Presentation on theme: "Agenda 1 Introduction 2 The Netherlands, an overview & European hub 3"— Presentation transcript:
0 Investing and Trade in the Netherlands & Netherlands the gateway to Europe September 16, 2014
1 Agenda1Introduction2The Netherlands, an overview & European hub3The Netherlands, a tax update4Q&A
2 With you here today Laurens Kreuze Head of high growth markets – AfricaLaurens H.A. KreuzePartner, KPMG Accountants N.V.Laan van Langerhuize DS AmstelveenPhone: Mobile:Starting for KPMG Nigeria in Lagos per 1 November 2014Jens KarremanTax expert high growth marketsJens KarremanPartner, KPMG Meijburg & CoProf.dr. Dorgelolaan 30D AM EindhovenPhone: Mobile:
3 KPMG in the Netherlands Founded merger between Peat Marwick and Klynveld Main GoerdelerRevenue (2013) US$ 23,4 billionEmployees 152,000 in 156 countriesIndustry Professional servicesMain services Audit, tax, and advisoryKPMG GlobalFounded by Piet KlynveldRevenue (2013) EUR 606 million (approx. US$ 833 million)Employees 3,131Industry Professional servicesMain services Audit, tax, and advisoryKPMG in the Netherlands
4 KPMG’s High Growth Market Desk Africa – multi discipline approach AUDITReviewing financial accountability on behalf of third partiesCorporate governanceAssessing strategy, business risks and implications for the financial statementsCenter of excellence for international holding and finance auditsTAXAll the different areas of the tax field, including corporation, income, turnover and wage taxTax Innovation CentreImport duties, international executive services, immovable property tax and environmental levies, succession planning and transfer pricingADVISORYTransactions & RestructuringRisk ConsultingManagement consultingHigh Growth Markets desk – AfricaOne point of contact covering all services and client related matters
6 The Netherlands Netherlands Facts & Figures Netherlands facts and figuresArea:41,528 sq km (water: 7,643 sq km; land: 33,883 sq km of which forest 3,447 sq km)Five largest cities (November 2013):Amsterdam (capital) – population 810,084Rotterdam – population 618,279The Hague (seat of government) – population 508,480Utrecht – population 327,834Eindhoven – population 221,101Climate:Temperate; marine; cool summers and mild wintersNetherlands Facts & Figures
7 The Netherlands Netherlands Facts & Figures Natural resources: Natural gas, petroleum and arable landPopulation (January 2014):16,825,618Age structure (2013)0-24 years: 29.3%25-64 years: 53.7%65 years and older: 17.0%Currency:Euro (EUR)Transportation infrastructure (2013)Roadways: 139,295 kmRailways: 3,013 kmWaterways: 6,237 kmNetherlands Facts & Figures
8 The Dutch economy The recent financial crisis has had a strong impact on the Dutch economy The financial crisis led to economic downturn. Only now the economy is slowly starting to recoverSluggish economic growth of 0,5% is forecasted for 2014, in 2015 the growth pace will likely pick up to 1,5%.In comparison to neighbouring countries, e.g. Germany, the Netherlands was slow to recover from the economic downturn. And Netherlands suffered serious drop in consumer confidenceAs in other countries, the Dutch financial sector was not able to withstand the global financial crisis and the state intervened to prevent its collapseFirst indications of Netherlands economy picking up again and faster than European averageCurrent growth is mainly export driven.Economic growth in the NetherlandsGDP, in % quarter-on-quarterSource: Economist Intelligence Unit, ING
9 Political developments Making the shift from welfare state to ‘participation society’ Prince day 2013 – The concept of participation society was introduced last year and means to change the way people perceive services provided by the stateThe recent economic downturn led to a downsizing of the welfare state, in order to control government expenditures. But reforms of the welfare state should lead to more sustainable government finance in the long term as wellThe participation society is supposed to introduce a changing mindset. Citizens in need should no longer expect the state to solve their problems, but should first involve their own social network to come up with a solution. The state should create conditions that enable citizens to undertake action themselves (similar to Cameron’s ‘Big society’)This is in line with previous governments that have sought to create a smaller state. Due to the ageing population many welfare arrangements are increasingly unsustainable and thus require an overhaulParticipation society was proclaimed the word of the year for 2013Prince day 2014 –Expectations are that on average there will be a (small) increase in personal income. And the there will be a focus going forward on creating more jobs.
