advertising rules oblige contracting authorities to send notices to the Office for Official Publications of the EC in Luxembourg. the restricted procedure. a newspaper for the construction industry. The content of notices may differ. the general principles of proper government. notices are also published in the Official Gazette (Staatscourant) and Cobouw. call for tender. notices on the existence of a qualification system. inter alia. through the Internet. design contest notices. According to Dutch and EC case laws. On a regular basis. and The first three principles are corollary to the general principles of procurement law. Dutch and EC case laws require compliance with the general principles of procurement law and proper government. Notices can or must take the form of indicative notices after the beginning of the budgetary year. Award procedures • • 132 Award procedures include the following: the open procedure. which fall outside the scope of the Framework Procurement Act. for instance.Baker & McKenzie • • • a ban on the use of technical specifications which favor or eliminate certain undertakings. that the contracting authority should always exercise a proper level of transparency while procuring contracts. is allowed. This entails. such as nondiscrimination. Voluntary use of advertising possibilities for contracts. or notices on contracts awarded. and transparency. It is determined by various publication requirements. objective criteria for the participation to and the award of public contracts. As stated above. regardless of whether or not the Framework Procurement Act applies.
and the competitive dialogue. 133 . contracting authorities may consult contractors. suppliers. 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.Doing Business in the Netherlands • • the negotiated procedure. Time limits for the receipt of requests or tenders may be fixed by contracting authorities. 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. being the competitive dialogue. If the negotiated procedure is followed. If the open procedure is followed. only those contractors. This is not allowed when the open or restricted procedure is followed. suppliers. In cases where urgency renders the time limits impracticable. a request to participate in the procedure can be made. they may be reduced. all interested contractors. a separate category of criteria is allowed by the use of additional specific conditions. but may not be less than indicated in the EC Directives. Time limits For those projects. If one is not invited. With the introduction of the competitive dialogue procedure. or service providers may submit tenders. for instance. which is also implemented by the Royal Decree in the Dutch legal system. 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. the capability of a company to hire long-term unemployed workers. If the restricted procedure is followed. In some cases. or service providers that have been invited may submit tenders. 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. suppliers. By not defining these criteria. Selection criteria Criteria for qualitative selection consider the company (and not the contract). the possibility to use the negotiated procedure is more limited than before.
including the price. e. Depending on the 134 . Regional preference schemes. In addition. and vice versa. 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. 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. or the protection of industrial and commercial property. animals or plants.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. With regard to trade between the Netherlands and other EU Member States. may still exist in practice. the protection of health and lives of human beings. Award criteria Public contracts are awarded on the basis of one of two possible criteria.g. various criteria. all customs duties have been abolished. and for the evidence of the company’s technical knowledge or ability on the other. The common EU customs tariff rate applies to trade between the Netherlands and non-EU countries. When the award is given to the economically most advantageous tender. Registration in an official list of recognized companies may be used as an alternative evidence to prove suitability. but are likely to be prohibited if as a result. a percentage of the contracts is restricted to certain companies established in a certain area of the Netherlands. such as running costs and technical merit. for reasons of public security. 4. used when awarding public procurement contracts.. Articles 28 to 31 of the EC Treaty have a direct effect in the Netherlands and can be invoked before Dutch courts. the European Commission’s import and export regulations for trade with non-EU countries must be observed. The Framework Procurement Act does not address the application of the EC state aid regime. 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. Such restrictions can be justified only in exceptional cases.
or strategic goods). 135 . Latvia. textiles. Lithuania. The European Economic Area 6. and the United Kingdom. the free movement of goods rules mentioned above also apply to goods of EEA origin. Finland.Doing Business in the Netherlands country of origin or the destination of a product or the type of goods (e. toys. Portugal. Romania. Malta. Slovak Republic. ____________________ 13 Member States: Austria. Belgium. In addition. Hungary. Czech Republic. and medical devices. Products that are produced in conformity with European standards are presumed to be in conformity with the EC Directives on Technical Harmonization. Bulgaria. Cyprus. Slovenia. such as machinery. such as livestock or chemicals. the Netherlands. In furtherance of this aim. which are virtually identical to the EC competition rules.g. and Liechtenstein. and have been implemented in the Netherlands and in other Member States. These Directives relate to the lawful marketability of a variety of products. Sweden. Norway. The EEA Agreement provides for a set of competition rules. Italy. Spain. Poland. France.. import or export licenses may be required. The European Economic Area (EEA) Agreement took effect on 1 January 1994. dual-use. a considerable number of EC Directives have been enacted to harmonize technical and safety requirements. Products that comply with those Directives are required to carry the CE mark and can be freely marketed throughout the European Union. Standardization One of the objectives of the Community is to eliminate technical barriers to trade and to promote the use of European standards. Greece. 5. Ireland. The EEA consists of the 27 EU Member States13 plus Iceland. Germany. Estonia. as well. Luxembourg. Additional controls exist for certain goods. Denmark.
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. or if the patent is not adequately used in the Netherlands within three years after its rights are granted. Intellectual Property 1.Baker & McKenzie XVII. Interlas judgment.. the description of the patent application may be filed in the English language. 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. The Dutch Supreme Court gave way to cross border relief in multi-jurisdictional patent infringement cases in 1989 in its Lincoln v. 136 . If it is considered necessary for the public interest. 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. The owner of a patent may grant licenses to third parties for the use of its patent. the Netherlands. as these patents create too many legal insecurities due to the lack of an extensive research as part of the application procedure.” i. if it contains an important new technology. the owner can be compelled to grant a license. Applications for a Dutch patent must be submitted to the Industrial Property Office (Bureau voor de Industriële Eigendom) in Rijswijk. Dutch courts have allowed for cross border injunctions in numerous instances. the (1970) Patent Cooperation Treaty.e. the (1973) European Patent Convention. however. The possibilities for obtaining cross border injunctions have been restricted lately. still needs to be filed in the Dutch language. The Netherlands is a party to the (1975) Treaty of Paris for the Protection of Industrial Property. The conclusion thereof. 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. Since then. As of June 2008. and the (1963) Strasbourg Convention. Patents Patents filed on the basis of extensive research can be registered in the Netherlands for a period of 20 years. it is no longer possible to file for shortterm patents (with a validity of six years).
Copyright protection continues for 70 years after the death of the author or. timetables. the Dutch 1912 Copyright Act has introduced new exceptions and limitations. after the publication of the work. a right of communication to the public. The Netherlands is a party to the 1886 Bern Convention on the protection of literary and artistic works and the 1952 Universal Copyright Convention. 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”). parody. As a result of Directive (EC) 2001/84 of 27 September 2001 on “droit de suite. The Copyright Directive introduces a reproduction right.” 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”). Germany. There are no formalities required to obtain copyright protection. copyrightable works made or published in most countries of the world will likewise be protected under the Dutch 1912 Copyright Act (Auteurswet 1912). The Netherlands is one of the few European Union Member States likewise. 137 . the scope of protection is limited. The amended Dutch Copyright Act entered into force on 1 September 2004.Doing Business in the Netherlands Applications for a European patent can be filed with the European Patent Office in Munich. and other collections of data. in some cases. such as phone books. A work qualifies for copyright protection if it has an “original and personal character”. such as the exception of use for purposes of caricature. or pastiche. or with its subdivision in Rijswijk. Furthermore. and a distribution right. Further to the implementation of the Copyright Directive. However.Therefore. provided that they are meant to be made available to the public. new provisions with respect to the protection of technological measures and rights management information have been included in the amended Dutch 1912 Copyright Act. to protect non-original works. the Netherlands. 2.
