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Company and Jurisdictions

Netherlands

Besloten Vennootschap (BV)

Legislation: Standard capital:
Netherlands Civil Code. Minimum authorized capital of Euro 90,000 of which minimally Euro 18,000 must be paid up.
Annual government fees: Corporate Taxation:
None. 35%
Time to incorporate: Ready-made companies:
12 weeks Yes.
Minimum members: Registered office required:
One, individual or corporate. Yes, must be maintained in the Netherlands at the address of a licensed management company or law firm, and register itself with a local Chamber of Commerce.
Local registered agent: Minimum number directors:
Yes. One, individual or corporate. A register of directors must be filed with the Registrar and is open to public inspection.
Officer to be locally resident: AGM required:
No, but this is advisable. No.
Annual return required: Financial statements to be prepared and/or audited:
An annual return which gives details of all those who have held shares throughout the year and the current directors must be filed with the Chamber of Commerce and the local tax department. Yes.
Balance sheets to be filed: Share register required:
No. Yes, at registered office
To be filed with Registrar: Open to public inspection:
Yes. Yes.
Exchange controls: Redomiciliation permitted:
No. No.
Language of incorporation: Confidentiality:
English. There are no confidentiality laws in the Netherlands. Exchange of information may take place under the terms of the many tax treaties to which The Netherlands is a party.
Bearer shares permitted:  
No

Advantages

Disadvantages


  • Stable high tax country, not a tax haven.
  • Massive range of tax treaties.
  • The jurisdiction for licensing and finance companies.
  • Historically one of the better jurisdictions for participation exemption (holding) companies.
  • Expensive.
  • Civil law system is cumbersome.

International Agreements

OECD Harmful Tax Practices

In 2000, the OECD Committee on Fiscal Affairs identified 47 preferential tax regimes in OECD Member States as potentially harmful, including eight in The Netherlands. In its 2004 progress report, the OECD found that these regimes had either been abolished or were in the process of being abolished, or been amended so that any potentially harmful features had been removed, or had been found not to be harmful based on further analysis. The OECD also concluded that The Netherlands’ holding tax regime was not harmful. In addition, The Netherlands Advance Pricing Agreement/Advance Tax Ruling Practice was examined and was not considered to constitute harmful tax practices.

Tax Information Exchange Agreement (TIEA)

A TIEA was signed in April 2002 between the Netherlands and the US, which is also applicable to the Netherlands Antilles, for the exchange of information with respect to taxes. This agreement was scheduled to come into force in January 2004. A TIEA between Aruba and the US, which was signed in November 2003, became effective in September 2004.

EU Savings Tax Directive

As a Member State of the EU, The Netherlands is required to collect and exchange information about savings income derived by taxpayers of other Member States, as of 1 July 2005.

Financial Action Task Force (FATF)

The Netherlands is a member of the FATF and is in full compliance with all FATF Recommendations, with respect to both legislation and enforcement. The Netherlands also complies with the EU Second Money Laundering Directive, and in some areas, is ahead of the EU legislation (such as full money laundering controls on money remitters, including licensing and identification of customers).

The Netherlands participates in the Caribbean Financial Action Task Force as a Cooperating and Supporting Nation.

Mutual Legal Assistance Treaties (MLATs)

The Netherlands has MLATs in force with Australia, Canada, France, the UK and the US. In September 2004, the US and the Netherlands signed two agreements in the area of mutual legal assistance and extradition, stemming from the agreements that were concluded in 2003 between the EU and the United States. One of the amendments to the existing bilateral agreement is the exchange of information on bank accounts.

The Central Bank of the Netherlands, which merged with the Pension and Insurance Chamber in April 2004, and the Financial Markets Authority, as the supervisors of the Dutch financial sector, regularly exchange information nationally and internationally. Sharing of information by Dutch supervisors does not require formal agreements or memoranda of understanding (MOUs).

The Office for Disclosure of Unusual Transactions (MOT), the Netherlands’ Financial Intelligence Unit (FIU), is a member of the Egmont Group. MOT has concluded formal information sharing MOUs with Belgium, Aruba and the Netherlands Antilles.