10 That is 6% higher than the German average The Dutch economy Both the standard of living and overall wellbeing are high, also compared to other EU countriesLife is GREAT!Income per capitaFeeling good(GDP per capita, PPP, average= 100)(Better Life Index, 2012)That is 6% higher than the German averageAverage
11 Ranking competitiveness The Dutch economy is based on strong fundamentals, but there is room for improvement+Quality of lifeTelecom / internet infrastructureTransport & logistical infrastructureStable social and political climateLocal labor skillsGood competitive position of the countryPlusRanking competitiveness57-Relative small domestic marketSize of the government sectorGraying of the populationHigh labor costsInflexible labor marketOpen economyMinus888101011Source: World Economic Forum
12 Competitive Position Netherlands and Amsterdam The NetherlandsGlobal Competitiveness Index (WEF)#8(2013)Global business environment rankings (EIU)#16 ( )InnovationAmbition top-5Technological readiness#4 (2013)Ease of Doing Business#28 (2014)Education (OECD PISA)#10 in mathematics, #15 in reading, # 14 in science (2012)KPMG: Competitive Alternatives 2012Lowest Cost Level in Continental EuropeAmsterdamCushman & Wakefield’s European Cities Monitor#4 (2011)Most livable city#2 (2012)IBM: Global LocationTrends Report#14 (2012)
14 Netherlands – European Business Hub: Home to Global and regional HQ’s 13 Dutch Multinationals belong to Fortune 500 (incl Shell, Unilever, Philips and Aegon)More than 400 US companies and more than 300 Asian companies have established EHQ’s in the NetherlandsMore than 5000 foreign based companies operate in the Netherlands
15 Netherlands: A European Business Hub Why:Most often used for activities:Open economy – long history with working with foreign companiesDependent on investments – so focused on creating the right legislation and infrastructureStrategic location and specialised in logisticsFavourable fiscal climateSpecialised industry with trust offices, specialised (tax) lawyers and auditorsHigh level of education with focus on innovationSales and marketingInfrastructure and LogisticsHolding/Finance/TreasuryIntellectual Property and R&DEU Regional HQ/Management CentreOther advantagesLower cost of operation than other countriesAvailability of different corporate governance regimes, which offer possibility to create most appropriate set up
16 Netherlands: A European Business Hub – further information Contents of Investment in the Netherlands app 2014Business environment in NetherlandsStarting or acquiring a business in the NetherlandsIncentives (government grants and other facilities)Reporting, audit and regulatory environmentBusiness taxationLogistical services and customsImmigration, employment and personal taxExit mattersIn total 232 pages of useful and detailed information on “Investing and Trade in the Netherlands & Netherlands the gateway to Europe”2014 version available in App store under “Invest in NL”Or on website: tment-in-the-netherlands-2013-en
17 Netherlands: A Business Hub – proven track record with Africa Did you know?There are currently > global companies based in the Netherlands holding investments in AfricaWe invite you to do the same and start using the Netherlands as hub for your investments in Europe & the rest of the worldFor further credentials on sectors and experiences of other companies:
20 Tax update the Netherlands Highlights of the Dutch tax system DomesticInternational25% Corporate income tax rate (20% if taxable amount < EUR 200,000)Fiscal Unity Regime (tax consolidation)Large tax treaty network and application EU directives100% Participation exemption (dividends, foreign exchange results and capital gains)5% Effective tax rate on qualifying innovative income60% Research & Development DeductionExpat Exemption (“30% ruling”) and tax return filing exemptionWhite listed jurisdictionNo stamp duties / capital contribution / net wealth taxNo withholding tax on interest, royalties, technical feesDividend withholding tax: 15%, 0% for cooperativesEffective centralized and coordinated practice to obtain certainty in advance through rulings with Dutch tax authoritiesFacilities available for business transfer to the Netherlands for Greenfield projects (i.e. informal capital approach).