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). 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. Furthermore. or presenting the contents. the European Court of Justice decided that with respect to the scope of database protection. Further to the implementation of the Copyright Directive. In its judgment in 2004 of the British Horseracing Board v. 138 5.William Hill case. 3. 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. if the database shows that there has been a qualitatively and/or quantitatively substantial investment in obtaining.Baker & McKenzie Performing artists. The EC Trademarks Directive 89/104 of 21 December 1988 has been implemented in the Benelux Trademarks Act. the Dutch 1993 Neighbouring Rights Act has also been amended. Trademarks . Registration is not required. 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. have had a uniform trademark protection law since 1971. forming together the Benelux region. Protection of Databases Apart from protection under Dutch copyright law. and Luxembourg. Belgium. verifying. the Netherlands. 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. Neighbouring Rights 4. the costs involved with the mere creation of data are not relevant. 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 producer of a database is granted exclusive rights to prevent extraction and/or reutilization of the whole or of a substantial part. For instance.
misleading. Unregistered trademarks are. trademark owners can oppose the use or registration of a younger sign that is identical and is used for identical goods or services. a trademark has to be registered with the Benelux Office for Intellectual Property in The Hague.g. It is also possible to register collective trademarks. or is detrimental to the distinctive character or reputation of the existing trademark. Furthermore. seals of approval. If an identical or similar trademark has been filed for similar or dissimilar goods or services. a trademark owner can. takes unfair advantage of. 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. In addition. logos for the environment). 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. words. in principle. 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.The Benelux Office for Intellectual Property may refuse signs that are not distinctive. in principle. The goal of the opposition is to obtain clarity at an early stage whether a trademark can be registered or not. without a valid reason. the Benelux countries have introduced an opposition procedure. not protected. the new rules are meant to encourage parties to reach an amicable settlement whenever possible. Furthermore. or are in violation of public order. 139 . colors.Doing Business in the Netherlands In principle. that allows trademark owners to oppose an application for registration of a conflicting sign with the Benelux Office for Intellectual Property. The said trademarks distinguish certain collective characteristics of goods and services (e. rather than to distinguish the goods and services themselves. in accordance with the Benelux Treaty for Intellectual Property. or is detrimental to the distinctive character or reputation of the existing trademark. symbols. Since 1 January 2004. To acquire protection. three-dimensional shapes (of a product or packaging). and sounds that distinguish goods or services can be registered as trademarks. In principle.. A trademark registration is valid for 10 years and can be renewed for another 10 years. As of January 2006. oppositions may be lodged against new trademarks filed for goods and services in all classes.
to extend a Benelux trademark registration to another Member State and vice versa. Lithuania. Organized by country. 140 . Romania and Bulgaria joined the EU on 1 January 2007. Trademark protection of existing European Community Trademarks has been extended to these countries automatically and without cost. or structured according to brand categories. Hungary. Cyprus. 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. With Global IP Manager (“GIPM”) Baker & McKenzie can provide web-based worldwide trademark portfolio management services. lapses or is cancelled within five years after the international registration. GIPM replaces the need for in-house attorneys to trace information on the status of pending applications or current contentious matters. all IP matters being handled by Baker & McKenzie. Estonia. legal action. the main advantage of international registration is that it is cheaper than filing individual national applications for registration. 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.Baker & McKenzie It is also possible to apply for a European Community Trademark registration. Latvia. GIPM enables our clients to review instantly online. Trademark attorneys can file applications in any EU country. Slovenia. In general. 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. 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. 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. and the Slovak Republic joined the EU. On 1 May 2004 the Czech Republic. The Netherlands is also party to the Madrid Convention and the Madrid Protocol (“the Madrid System”). and for persons or legal entities with domicile or a registered seat in an EU Member State. Poland. which covers all the Member States of the European Union. Malta.
or patterns. This system also incorporates an Unregistered Community Design right. Pursuant to EC Directive 98/71 of 13 October 1998 (European Directive on the Legal Protection of Designs). The latter right provides protection for a five-year period. a design is still considered new if it has been made public for the first time within 12 months before the filing. features of shape. which provides protection for three years from the day the product incorporating the design is made available to the public in the EU.e. Nevertheless. whereas the Registered Community Design right entitles the owner to also oppose the use of designs that produce a similar impression. has been available since 6 March 2002. Applications for this right are to be filed with the OHIM (Office for Harmonization in the Internal Market) of the EU. the Benelux Designs and Models Act was amended and came into force on 1 December 2003. ornaments. It only allows the owner to oppose the use of identical designs. Countries that are a party to Novelty and having a “distinctive character” are conditions for protection. The Netherlands is a party to the The Hague Agreement for the International Registration of Designs and Models. for a maximum total of 25 years. This design right. a new and separate system has been created for the protection of designs in the European Community. 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. The OHIM began accepting applications on 1 January 2003. which can be renewed four times (a total of 25 years of protection). 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. i. 141 . Applications for registration are filed with the Benelux Office for Intellectual Property or with the International Bureau for the Protection of Industrial Property. granted by law without formalities and free of charge. The term of protection (five years) can be extended four times. The Benelux Designs and Models Act was merged into the Benelux Treaty for Intellectual Property on 1 September 2006. This agreement makes it possible to apply for “international registration” in all Member States. but originality of design is not required.6. As a result.. in the case of international applications. As a result of EC Council Regulation 6/2002 of 12 December 2001 on Community Designs.
the Netherlands has implemented measures to harmonize customs controls with respect to IP rights. 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. Anti-counterfeit Measures As a member of the European Union. 9. Remedies available to intellectual property right holders include the destruction. 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. Trade Names 8. 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. 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. As of 1 May 2007 the provisions of the IP Enforcement Directive have been implemented into various Dutch IP laws. within six months. to acquire a priority date. 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. based on the European Commission’s view of best practice across the EU. along with details of the quantities and prices involved. as well as financial compensation. but must also use it. injunctions and damages. recall or permanent removal from the market of illegal goods. as of which the owner of the design or model can object to all identical and similar design or model applications and registrations. These measures provide an effective tool in protecting most IP rights against the counterfeit trade. 142 .Baker & McKenzie the Paris Treaty can claim priority rights. 7. The Directive’s provisions include procedures covering evidence and the protection of evidence and provisional measures such as ex parte injunctions and seizure.
BorderResponse is a pre-litigation enforcement service on a fixed fee basis. practical tips and advice. Practice shows that the goods are usually surrendered for destruction to avoid legal proceedings.Doing Business in the Netherlands Under the Council Regulation. Customs charges no administrative costs for processing the filing of such notice. origin. and dealing with initial responses from the adverse parties to reach a settlement. The process for filing a customs notice is relatively simple and straightforward. Advertising Misleading advertising is primarily addressed under the tort law. consignor. it is also possible to obtain the presumed agreement to the destruction of the goods. or price of a product. or to commence civil or criminal proceedings. 143 . composition. including information on filing customs notices. in case the carrier. Once customs has detained goods. characteristics. 10. contact details for customs. 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. user possibilities. BorderWatch features 55 country reports on customs procedures and enforcement options.” Baker & McKenzie has introduced global web-enabled tools to (cost) effectively fight counterfeit on the customs level on a global basis. customs can either independently take action by detaining goods that are suspected of infringing certain IP rights. quality. which includes customs recordation of intellectual property rights. With “BorderWatch” and “BorderResponse.The Dutch Civil Code declares it a tort to misrepresent the nature. relevant. customs registration forms. or consignee does not oppose a request for surrender. BorderWatch is an online service offering tips on intellectual property protection through customs procedures in 55 countries. quantity. verifiable. Other trademarks may be used in such comparisons provided that the advertisement does not harm the reputation of the other trademark. and representative features or qualities of the products or services being compared. acting on a detention or seizure. preparing cease and desist letters. Comparative advertising is permitted under Dutch law provided it gives an objective comparison of one or more material. or customs can take such action provided that the holder of these IP rights has filed an appropriate notice with customs. Aside from the voluntary surrender of the goods. and local legal assistance.
public order. but public advertising of prescription pharmaceuticals is prohibited. Public advertising of non-prescription pharmaceuticals is allowed under certain conditions. In addition to the option of taking legal action. Although decisions of either group are not legally binding.. The advertising of pharmaceuticals is regulated by the Pharmaceuticals Act (Geneesmiddelenwet). 144 . the facts. pharmaceuticals. The advertising of pharmaceuticals (including the grant of incentives to health professionals) is strictly regulated.Baker & McKenzie In the case of misleading or unlawful advertising. or it can render a “public recommendation” which is published in various media. Advertising that misleads the public. the price or origin of a certain product is prohibited.g. negative decisions are normally respected by the affiliated media. e. 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. Specific regulations apply to advertising directed at children and to the advertising of products such as alcoholic beverages. Strict rules apply to comparative advertising for pharmaceuticals. a rectification. The advertisement of tobacco products has been banned in the Netherlands. advertising standards for specific industries are regulated by separate laws and the industry itself. a complaint can be filed with the Advertising Code Committee and its Board of Appeal. and good taste and that it may not be contrary to the public interest. The advertising of pharmaceuticals is further regulated by the self-regulatory codes. 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). which will refrain from publishing the advertisement in question. Furthermore. The Dutch Tobacco Act also restricts the use of tobacco trademarks and distinguishing signs for non-tobacco products. or compensation for damages can be sought before the Dutch courts based on the relevant provisions of the Dutch Civil Code. or common decency. an injunction. and financial products. Advertising to health professionals is allowed provided that certain requirements are complied with. 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.