The Netherlands is a party to the 1988 UN Drug Convention and the Council of Europe Convention on Laundering, Search, Seizure, and Confiscation of the Proceeds from Crime. The Dutch participate in the Basel Committee, and have endorsed the Committee’s "Core Principles for Effective Banking Supervision." The Netherlands is a party to the UN International Convention for the Suppression of the Financing of Terrorism and the UN Convention against Transnational Organized Crime.

Tax Treaties

The Netherlands has a complex network of double taxation treaties, few of which contain any anti avoidance provisions. The tax treaties in force are with the following countries:

  • Argentina
  • Aruba
  • Australia
  • Austria
  • Bangladesh
  • Belarus
  • Belgium
  • Bosnia-Herzegovina
  • Brazil
  • Bulgaria
  • Canada
  • China
  • Croatia
  • Czech Republic
  • Denmark
  • Egypt
  • Estonia
  • Federal Republic of Yugoslavia ( Montenegro and Serbia)
  • Finland
  • France
  • Georgia
  • Germany
  • Greece .
  • Hungary
  • Iceland
  • India
  • Indonesia
  • Ireland
  • Israel
  • Italy
  • Japan
  • Kazakhstan
  • Korea
  • Kuwait
  • Latvia
  • Lithuania
  • Luxembourg
  • Macedonia
  • Malawi
  • Malaysia
  • Malta
  • Mexico
  • Moldova
  • Mongolia
  • Morocco .
  • Netherlands Antilles
  • New Zealand
  • Nigeria
  • Norway
  • Pakistan
  • Philippines
  • Poland
  • Portugal
  • Romania
  • Russian Federation
  • Singapore
  • Slovakia
  • Slovenia
  • South Africa
  • Spain
  • Sri Lanka
  • Surinam
  • Sweden
  • Switzerland
  • Taiwan
  • Thailand
  • Tunisia
  • Turkey
  • Ukraine
  • UK
  • USA
  • Uzbekistan
  • Venezuela
  • Vietnam
  • Zambia
  • Zimbabwe

General Info

Full Country Name: Kingdom of the Netherlands (also Holland)
Area: 41,526 sq km
Population: 16,407,491 (July 2005 est.)
Capital City: Amsterdam ; The Hague is seat of government
Nationality: Dutchman, Dutchwoman; adjective, Dutch
People: Dutch 83%, other 17% (of which 9% are non-Western origin mainly Turks, Moroccans, Antilleans, Surinamese and Indonesians) (1999 est.)
Languages: Dutch (official), Frisian (official)
Currency: euro (EUR), sole currency since 1 January 2002 – EUR 0.8089 per USD (2004)
Government: Constitutional monarchy
Legal system: civil law system incorporating French penal theory; constitution does not permit judicial review of acts of the States General; accepts compulsory ICJ jurisdiction, with reservations
Head of State: HM Queen Beatrix

Geography

The Netherlands is in Western Europe, bordering the North Sea, between Belgium and Germany. It is a very flat country with nearly a quarter of its area below sea level. The country’s lowest point, at 6.7 metres below sea level, is near Rotterdam. The highest point, the Vaalserberg, is 321 metres high, and lies in the southeast, where the borders of the Netherlands, Belgium and Germany meet.


History

The Netherlands began as a number of separate feudal entities, which were eventually united with the rest of the 'Low Countries' (present-day Belgium and Luxembourg) as part of the Holy Roman Empire. In 1568, some of the northern Dutch provinces revolted under Prince William of Orange, starting what the Dutch call the Eighty Years’ War. This ended in 1648 with the Treaty of Münster, which recognised the Republic of the United Provinces (the seven sovereign provinces of Holland, Zeeland, Utrecht, Friesland, Groningen, Overijssel and Gelderland) as an independent state.

During the 17th century, the Netherlands' 'Golden Age', the Republic became very prosperous thanks largely to the Dutch East Indies Company, which could be described as the world’s first multinational. This company had interests along the coasts of Africa and Asia, with bases in present-day Indonesia, Japan, Taiwan, Sri Lanka and South Africa. Around the same time, the Dutch West Indies Company (WIC) was trading with West Africa and the Americas, and from 1625 to 1664 it administered New Amsterdam, which later became New York.