21 Tax update the Netherlands Also a competitive legal edge … Stable political environmentProven track record in investment protectionLarge Treaty Network availableExcellent legal infrastructureQuality & independency courtsCompany law robust, yet flexibleGood logistic infrastructureSea ports Rotterdam, AmsterdamSchiphol airportQuality work forceWell trained and skilled labour forceMulti lingualExperienced high quality service providersCompetitive fiduciary service providersTax / legal service providers
22 Tax update the Netherlands Dutch innovation box WHATInnovation as wide scoped term (not only true R&D, but any innovation that results in efficiencies or enhanced performance)Entry tickect – S&O certificate or Patent; andSelf producedEffective tax rate of 5%SAVINGSWHY20%Innovative income taxed at effective rate of 5%No limitAvailable for all industriesDevelopment costs deductible at 25%HOW1Analysis Innovative Character23Quantify SavingsRuling tax authoritiesUnique track record with negotiating rulings with the Dutch tax authoritiesRuling provides certainty as to tax effects and what part of income can be qualified as innovative incomeTaxInno-vation box25%)Normal tax1525%)17Saving8An ExampleRoutine functionsEBT100Profit from entrepreneurial functions + profit from innovation802040Income for Innovation boxIncome at normal rateTax 25
24 as well as Investment Protection Treaty network...
25 Basic holding structure Dutch participation exemption HoldcoGeneral rulesThe Dutch participation exemption applies to (non transparent) shareholdings of at least 5% unless these can be qualified as “low taxed passive investments”All benefits exempt for 100% - dividends, forex and capital gainsLosses not tax deductible (exception: liquidation losses)Expenses tax deductible (exception: acquisition / disposal costs)A “Cooperative” is not subject to dividend withholding tax, unless the participant in the Cooperative is a passive investor and the use of the cooperative can be regarded “abusive”Substance requirements applyAdvance certainty from tax authorities available (Advance Tax Ruling)DividendsDutch Holdco (Cooperative)≥ 5%Full exemptionDividends and capital gainsForeign Co’sForeign Co’sForeign Co’s
26 Basic financing structures General rulesAccess to the vast tax treaty network of the NetherlandsCredit for foreign withholding tax on interest on incoming interest paymentsNo Dutch withholding tax on outgoing interest paymentsLow taxable spreadSubstance requirements to be met – Sanction: Exchange of information to source countryAPA availableMutual Agreement Procedure protection availableAdvance certainty from tax authorities available (Advance Pricing Agreement)Foreign GroupCoDutch FinCoForeign GroupCoProvision of loanTax implicationsIf FinCo 1 and FinCo 2 will create a consolidated tax group interest paid by FinCo 1 could be deducted against interest received by FinCo 2. Interest margin should correspond to the market level which should be confirmed by TP study.Both Dutch companies should be established in the Netherlands for tax purposes in order to form a fiscal unity (i.e. the effective place of management should be the Netherlands). Both Dutch companies should also be liable to tax in the Netherlands in order to gain access to the tax treaties.Dutch companies that are involved in intra group back-to-back financing activities should satisfy economic substance requirements included in Dutch law. In order to satisfy the economic substance requirements, it should be demonstrated that the Dutch companies incur credit risks, market risks and operational risks with respect to its financing arrangements. In Dutch tax law, a company performing intercompany financing activities is deemed to bear risks in case the equity of the company is at least equal to the lower of 1% of the outstanding loans or EUR 2,000,000.Provided that the economic substance requirements are met, in principle a credit for foreign interest withholding tax can be obtained.Interest payments in favor of offshore jurisdiction should not be subject to WHT in the Netherlands.Theoretically, Dutch anti abuse rules may limit the deductibility of interest costs at the level of the Dutch group. This is based on anti abuse rules that limit the deductibility of interest related to loans that are used for making an equity contribution into an affiliated entity. However, since the capital contribution takes place within a fiscal unity for Dutch corporate income tax purposes, we see good arguments that these rules should not apply in this case.