The total amount of any winnings must not exceed EUR 100. The price of the product or service may not be increased merely because of the prize draw. such as the name and address of the organizer. 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). the communication costs. nature and value of the prizes. Appeals against the Code Committees decisions can be filed with the respective Boards of Appeal. No costs other than the costs of communication may be charged for participation in a prize draw. the number. 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. Furthermore. Advertising and freedom of expression Article 7 of the Dutch constitution regarding the freedom of expression does not apply to commercial advertising. the way that the tax on games of chance will be paid. and the like. However. such costs of communication may not exceed EUR 0. the promotional action will not qualify as a game of chance but as a prize contest. the date of the prize draw. For “small promotional games of chance.” where the total value of the prizes is less than EUR 4.300. A violation of these regulations is an economic offense. In case a promotional action consists of a performance that can be adjudicated.60 per entry and must be clearly communicated before entry.000. a maximum of one promotional game of chance per product. Under the code of conduct.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. the total value of the prizes may not exceed EUR 2. In addition. In that case. It is also possible to initiate court proceedings against competitors based on unfair competition. service. the corresponding Article 10 of the 145 . or organization per year is allowed. the period during which the prize draw is open. 11.500. the regulations are less strict. The organizer of a promotional game of chance must use general terms and conditions which include certain information. there must be no more than 13 prize draws in one promotional game of chance.
according to European law. In December 2003. In practice. This implies that. which supersedes the national constitutions within the EU. 12. 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. the intellectual property rights of a competitor. recourse may be claimed against passing off or unfair competition under Dutch tort law. They may. it has been established that in case of a conflict between commercial advertising and. Generally. also be protected by tort law under certain circumstances (see “Unfair Competition” above). In Dutch and European case laws. the possibilities to base legal action against design infringements on unfair competition became less restrictive. Other unlawful acts. 146 . To base a claim against unlawful reproduction or copying of goods on unfair competition. the scope of protection of Article 10 ECHR for commercial advertising seems limited. Unfair Competition Under certain conditions. Furthermore.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. commercial advertising can fall under the scope of the right to freedom of expression. for instance. 13. can also be redressed on the basis of unfair competition under Dutch tort law. does not exclude commercial advertising. or misleading (comparative) advertising claims. such as unfairly competing with one’s former employer. theft of trade secrets. it will have to be demonstrated that the unlawful acts in question caused damages for the plaintiff. by an amendment of the Benelux Design legislation. It does not provide advertisers an unrestricted right to advertise for their own benefit and at their competitor’s expense. Trade Secrets Trade secrets are generally protected by contract rather than by law. the court will weigh the interests involved. however.
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. they must be registered with the applicable registration offices. design and models. trademarks. the TRIPs agreement (effective since 1 January 1996) and the Paris Convention establishing the World Intellectual Property Organisation. Licensing. 15. and pledges such as patents. the assignment. However. Assignment. or plant breeders’ rights to be effective against third parties. and Pledge Doing Business in the Netherlands Further to the specific provisions under Dutch intellectual property law. No government approval is required. 147 . Treaties and General European Legislation In addition to the treaties mentioned above. the Netherlands is also party to inter alia. topographies.14. in order for certain assignments. licenses. licensing.
Telecommunications 1. and also has significant jurisdiction with respect to the resolution of interconnection disputes. a party is required to register with OPTA. this Policy Document strives for a less regulating attitude of the Dutch government with regard to the use of frequency. OPTA is also 148 . the new Dutch Telecommunications Act (Telecommunicatiewet. Currently.. The independent regulatory authority (OPTA) remains responsible for the general supervision of parties operating on the telecommunications market.. video-on-demand). Like its predecessor. for management of numbering and for the registration of providers. Various operators are active in all sectors of the electronic communications industry.g. Registration In order to install or operate public electronic communications networks and to provide public electronic communications services and conditional access systems (e. Market Situation The Dutch telecommunications sector has been fully liberalized since 1 July 1997. OPTA and NMa have strengthened their cooperation since 2004. 3.g. It is designed to work more in line with general competition law. or TW) took effect. Basic Legislation and Regulatory Authorities The principal aim of the new TW is to encourage effective competition.Baker & McKenzie XVIII. affiliated with the Ministry of Economic Affairs. The modification aims amongst other on the establishment of an antenna register and extension of the prohibition on undesired electronical communications. many details of which are further specified in secondary legislation (e. replacing the TW of 19 November 1998 and implementing the 2002 EU Directives on electronic communications. On 19 May 2004. the TW is a framework act. In short. governmental and ministerial decrees).The Dutch Competition Authority (NMa). 2. Besides in the current proposal the so-called Policy Document on Frequency. The distribution of frequencies will preferably take place by means of an auction. is empowered to monitor the electronic communications sector for anti-competitive activities and concentrations. proposed amendments to the TW are being discussed in parliament. The new TW is also more technologically neutral compared to the 1998 TW.
or (iii) by auction. the number plans indicate what allocation method applies to a certain type of number (i. 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. 4. which as of 2006 has been tied to annual turnover. which may include the requirement of a financial quotation. The fees OPTA charges consist of a one-time registration fee and an annual “supervision” fee. reserving numbers. and supervising the use of such numbers. (4) international signaling point codes. or “first come. Number plans have been drawn up for. OPTA is charged with the task of granting. for mobile and satellite communications. lottery. other than demonstrating to OPTA that the service/network is indeed offered to the general public. An individual license under the TW is required. 149 . first served”). (2) telex services. Details on the allocation and use of frequencies are set out in a National Frequency Plan. 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). There are standard registration forms available for this purpose (in Dutch and English).Doing Business in the Netherlands responsible for certifying service providers for electronic signatures. (ii) by competitive assessment of applicants and applications (“beauty contests”). (iii) individual numbers. only for the use of frequencies. (ii) number blocks. (3) packet and circuit-switched data services. Under the revised TW. and (vi) transit network signaling point codes. Depending on the scarcity of the frequencies concerned. in principle. Numbers may be obtained or reserved by means of standard forms. if this is necessary to guarantee genuine competition in the relevant market. (iv) carrier (pre)select numbers (a prefix of “16xx”). (v) international signaling point codes. which are available for: (i) information numbers for free services (0800) and paid services (0900 and 0906).e.. inter alia: (1) telephone and ISDN services. (5) transit network signaling point codes. Parties can be excluded from a frequency allocation procedure. Numbers The designated use of numbers is indicated in a number plan. auction. and (6) identity numbers for international mobility (IMSI numbers).
In summary proceedings before an administrative court. Under the TW. any party is obliged to tolerate the installation. the obligation to tolerate the installation.e. For owners and supervisors of public grounds. the TW provides that. maintenance. 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. OPTA’s guidelines were regarded as unlawful. Numbers allocated by auction will be assigned for an indefinite period. the provider of the network can be obliged to remove the empty ducts. 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. Numbers may not be traded as a business activity. A mobile network provider therefore. this obligation extends to all other land. However. In this respect. In the case of regional and international networks. 5. regardless of the contractual provisions between the provider and the end user (including notice terms and minimum contract periods). this obligation is limited to 10 years. with the exception of enclosed gardens and other enclosed grounds that are integrally connected to private residential premises. After the expiration of these years. notwithstanding a right to compensation of certain damages. and clearance of cables in and on public grounds by these providers. and clearance of cables is extended to empty cable ducts..Baker & McKenzie Numbers with an exceptional economic value (i. Empty cable ducts that already situated in public grounds before 6 December 2006 will be allowed until 1 January 2018. 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. unless the number plan specifies the duration of the assignment. Rights of Way All providers of public electronic communications and broadcasting networks are accorded rights of way. In 2004. maintenance. cannot rely on a landlord’s obligation to tolerate the installation of antennas or antenna sites. short numbers) will be allocated by auction. Antennas and antenna sites are not regarded as cables. 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 .
Also. OPTA will have to stay alert to protect the customer.. In this scenario parties with significant market power are less probable. broadcasting. 7. already currently happening and if it continues. thus less regulatory intervention. This subjects KPN Telecom to the full range of ONP obligations. 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 . i. Interoperability Save for certain specified exemptions. As a result. KPN Telecom has been designated a party with significant market power (SMP) in various communications markets. (i) public fixed telephony. but successfully disputed this designation). and (iii) public mobile telephony (Vodafone was designated as party with SMP in the public mobile telephony market. with the exceptions of lines with a capacity greater than 2 Mb/s. KPN’s designation as a party with SMP on the market for public fixed telephony continues for 12 months after the TW was enforced. an Act concerning improvement of exchange of information regarding underground networks is being prepared. and (ii) consolidation. OPTA has conducted new market analyses on broadband. Significant Market Power In its Vision on the market OPTA has set forth two extremes: (i) convergence. OPTA completed its market analyses for the various electronic communications markets in the Netherlands. maintenance. Under the TW. Therefore. which will mean that only few providers will remain. At the moment.e. as described in the following paragraphs. meaning that a horizontal market structure with multiple providers will exist. and clearance of cables within their jurisdictions. and mobile telephony. In 2006.Doing Business in the Netherlands cable ducts. 6. The municipal authorities are charged with coordinating the work relating to the laying. 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. (ii) leased lines. 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.