Occupied by French revolutionary forces in 1795, the Low Countries regained their independence in 1813. In 1815, following a power struggle between republicans and monarchists, the Kingdom of the Netherlands was created under Willem Frederik, Prince of Orange, as King William I. This marked the introduction of the Dutch hereditary monarchy. In 1830, the southern Netherlands seceded from the Kingdom to form the independent state of Belgium. The constitution was radically revised in 1848, making ministers accountable to an elected parliament rather than the monarch. The new constitution was the basis for a constitutional monarchy with a parliamentary system.

During the First World War (1914-18), the Netherlands remained neutral. It continued to pursue a policy of strict neutrality until the Second World War, but was invaded by Germany in May 1940 and occupied for five years. The Netherlands was a major colonial power until the Second World War, but after 1945 its two largest colonies, Indonesia and Suriname, gained independence. Today, the Dutch Antilles and Aruba still form part of the Kingdom of the Netherlands.

The Netherlands is one of the most stable European countries and is a full member and one of the co-founders of the European Union.


Government and Politics

Executive branch
Head of State: Queen Beatrix (since 30 April 1980); Heir Apparent Willem-Alexander (born 27 April 1967), son of the monarch
Head of Government: Prime Minister Jan Peter Balkenende (since 22 July 2002) and Deputy Prime Ministers Gerrit Zalm (since 27 May 2003) and Laurens Jan Brinkhorst (since 31 March 2005)
Cabinet: Council of Ministers appointed by the monarch
Elections:

none; the monarchy is hereditary; following Second Chamber elections, the leader of the majority party or leader of a majority coalition is usually appointed prime minister by the monarch; vice prime ministers appointed by the monarch

Note: there is also a Council of State composed of the monarch, heir apparent, and councillors that provides consultations to the cabinet on legislative and administrative policy

Legislative branch

Bicameral States General or Staten Generaal consists of the First Chamber or Eerste Kamer (75 seats; members indirectly elected by the country's 12 provincial councils for four-year terms) and the Second Chamber or Tweede Kamer (150 seats; members directly elected by popular vote to serve four-year terms) .

Elections: First Chamber - last held 25 May 2003 (next to be held May 2007); Second Chamber - last held 22 January 2003 (next to be held May 2007).

Election results: First Chamber - seats by party - CDA 23, PvdA 19, VVD 15, Green Party 5, Socialist Party 4, D66 3, other 6; Second Chamber - seats by party - CDA 44, PvdA 42, VVD 28, Socialist Party 9, List Pim Fortuyn 8, Green Party 8, D66 6, other 5.

Judicial branch

Supreme Court or Hoge Raad (justices are nominated for life by the monarch)

Political parties and leaders

Christian Democratic Appeal or CDA (Maxime Jacques Marcel Verhagen); Democrats 66 or D66 (Boris Dittrich); Green Party (Femke Halsema]; Labour Party or PvdA (Wouter Bos); List Pim Fortuyn (Gerard van As); People's Party for Freedom and Democracy (Liberal) or VVD (Jozias Van Aartsen); Socialist Party (Jan Marijnissen); plus a few minor parties.

The Netherlands has a history of coalition governments. In May 2003, the Christian Democratic Appeal (CDA), the People's Party for Freedom and Democracy (VVD), and Democrats 66 (D66) successfully completed negotiations for a coalition agreement under Jan Peter Balkenende, Prime Minister and leader of the CDA. The Labour Party, PvdA, remains in opposition.


Economy

Basis economic facts

GDP (2002):USD 481.1 billion

Growth rate (2002): 1.2%.

Per capita GDP (2002):USD 29,500.

Main industries: Agroindustries, electrical machinery and equipment, metal and engineering products, chemicals, petroleum, construction, microelectronics, and fishing.

The Netherlands has a prosperous and open economy that depends heavily on foreign trade. The Netherlands currently enjoys stable industrial relations, moderate inflation and a substantial current account surplus. It has a significant role as a European transportation hub. Industrial activity is mainly in food processing, chemicals, the refining of petroleum, and electrical machinery. The services sector represents 70% of the economy. The agricultural sector is highly mechanised and employs no more than 4% of the labour force, but it provides large surpluses for exports and the food processing industry. The Dutch rank third worldwide in terms of the value of agricultural exports. The Dutch were among the first 11 EU countries establishing the euro currency zone on 1 January 1999.