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. certain services and provisions must be available to everyone at affordable prices and at a specified quality. Through a notification published in the Dutch State Gazette (Staatscourant). access to public phone booths (one for every five thousand inhabitants). All providers of the services concerned that possess SMP within the designated area must participate in the competitive test procedure. OPTA may set a term within which an interconnection agreement must be concluded. access to a comprehensive and complete telephone directory of fixed and mobile telephony subscribers. The Minister will assign the universal service obligation to the party that can provide the services at the lowest net cost. More onerous interconnection obligations apply to providers who have been designated by OPTA as having SMP in the market sector concerned.. on the grounds of general and social interest (universal service). 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. These services and provisions currently include fixed voice telephony service. (ii) provide other operators with all necessary information. (iii) publicise a reference interconnection offer which described the interconnection facilities and services and which is subject to OPTA’s review and approval. 8. The TW contains a description of net cost. including all changes in that information scheduled to be introduced in the next six months. The “dominant” providers (i. KPN Telecom) are obliged to (i) offer interconnection to their networks on nondiscriminatory conditions.e. other parties will be invited to provide a competitive offer. 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. and (iv) offer interconnection at costoriented and sufficiently unbundled rates. 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. Pursuant to the TW. 152 .Baker & McKenzie achieve interoperability between their respective end users.
the subscribers’ personal data. the universal services regulation was amended concerning the duty to inform the customers on the tariffs used. 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. and the like. which includes e-mail and SMS SPAM.Doing Business in the Netherlands In 2006. OPTA has issued new guidelines for providers on how to abide by these new regulations. In addition to the general rules for the protection of privacy under Dutch privacy regulation.000 because of unwanted distribution of software. The TW contains specific obligations regarding the processing of location data (data processed in an electronic communications network. 9. 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. In general. These can be found on OPTA’s web site. payment options. OPTA has for the first time imposed a penalty of EUR 1. At the end of 2006. Location data may be processed only when rendered anonymous to the extent necessary to provide the services.The TW contains an opt-in regime for SPAM. the TW lays down specific privacy rules with respect to providers of public electronic communications networks and services. 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. indicating the geographic position of the terminal equipment of a user). or with consent of the end user. dialed phone numbers. Privacy and Legal Interception 153 . taking into account the level of technology and the costs involved. providers must take appropriate organisational and technical measures to protect the privacy of their subscribers. if the customer has not initially refused such use. In order to enable the authorities to make use of interception. In 2007. The opt-in regime does not apply to unsolicited e-mail sent for products or services similar to those already purchased by a customer.000. and the users of their network or services.
The protection granted under the Copyright Act covers. generally.Baker & McKenzie XIX. The Copyright Act offers the owner of a copyright to software both civil and criminal recourse against third-party infringement. the Copyright Act contains a special section dealing with computer software. enabling the claiming party to verify whether the infringing party has forfeited any penalties by breaking a previous court order. among other things. In 2004. preparatory materials. Computer software can be protected under the Dutch Copyright Act (Auteurswet). source codes. General The Netherlands takes a pragmatic approach to ICT legal issues. Computer Software . much is left to the agreement between the parties. icons. Unless the software is developed within the framework of an employer-employee relationship (in which case the employer will normally hold the copyright). In general. the Dutch Copyright Act was amended to reflect Directive 2001/29/EG. there is no equivalent to the “work for hire” doctrine as may be applicable in other jurisdictions. The regulatory body provides a basis for IT companies seeking IP protection for their products and services (see also Chapter XVII). provided it satisfies the originality requirement (see also Chapter XVII). software suppliers will thus retain the copyright to their software. Following the (late) implementation of the 1991 EC Directive on Copyright Protection for Computer Programs. To safeguard 154 2. object codes. even if it was specifically developed for a customer. 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. displays and interfaces. Information and Communication Technology (ICT) 1. screens. These changes have not affected the protection granted under the Copyright Act to computer software. the court decided on whether all data and data carriers of an alleged software infringer needed to be disclosed to the requesting party. In a recent court decision in summary proceedings. Unless the parties agree otherwise. No formalities are required in order to obtain copyright protection for computer software.
verification.The Dutch legislature adhered to the two-tier regime prescribed by the EU Directive. Original databases. individually accessible by electronic or other means.There is not much Dutch case law on patent protection for computer software. or stored using another medium. the Commission has issued an additional/ specific Regulation ([EC] No 772/2004) containing certain categories of technology transfer agreements which. It concerns a national right only. data. or electronically. even at the European level. The acquisition.Doing Business in the Netherlands the alleged infringer’s trade secrets and know-how. Databases 4. Recent European and Dutch case laws provide an indication as to how the principles of qualitatively and quantitatively substantial investment can be interpreted. or other independent materials arranged in a systematic or methodical way. The Dutch Database Act (Databankenwet) took effect on 21 July 1999. provided certain requirements are met. a database is a collection of works. It is concerned mainly with competition law aspects of technology transfer (see also chapter XVI). will qualify for either copyright or sui generis protection. The possibility of protecting software by means of a patent is still under discussion. Furthermore. pursuant to the Dutch Original Topographies of Semiconductor Products Legal Protection Act (Wet houdende regelen inzake de bescherming van oorspronkelijke topographieën van halfgeleiderprodukten). Registration with the Office of Industrial Property is required and will remain valid for 10 years. 5.Within the meaning of the Act. whether a copy of which is printed. Topographies of Semiconductors Chips and their topography may be protected against unlawful exploitation by third parties. 3. the court limited the type data to be disclosed to the source code and only to an independent party. in 2004.The Database Act is based on the EU Directive on the Legal Protection of Databases. are allowed for a competition law perspective. Technology Transfer The 2002 EU Technology Transfer Regulation has a direct effect in the Netherlands. 155 . or presentation of the content must be the result of a qualitatively or quantitatively substantial investment. Foreign companies should at least verify whether their computer software qualifies for patent protection in the Netherlands (see Chapter XVII).
ICT Agreements and Standard Terms As in many jurisdictions. suppliers and distributors of ICT products use a plethora of agreements to. 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. which are freely available and which are sometimes used. EDI Model Agreement The Netherlands has a model EDI Agreement.The main changes were that: (i) suppliers were better protected against the bankruptcy of their customers. from the purchase or lease of hardware to complex turnkey projects. the industry organisation for suppliers of computer products and services has published standard conditions for. restrict warranties and liability. Purchase Conditions The Dutch Ministry of the Interior has published general terms and conditions. A number of standard terms are mentioned below. Both suppliers of computer products/services and end users draft standard terms. Generally. covering a range of topics. These standard conditions are known as “BiZa” contracts. They are produced regularly in negotiations by prospective end users and are in their favor. The liability of suppliers of ICT goods and services is governed by the rules in the Dutch Civil Code on liability (see chapter XX). although their use is by no means mandatory.. the conditions are more advantageous to the supplier. The FENIT conditions were updated in 2003. the sale of hardware. the development and licensing of software. but a number of cases with respect to the IT industry have been published.g. for instance. 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. e. 156 . and the provision of maintenance and computer services.Baker & McKenzie 6. which is based on the European standard. FENIT Conditions FENIT.
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). The applicability of such terms will mainly depend on the manner in which they have been brought to the attention of the end user. 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. the . 8. 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. Source Code Escrow Software source code escrow is fairly common in the Netherlands. 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. In 2006. In the Netherlands. there is an association for the registration of domain names (“SIDN”). 9. if possible). irrespective of the level on which it is used. 157 . 7. The SIDN has incorporated Alternative Dispute Resolution for . 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. Both active and passive escrow agents make use of tripartite agreements with the supplier and the end user. 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. in principle. Shrink-Wrap License Agreements Many larger (mostly US) software manufacturers use shrink-wrap or even clickwrap licensing terms in the Netherlands.nl domain names only. but there is no specific legislation.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).eu domain name was successfully introduced. It is generally felt that.
Consumer protection 158 . a service provider was ordered to disclose the name and address of an anonymous web site holder to a third party. All of the Directives mentioned determine some of the legal parameters for the development and operation of E-Commerce in the European Union market. it is revealed by the service provider upon first order by the judiciary.Baker & McKenzie Liability of Service Providers Generally speaking. various principles for civil law liability of Internet service providers have been introduced. Furthermore. transactions. including online. How this enforcement will crystallize in practice has yet to be seen. if (i) they reveal their identity at the time of the disclosure or dissemination. Under the new legislation implementing the EU E-Commerce Directive. once a judicial inquiry is commenced. a new authority (Consumentenautoriteit) for the protection of the collective interests of consumers was founded. The authority has announced that it will especially focus on internet trade. note that in a Supreme Court decision. Electronic Commerce Directive The Dutch government has implemented the EU E-Commerce Directive into Dutch law. 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. The EU Distance Contracts Directive has been implemented into Dutch law as well. Electronic Signatures The EU Electronic Signatures Directive (Wetsvoorstel elektronische handtekeningen) was implemented under Dutch law. and contains provisions protecting consumers in distance. The new law establishes a legal regime for electronic signatures. effective 21 May 2003. and (iii) the service provider has taken all reasonable measures to prevent further dissemination of the contentious information. In 2007. (ii) the identity of the perpetrator is known or. This new authority has been attributed with certain public powers to enforce consumer law.
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). Online Gambling In principle. 11. 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. Likewise. It does not seem likely that legislative initiatives will ensue in this context in the near future. (a draft of such a bill already circulated in 1994 and which was heavily criticized and never made it as a bill) still. Data Protection The 2001 Data Protection Act (Wet bescherming persoonsgegevens) imposes a number of obligations on parties that collect and control personal data. the Ministry of Justice has successfully undertaken a crusade against illegal gambling sites. the Dutch Supreme Court issued a judgment that held that computer data are not “goods” within the meaning of the Criminal Code. Most illegal gambling sites in the Netherlands have shut down. no such bill has been introduced. The Act on Computer Crime is incorporated in the Dutch Criminal Code and the Dutch Code of Criminal Procedure. What constitutes personal data is largely a question of fact.10. The Dutch 1993 Act on Computer Crime (Wet computercriminaliteit) contains criminal provisions related to computers. In 2006. Computer Crime 13. This Act expands the scope of certain computer crimes and also introduces new investigative powers for the enforcement agencies. At the end of 1996. to offer games of chance over the Internet in the Netherlands requires the government’s permit. 159 . Encryption Doing Business in the Netherlands Although in the past. 12. the Dutch government had expressed its intention to introduce a bill dealing with the use and availability of encrypted software. In 2006. that transfer outside the EU triggers specific requirements.
Retention Recently. Likewise. This proposal is currently still under discussion. the EU is currently considering a minimum retention period for Internet traffic data. 160 .Baker & McKenzie 14. there has been a Dutch proposal to implement a retention period of 18 months for Dutch service providers for Internet traffic data.
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. Pre-contractual liability Dutch law is notorious for its pre-contractual liability. Contractual liability Breach of contract A general section of the Code applies to all contractual liabilities. dangerous substances. Such a party may avoid liability if it can 161 . 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. damage caused by animals. Depending on the exact stage of the negotiations. as if he had an agreement. These two types of liability may coincide. liability may be based only on a wrongful act (or strict liability). Liability 1. reasonably expect that an agreement will be entered into. The main provision is Article 6:74 of the Code. All liabilities that may arise between parties in any contractual relationship are essentially governed by the same general provisions of the Code. 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. regardless of the type of contract. 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. and the like). or even for all lost profits..XX. 3. e.g. which form a separate category within liability based on wrongful acts (for instance. The Code contains several strict liability provisions. Outside of a contractual relationship. for example. defective goods and premises. which stipulates as a basic rule that a party is liable for all damages resulting from its attributable nonperformance (breach of contract). 2.
but. Upon dissolution.Baker & McKenzie prove that it acted under force majeure. the contract. according to the nature of the contract.. deviation from the Code is not allowed. Both parties to an obligation must behave in their relationship according to what is reasonable and fair. but also to repair or replace a defective product. which generally entails proving that the nonperformance cannot be attributed to it on the basis of its actions. or generally prevailing public opinion. or the requirements of reasonableness and fairness. For instance. in the case of agreements with consumers. the law. the creditor may also claim specific performance (nakoming). the creditor is not only allowed to claim damages. also those which result from the law. the seller of certain goods is obliged not only to compensate the buyer for any damages.g. the law on contracts for the sale of goods contains several specific obligations on the part of the seller. Damage and performance Several types of contracts are governed by specific statutory provisions. 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. Alternatively. In addition. Different to many other jurisdictions. e. In a contractual relationship. if the buyer so desires. Limitation of liability The parties to an agreement may deviate from most liability provisions in the Code. contracts do not only have the effects expressly agreed upon. in both situations. In some cases. trade customs. Good faith Furthermore. each party must return to the other what it has received under the dissolved agreement. the creditor is entitled to compensation for damages incurred as a result of the breach. Under those obligations. This contractual right to invoke an exemption clause may be limited only by the court in exceptional cases. or supply any missing part. which may contain specific obligations. the creditor may be allowed to dissolve the agreement. but in all cases in which the debtor is still able to comply with its obligations. the concept of ‘good faith’ permeates contract law. In addition to those rare cases in which a contractual 162 .
Nevertheless. Strict liability Several types of strict liability apply with respect to goods. provisions that limit or exclude liability for damage caused intentionally or caused by gross negligence of one of the parties are void. Under Dutch law. and (ii) conduct contrary to the general standard of conduct acceptable in society. a restriction is imposed by the principles of reasonableness and fairness. liability is denied if the rule invoked by the injured party does not cover the interests of the injured party.Doing Business in the Netherlands deviation is expressly prohibited in the Code. In practice. 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). There are three forms of wrongful acts: (i) infringement of a subjective right. and far more important. 4. “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 . Second. which stipulates that any party that commits a “wrongful act” towards another party. Noncontractual Liability (Wrongful Act) Wrongful act The basis of all types of liability outside of contractual relationships is Article 6:162 of the Code. (ii) act or omission violating a statutory duty. only the seller of the goods may be held liable by the end user if the goods are not in conformity to the agreement. since it is far more difficult to provide the evidence required to obtain damages from a manufacturer or distributor than the seller. In product liability cases however. although it is permitted to exonerate for damages intentionally caused or caused by gross negligence of employees other than senior management. First. Generally. In principle. damaged by the liable party. whose act can be attributed to the party committing the wrongful act is liable for all damages incurred by the injured party. this means that it is usually difficult for the end user of defective goods to claim damages from any party other than the seller. this is different (see below). in the case of a contract for the sale of goods. several other restrictions apply to all contracts in general and liability provisions in particular.
g. Depending on the facts of the case. Although there is still some uncertainty in this respect. the distinction between claims based on wrongful acts and claims based on product liability appears to have faded.. 159. the seller. This type of liability exists towards professional buyers. Rockwool). and (c) the time the product is brought into circulation. It is not possible to exclude product liability towards the injured party contractually. 164 . the general law on wrongful acts or a breach of warranty). However. 22 October 1999.g. a product is defective if it does not provide the safety that one is entitled to expect. end users. if a party brought a product into the market that had caused damages. With this decision. (b) the reasonably anticipated use of the product. the importer into the European Economic Area. in particular. 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. and covers all types of damage (including physical injury. the Supreme Court held that as a general rule of law. The manufacturer may also be liable for damage to other goods that are normally used by consumers if such damage exceeds EUR 500. In a case heard by the Dutch Supreme Court in 1999 (in Hoge Raad. 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. and consequential damage). and consumers. that party would be liable for the damage. Nederlandse Jurisprudentie 2000.Baker & McKenzie wrongful act and the damages. property damage. only some forms of damages may be claimed from the manufacturer on the basis of product liability legislation. 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. Essentially. no. Dutch law generally allows for a limitation of product liability between companies in a distribution chain. (a) the presentation 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. if it was used for a purpose that could reasonably have been anticipated. According to the Code. The manufacturer is liable for all damages resulting from physical injury or death caused by its defective product. the injured party may also claim damages from a party other than the manufacturer (e. taking all circumstances into consideration.