The Netherlands can in no way be considered an offshore finance centre. Corporate rates of tax are high: 35% tax is levied on worldwide income. However, concessionary treatment of some forms of income, coupled with the extremely wide network of double taxation treaties (including treaties with most of the major developed nations of the world) provide outstanding opportunities to use Netherlands corporations in structuring international financial transactions. Netherlands companies may be put to the following uses:

  • Holding companies – subject to certain conditions a resident Dutch company may qualify for the “participation exemption” which exempts such companies from corporate tax on income and capital gains resulting from the holding or disposal of qualifying shareholdings.
  • Finance companies – The Netherlands imposes no withholding taxes on interest paid by a Netherlands company to a non-resident. Many Dutch tax treaties also allow foreign companies to pay interest to a Netherlands company without a requirement to withhold tax or subject to a requirement to withhold tax at a reduced level. The Netherlands may therefore provide a suitable conduit through which inter-company loans may be made. The Netherlands require that the margin of profit on loans received and made must be (subject to a decreasing sliding scale) of between 1/6% and 1/8% for inter group loans and between 1/32% and 1/4% on third party loans. The amount of this margin would be taxable at normal Dutch rates but the balance of the interest received will escape Dutch taxation.
  • Licensing companies – there is no withholding tax on royalty payments made by a Dutch company to a non-resident and, as with interest payments, many of the tax treaties signed by The Netherlands allow foreign companies to make royalty payments to a Netherlands company without a requirement to withhold tax or subject to only a reduced rate of withholding tax. Where the Dutch company is related to the payee or payer then a margin on basis of a sliding scale ranging from 2%-7% (6% for lump sum payments and film royalties) must be maintained between the royalties received and the expenses paid out. The amount of this margin would be taxable at normal Dutch rates but the balance of the royalties received will escape Dutch taxation.


The Netherlands has comprehensive money laundering legislation. The Services Identification Act (WID) and the Disclosure Act set forth identification and reporting requirements. All financial institutions in the Netherlands, including banks, bureaux de change, casinos, life insurance companies, securities firms, stock brokers, and credit card companies, are required to report cash transactions over 15,000 euros, as well as any less substantial transaction that appears unusual, a broader standard than "suspicious" transactions, to the Office for Disclosure of Unusual Transactions (MOT), the Netherlands’ Financial Intelligence Unit (FIU). In December 2001, the reporting requirements were expanded to include trust companies, financing companies, and commercial dealers of high-value goods. In June 2003, notaries, lawyers, real estate agents/intermediaries, accountants, business economic consultants, independent legal advisers, trust companies and other providers of trust related services, and tax advisors were added. Reporting entities that fail to file reports with the MOT may be fined 11,250 euros or be imprisoned up to two years. Under the Identification of Services Act (WID), all those that are subject to reporting obligations must identify their clients, including the identity of ultimate beneficial owners, either at the time of the transaction or at some point prior to the transaction, before providing financial services.

Financial institutions are also required by law to maintain records necessary to reconstruct financial transactions for at least seven years. The requirements also have been applicable to the Central Bank of the Netherlands (to the extent that it provides covered services) since 1998. There are no secrecy laws or fiscal regulations that prohibit Dutch banks from disclosing client and owner information to bank supervisors, law enforcement officials, or tax authorities. Financial institutions and all other institutions under the reporting and identification acts, and their employees, are specifically protected by law from criminal or civil liability related to cooperation with law enforcement or bank supervisory authorities. Furthermore, current legislation requires Customs authorities to report unusual transactions to the MOT; however, the Dutch do not currently have a currency declaration requirement for incoming travellers.

The Money Transfer and Exchange Offices Act, which was passed in June 2001, requires money transfer offices, as well as exchange offices, to obtain a permit to operate, and subjects them to supervision by the Central Bank. Every money transfer client has to be identified.


The Netherlands places great importance on maintaining good relations with its neighbouring countries: its Benelux partners ( Belgium and Luxembourg), Germany, France, the UK and the Scandinavian countries. In addition, it is closely involved in developments in Central and Eastern Europe, and in assisting the fledgling democracies in their transition to a market economy.

The Netherlands largely pursues its foreign policy within the framework of multilateral organisations such as the United Nations (UN), the European Union (EU) and the North Atlantic Treaty Organisation (NATO). The Netherlands was a founding member of the International Monetary Fund (IMF), the World Bank, the UN, the Western European Union (WEU), NATO and the European Communities (now the EU).





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