This act is aimed especially at protecting further distribution of unsafe goods. damages will be compensated in money. the courts are free to assess the damage in a more abstract way. the court may calculate the 165 . The liable party is obliged to compensate the injured party for all these damages incurred by the injured party as a result of. personal injury. safety. 5. The Consumer Goods Act Decree on “general product safety” (of 29 June 1994) deals with the obligation to launch a product recall. Although in principle the injured party has a right to claim compensation for the exact damages. if the liable party has made profits as a result of its breach of contract or wrongful act. if that corresponds better to its nature. fairness in trade. and (ii) other disadvantages (ander nadeel). Compensation of non-pecuniary loss (Article 6:106 of the Code) for instance. pure or consequential. and in case the injured party’s reputation has been damaged. Other disadvantages will be compensated only if these have a legal basis. and that may be attributed to. the event that has led to liability (“causal link”). such damages may include compensation for costs incurred as a result of a breach of contract or a wrongful act. but the injured party may demand compensation in any other form.Doing Business in the Netherlands For completeness’ sake. rules may be imposed regarding product safety in the interest of public health. Moreover. Two kinds of damage can be compensated: (i) financial loss (vermogensschade). is possible only in case of intentional damage. in the Consumer Goods Act the EU Directive 2001/95/EC on General Product Safety was implemented on 1 December 2005. including damage to goods and economic loss. and costs incurred in order to limit or reduce the damages. More specifically. Compensation of Damages Kinds of damage The sections of the Code that govern the compensation of damages apply to both contractual and noncontractual liabilities. Kind of compensation Normally. or proper information about the goods. lost profits. Financial loss is the damage to pecuniary interests. costs incurred for assessing and (out-of-court) collection of the amount of damages. Based on this act.
166 . the court is entitled to reduce the obligation to compensate the damages if it believes that full compensation will lead to clearly unacceptable results. regardless of the size of the penalty. Unless otherwise agreed upon. Therefore. On the other hand. the penalty is the only compensation that can be claimed. a penalty does not need to be a reasonable estimate of damage actually incurred. 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. 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.Baker & McKenzie damages so as to include all or part of the profit.
courts of appeal and the Supreme Court. including any European Community legislation. acts of law may be tested for compatibility with a provision of a treaty to which the Netherlands is a party. regardless of the cause. 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. (iii) buyouts of minority shareholders. The cantonal divisions of the district courts also have jurisdiction over employment law issues. Jurisdiction Doing Business in the Netherlands District courts essentially hear all other civil and commercial first instance claims. but not the law of another country. the civil and criminal judiciary comprises cantonal divisions. With a few exceptions. be submitted for review or cassation before the Supreme Court of the Netherlands on issues of law only. (ii) mismanagement. agency and (real estate) lease disputes. not decide any factual issues. the cantonal divisions of the courts are concerned with first instance claims that do not exceed EUR 5. Dispute Resolution 1. as well as certain courts of appeal. district courts. for example. (iv) the Dutch Works Councils Act and on In the Netherlands. 167 . Courts of appeal decide on judgments given by a district court though most cantonal division judgments may be appealed before a court of appeal. therefore. Some cantonal divisions and district courts. have special chambers that deal with particular issues. judges are professional judges and are appointed for life. in principle. A submission for cassation to the Supreme Court may be brought on the grounds of noncompliance with formal requirements (for instance. concerning (i) annual accounts. In civil and commercial cases.The district courts have general jurisdiction over civil law disputes.XXI.000. On the other hand.The administration of justice in the Netherlands is essentially limited to two instances. The Supreme Court will. Administrative disputes are resolved by separate administrative branches of the district courts. if a court fails to give adequate reasons for a judgment) or breach of the law. A judgment given by the court of appeal may. One such chamber is the Enterprise Chamber of the Amsterdam Court of Appeal. This chamber decides on disputes on first instance. The Dutch Supreme Court and lower courts have no authority to examine laws for compliance with the Constitution (Grondwet).
After the statement of defense is submitted. It is served on the defendant by a bailiff. additional briefs may subsequently be exchanged.Baker & McKenzie appeal. they are even used to obtain a payment order for essentially undisputed claims. by examining witnesses. In district court proceedings. This first appearance is merely for administration and record purposes and does not take place physically. (b) the revocation of responsibility for a group company. 2. concerning (a) mandated departure or ejection of shareholders. Course of the Proceedings The course of the proceedings may be complicated by accessory actions and orders to provide evidence. In the appellant’s brief. which is a district court session held specifically for that purpose. the court customarily grants the defendant a six-week extension to submit a written answer. a hearing for oral arguments before the court may be held if either of the parties so requires. Today. the defendant must appear through an attorney of record. legal merger or split. Summary proceedings have gained substantial importance in recent years. for instance. Unless the defendant makes no appearance. There are far fewer restrictions on the type of dispute that may be heard than in almost all other jurisdictions. After the briefs have been exchanged.The writ requires that the defendant appears in court on a certain date. The opponent may file an answer. 3. Most civil and commercial proceedings are initiated by a writ of summons and take place before the district court. 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). Summary proceedings have the 168 . which is often followed by a hearing for oral arguments. The briefs are filed at a docket session. and (c) objections to a reduction of capital. 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. Summary Proceedings In urgent cases. The appellant may contest the judgment by the district court in whole or in part. the President of the district court may sit in summary proceedings to provide provisional relief. the party filing the appeal explains why it disagrees with the judgment passed in first instance.The greater part of the proceedings is conducted in writing. for example.
but may do so earlier if the case is urgent. The President generally hands down his decision in summary proceedings within 14 days. Although no sworn statements are taken. The prejudgment attachment is levied by a bailiff. They usually accept the judgment given in summary proceedings (whether or not on appeal). On the date of the summary proceedings. The President has a great degree of latitude to decide on the procedure at a hearing. there is room for formal evidence gathering and witness examination. The plaintiff initiates the summary proceedings by serving a writ on the defendant. It is also possible to lodge a summary appeal. so that the proceedings before this court are conducted as swiftly as possible. At the plaintiff’s request. An attachment on movable property may be combined with judicial custody. Although witnesses cannot be heard in the context of summary proceedings. Parties rarely initiate principal proceedings after summary proceedings. Prejudgment Attachment 169 . The court is in no way bound by a judgment given in summary proceedings. the President may hear “informants” if they are present at the hearing. The judgment may be appealed before the court of appeal (within four weeks after the judgment in first instance is rendered). A decision by the court of appeal may be submitted for cassation to the Supreme Court. before or during legal proceedings. This means that the bailiff turns 4. The leave of the President of the district court is required for a prejudgment attachment. In very urgent cases.Doing Business in the Netherlands advantage of being fast. an indication of the generally good quality of the summary judgment decisions (and judges). To secure the claim. 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. Such leave is generally easy to obtain. 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.) In these proceedings. The plaintiff must file an “ex parte” petition with the President in which the claim is prima facie demonstrated. 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. often on the same day. hearings can be scheduled even on the same day. the President will schedule a date for the summary hearing to take place within a few weeks. the President usually takes the information provided into account when deciding the issue. the plaintiff may levy one or more prejudgment attachments. After the summary proceedings.
Dutch arbitral decisions can easily be enforced in the Netherlands. the President of the district court is competent to grant such relief in summary proceedings. Like many European countries and the United States of America. the President will set a term within which such proceedings must be initiated. rather than in court. 170 . or that the attachment is unnecessary. a bank guarantee by a first-class Dutch bank). 5. The party subject to attachment may object to the attachment in summary proceedings. the President may nevertheless assume jurisdiction if he believes the remedy provided in arbitration is inadequate. If proceedings before the district court are not yet pending at the time of filing the petition for the President’s leave.Baker & McKenzie over the attached property to a person appointed by the President to keep the property in his custody pending the proceedings. Arbitration Parties may also choose to settle their disputes by arbitration. The President will lift the attachment if the party subject to attachment demonstrates that the asserted claim is nonexistent or frivolous. the attachment is wrongful. the Netherlands is a signatory to the New York Convention on the recognition and enforcement of foreign arbitral awards. or the parties may do so themselves. Thus. In that case. The usual term is 14 days. The NAI may appoint the arbitrators. the Dutch court will find that it has no jurisdiction over the case. If judgment is eventually rendered against the plaintiff. If the arbitrators are not authorized under the arbitration agreement to grant provisional relief for urgent cases. The President will also lift the attachment if the party subject to attachment provides adequate security (generally. The best known Dutch arbitration institute is the Netherlands Arbitration Institute (NAI) in Rotterdam. the plaintiff is liable for damages caused by the attachment. as well as in the event of noncompliance with formal requirements (which can result in a nullity). which has its own arbitration rules that parties can adopt in their arbitration agreement. and even if they are not. A Dutch court will usually accept this choice. The NAI has a list of qualified and experienced arbitrators who are often attorneys. If either party invokes the arbitration agreement. This term may be extended at the request of the attaching party. arbitral awards given in the territory of these States can be enforced in the Netherlands and vice versa.
creating a European enforcement order for uncontested claims. European enforcement order for uncontested claims . the EU Member States are subject to the Council Regulation on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters. Dutch judgments are easy to enforce in EU Member States. The European Parliament and Council Regulation of 21 April 2004. 7. Similarly. Today. though. This entails the abolition of any intermediate proceedings or grounds for refusal of enforcement regarding judgments handed down in another Member State. However. 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. The same holds true as regards judgments handed down in States that are a party to the Lugano Convention. 171 8. At the start. was implemented in the Netherlands on 21 October 2005. Such cases must be retried in the Netherlands and settled anew. This Council Regulation replaced the Brussels Convention. on the condition that the prior leave of the President of the district court is obtained. the leave to do so must be obtained from the President of the district court. International Enforcement Judgments passed by the courts of EU Member States can easily be enforced in the Netherlands. It lays down minimum standards to ensure that judgments. which now applies only to Denmark. Judgments passed by courts in States with which the Netherlands has no enforcement convention cannot be enforced in the Netherlands. court settlements. we see mediation being used with increasing frequency in other types of disputes. The procedure to obtain leave generally takes no more than two or three weeks.6. Judgments issued by a court of a State with which the Netherlands has an enforcement convention are also enforceable in the Netherlands. if the judgment is passed by a court of a State with a well-developed court system. Prior to enforcement of a judgment handed down by a court in an EU Member State. and authentic instruments on uncontested claims can be enforced easily in the Member States. With the exception of Denmark. mediation was mainly used in family law cases.
Baker & McKenzie The Regulation applies in civil and commercial matters. 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. The claimant only has to submit its application. the European Parliament and the Council adopted a Regulation creating a European order for payment procedure. Due to the existence of a procedure that will be common to all Member States. or administrative matters. and • 9. 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 summons to a court hearing) to ensure that the rights of the defendant are respected. customs. The creditor must supply the authorities of the other State responsible for enforcement with: • • a copy of the judgment. It can even be started and handled in a purely electronic way. It is applicable in all Member States with the exception of Denmark. 172 . Certification is carried out by means of the standard form. Only the document service methods listed in the Regulation are allowed if the judgment is to be certified as a European enforcement order. the need for creditors to familiarize themselves with foreign civil procedures will be reduced to a minimum. where applicable. On 30 December 2006. in which case the order will be known as “partial European enforcement order.” The Regulation lays down minimum standards with regard to the service of documents (the document instituting proceedings and. except Denmark according to a uniform procedure that operates on the basis of standard forms. The procedure does not require presence before the court. a copy of the European enforcement order certificate.This procedure will allow creditors to recover their uncontested civil and commercial claims before the courts of the Member States. It does not cover revenue. International payment orders where necessary. The certification may apply to only parts of the judgment.
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. 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. the procedure will keep the costs to a minimum. The Regulation will be applicable for 24 months from 30 December 2006. The most important limitation of the collective action is that damages may not be claimed. The individual will not be bound and it keeps the possibility of filing an individual claim. 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. Possible remedies are declaratory judgments or injunctions. Before filing a claim. 10. the foundation or association is obliged to make sufficient efforts to settle the dispute out of court. The judgment is only binding between the foundation or association and the party or parties responsible for the damages. In addition. Class actions A new Act on the Collective Settlement of Mass Damages took effect on 27 July 2005. as well as public law entities.Doing Business in the Netherlands It does not require any further formalities or intervention on the part of the claimant.” The articles of association should stipulate that the foundation or association promote these interests. Collective action Articles 3:305a and 305b of the Dutch Civil Code allow associations and foundations with full legal capacity. 11. Those remedies can be helpful to enable individuals claim damages. The represented parties will not be a party to the proceedings. The foundation or association files the claim in its own name. This will ensure a swift and efficient handling of the claim. 173 . The creditor will not have to undertake intermediate steps to enforce the decision abroad. The judicial decision obtained as a result of this procedure can be enforced easily in the other Member States. since no assistance by a lawyer is required.
the court of appeal must assess whether the settlement agreement meets the criteria as set out in the act. against the settlement agreement. to a certain extent. 174 . The party responsible must provide sufficient security for its payment obligations under the settlement agreement. if there are any. 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. all legal proceedings against the party involved are suspended. From the articles of association of the representative organization. In principle. and more specifically. Pending the request to the court of appeal. the amount of monetary compensation to each affected party. the representative organization and the responsible party negotiate as regards a possible settlement agreement. If the court of appeal declares the settlement agreement binding. it must appear that it acts in the interest of the parties affected. namely in the DES. During the first phase.Baker & McKenzie The procedure to achieve a binding settlement agreement as described in the act is undertaken in three phases. In the second phase. The claims of the affected parties must. the settlement must then be published in one or more Dutch newspapers and be sent to all known affected parties. 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. After this hearing. whether the compensation is reasonable. Until now. be similar. The affected parties not opting out may collect their compensation within a time frame as specified in the settlement agreement. In the settlement agreement. The third phase concerns the execution of the settlement agreement. These cases refer to pharmaceuticals and securities. or a formula to calculate the monetary compensation on the basis of objective criteria must be specified. three court endorsements of collective settlements have been applied for. 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. 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. or order the parties to amend the settlement agreement. If the responsible party does not fulfill its payment obligations in a timely manner. deny the request. Dexia and Shell cases.
The legislator and the courts are wary of “fishing expeditions. The court will decide on the validity of these defenses. 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. If necessary.12. There are restrictions to the application of Article 843a DCCP. such an attachment may be made even prior to filing the application of the court order. because of its duties. The party may demand this information from any party that has these documents at its disposal or in its possession.” Article 843a Dutch Code of Civil Procedure (“DCCP”). the court will decide the manner in which inspection. the confidentiality of the information may be a compelling reason not to comply with the demand. 175 . profession. a party that. the interest of not divulging information outweighs the interest in obtaining it. 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. By “identifiable. cannot be forced to comply with the demand if the documents are solely at its disposal or in its possession on that account. however. extract. Third. Finally. In certain circumstances. Second. Bearers of those duties are inter alia attorneys-at-law. First. A court order pursuant to Article 843a DCCP may be enforced by a penalty for noncompliance or attachment of the documents in question. is bound by secrecy. A contract or alleged wrongful act constitutes such a legal relationship. or copy must be furnished. or occupation.” it is meant that the party that asks for inspection must identify the documents or at least a specified category of documents. the proper administration of justice is guaranteed even without providing the requested documents.
The only exception is if there are restrictions attached to ownership based on statutory provisions or unwritten law. The transfer of ownership of real estate requires the formal execution of a notarial deed by a civil law notary in the Netherlands. Purchase and sale agreements can be made without specific formalities if these concern business or office space.Baker & McKenzie XXII. a new law has governed purchase and sale contracts for homes when the buyer is a private individual. The same applies to the establishment and transfer of in rem rights in general. 176 . which gives the buyer protection within the period that the purchase and sale contract and the deed of transfer are signed. mortgages. which must be entered in the land register. Purchase and sale contracts must be in writing. The information recorded includes ownership. Leases that do not grant in rem rights are not recorded in the land registers. 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. The owner can use the property at his or her own discretion. after which the delivery is complete and the buyer is the owner of the property. 2. Land Register Real estate is registered in land registers. Since September 2003. 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. easements and other in rem rights. which are publicly accessible. including mortgages. The transfer of title of immovable property requires a notarial deed. since ownership is the most complete right to a piece of property. Ownership A buyer of immovable property becomes the owner of that property after delivery. Real Estate 1. as well as any court orders relating to real estate and administrative enforcement decisions.
he must consult the Housing Act to determine whether a building permit is required. the rights that are known to him. If the seller has not informed the buyer of such rights. Rights attached to a certain capacity are those arising from an agreement and relate to immovable property. Article 8 of the Housing Act stipulates what issues must be regulated. regulations regarding building demolition and requirements regarding the external appearance of buildings. A building ordinance does not include technical building regulations. municipalities are obliged to adopt a building ordinance (bouwverordening) containing building and renovation regulations. This Act divides buildings into three types: those for which a regular building permit is required. Those regulations are included in the Building Decree (Bouwbesluit). for instance. Under the Dutch Housing Act (Woningwet). An example of servitude is the obligation to tolerate water from the neighbor’s roof falling on one’s own yard. If an owner of a plot of land wishes to build a house or a homeowner wishes to renovate his home. The buyer should first investigate whether a (light) permit is required as regards 177 4. obliged to transfer the immovable property without any restrictions or burdens unless the buyer expressly accepts these restrictions and burdens. an agreement with a neighbor to refrain from uprooting a tree. Municipalities are not permitted to regulate any other matters.3. those for which a light building permit is required and those that do not require a permit. A building ordinance includes regulations prohibiting building on polluted soil. This imposes on the seller the additional obligation to disclose all information on the immovable property. 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. the buyer can order the seller to have those rights cancelled or to pay him a lump sum. The seller must inform the buyer of all rights vested in the immovable property. Other Rights and Obligations Doing Business in the Netherlands In addition to formally executing the notarial deed. and what issues may be regulated in the ordinance. the buyer should investigate all legal aspects of the property by consulting the land register. i. In the Netherlands. The rights can be divided into rights attached to a certain capacity and servitude. the seller is..e. Construction and Renovation . by virtue of the law. which the buyer of immovable property must file with the land register.
an application for a building permit is assessed against the zoning plan. the use of space for residential and business purposes is tightly regulated. 178 .Baker & McKenzie the construction of the building. Environmental Permits and Soil Pollution Both in asset (real estate) and share transactions. In principle. The Dutch Soil Protection Act (Wet bodembescherming) came into force on 1 January 1987. as well as to requirements regarding environmental permits. The coordination rule that applies to the building permit and the environmental permit plays a part in the establishment or expansion of a facility. it was expected that the new Spatial Planning Act will come into force in July 2008. in particular as it relates to the zoning plan and the building permit. Modernization of regulation The Ministry of Housing. The Soil Protection Act is based on the concept of “new” and “historic” pollution. all companies bear a general liability for maintenance. In most cases a regular building permit will be required. 6. it is of utmost importance to give sufficient attention to the possible presence of soil pollution. if appropriate. is enforced by the authorities. The Netherlands is a small and densely populated country. 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. 5. At the moment this book was edited.With regard to new pollution. negotiations with the relevant authorities. change and operations of an establishment. Zoning law. One of the key elements of the Dutch Environmental Management Act (Wet milieubeheer) is the “integrated environmental permit. which have a wide range of instruments at their disposal to ensure observance.” This permit is an important regulatory instrument linked to the setup. The zoning plan sets out specifically how land is to be used and developed. Consequently. This means that the issuing of the two permits is harmonized.
the government has decided to fundamentally revise the act. A new element is the structural concept in which authorities describe their spatial planning policy. It is becoming more and more common for disputes between government bodies to be settled in court. the Spatial Planning Act also means: • • • a shortened zoning plan procedure. the Second Chamber of the Netherlands parliament concurs with this opinion and because of this. more integrated and enforced more quickly. to have the responsibility shared properly among the various layers of government and to have government and provincial policy implemented throughout the system. The zoning plan occupies a central position. 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 increase in the scale of spatial planning. become more businesslike. In addition. This has made the processes involved more complex.Doing Business in the Netherlands Spatial planning The relationships between the different layers of government have. This often means that they have to be better. reduced from over a year to 26 weeks. provincial authorities may no longer approve zoning plans. One advantage of this is the shorter procedure. In the new Act. The aim of the revision is to simplify the system. zoning plans must be digitalized. Furthermore. it is not always clear as to who is responsible for doing what. 179 . This has led to an increasing entrenchment of opposing interests. The last major alteration involved changing Section 19 to include an independent project procedure for local authorities. Since then a large number of amendments have been passed. renewed economic growth and technological developments have all affected the way in which decisions related to spatial planning are made. These new structural concepts replace the current key planning decision (at national level). The same is true of the relationship between the government and the public. Among other things. for example. The Council of State has even compared it to a “patchwork quilt”. regional plans (at the provincial level) and structure plans (at the regional and municipal level). a clear difference has been made between spatial planning policy and its (legal) implementation. which allows parties to quickly take advantage of new possibilities and opportunities. The present Spatial Planning Act came into force in 1965.
housing and the environment to municipal demolition and tree-felling permits.Baker & McKenzie • • • • • provinces and the State can give indications in the zoning plan procedure. With respect to office space. 7. However. Upon termination of a lease. and zoning plans must be updated or extended every 10 years. It involves the amalgamation of around 25 licensing systems. the courts can grant protection from eviction to a tenant for a maximum of three years. due to legislative difficulties. a nonrestrictive system applies. a 2% excess for compensation for loss resulting from government planning decisions. These range from national regulations for building. With respect to retail business space. a complicated semi-restrictive system applies. The rental price is often indexed on the basis of a price index figure. a fast construction procedure (project decision). which allows parties to freely negotiate the rent and other terms of their agreement on the basis of prevailing market conditions. 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. the permit-issuing body has the option of coordinating licensing procedures and of combining them into a single appeal/objection procedure (coordination scheme). Leases 180 . 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. of which 11 are decentralized. 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). Leases are subject to various statutory provisions and administrative regulations.
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
Baker & McKenzie
Tax treaties are currently in force in the following countries: • • • • • • • • • • • • • • • • • • • • • •
Argentina Armenia Aruba
• • • • • • • • • • • • • • • •
Germany Ghana Greece India
• • • • • • • • • • • • • • • •
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
Philippines Portugal Russia
Romania Singapore Slovenia
Kazakhstan Kuwait Lithuania
Slovak Republic South Africa Sri Lanka Sweden Taiwan Spain
Czech Republic Denmark Egypt Estonia
• • • • • • •
• • • • • • •
Luxembourg Macedonia Malaysia Malta Mexico
Finland France Georgia
Doing Business in the Netherlands
• • • • •
Thailand Tunisia Turkey
• • • • •
United Kingdom United States Uzbekistan Venezuela
• • • •
(former) Yugoslavia Zimbabwe
Tax treaties are still in force in the following countries after split or separation from the (former) Soviet Union: • • • • • • • • Azerbaijan * Tajikistan * Kyrgyzstan * Turkmenistan
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.
Baker & McKenzie
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
Tax treaties with regard to the profits from air and/or sea shipping are currently in force in the following countries: • • • • • • • • • •
Argentine Armenia Albania
air/sea air air
• • • • •
Azerbaijan Barbados Belarus Brunei Canada Bahrain
Czech Republic Egypt Estonia
air air air
• • • • • •
Hong Kong Hungary Iran
air air air
China (People’s Rep.) 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 .
(c) Submit questionnaires to the Ministry of Justice. Documentation The following information or documentation is required for the application procedure at the Ministry of Justice as described above: 1. (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. 2. 186 . Steps c. or a Cooperative Procedure for the incorporation a Dutch NV (Naamloze Vennootschap met beperkte aansprakelijkheid or public limited liability company).Procedure for Incorporating a Dutch NV. 3. 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. (f) Execute the notarial deed of incorporation including the Articles of Association. and address of the new company. number. (d) Open a separate bank account in the name of the company in incorporation. and par value of shares. d. and a Cooperative (cooperatie).Baker & McKenzie Appendix I . Authorized and issued share capital. statutory seat. (b) Execute a power of attorney by incorporation. a BV (Besloten Vennootschap met beperkte aansprakelijkheid or private limited liability company). and f are not applicable to the incorporation of a Cooperative. (e) Issue a bank statement to the notary confirming the payment of the incorporation capital. a BV. Three different names can be examined in one trade name research. e. Proposed name. Description of the new company’s activities.
object. address. financial figures. 5. marital status. 6. and employment details). statutory seat. nationality. data of directors and shareholders. either a private individual or a listed company. 187 . should partly complete and sign a Ministry of Justice “form B” or “form C” respectively. The ultimate beneficial owner. A completed and signed Ministry of Justice “form C” for the incorporator or managing director that is a legal entity (name. place and date of birth.Doing Business in the Netherlands 4. and history). A completed and signed Ministry of Justice “form B” in case the incorporator or managing director is a private individual (full name.
Overview of Tax Rates Inbound Income Under Dutch Tax Treaties Country N. Denmark Estonia Finland France Georgia Greece 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% Germany Hungary Iceland 0%/5% 10% 188 .i.Baker & McKenzie Appendix II . 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% 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% 7.5%/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.f.
i. 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% 2.5% 10%/15%/20% 10% 0% 12.3% 12.5% 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% 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%/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% 10% 0% 5% Philippines 0%/10%/15% 0%/5% 10% 5%/15% 15% 10% 189 .
f.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 .5% 10% 6% Country N.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. 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.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.
and payments for the use of patents. interest paid to the state. Royalty column Different rates in the columns generally refer to different types of withholding tax rates depending upon the type of royalty. 191 . The lower rates generally refer to interest paid by banks or on government bonds. and know-how. e.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. export credit institutions. or in relation to sales on credit. as the case may be. There may be special conditions or exceptions. Such exemptions are not considered in this column. copyright payments.g. local authorities. Interest column Many treaties provide for an exemption for certain types of interest.g. trademarks. the central bank.. e.. payments for the use of films and computer software.
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