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Agenda 1 Introduction 2 The Netherlands, an overview & European hub 3

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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 Agenda 1 Introduction 2 The Netherlands, an overview & European hub 3 The Netherlands, a tax update 4 Q&A

2 With you here today Laurens Kreuze
Head of high growth markets – Africa Laurens H.A. Kreuze Partner, KPMG Accountants N.V. Laan van Langerhuize DS Amstelveen Phone: Mobile: Starting for KPMG Nigeria in Lagos per 1 November 2014 Jens Karreman Tax expert high growth markets Jens Karreman Partner, KPMG Meijburg & Co Prof.dr. Dorgelolaan 30D AM Eindhoven Phone: Mobile:

3 KPMG in the Netherlands
Founded merger between Peat Marwick and Klynveld Main Goerdeler Revenue (2013) US$ 23,4 billion Employees 152,000 in 156 countries Industry Professional services Main services Audit, tax, and advisory KPMG Global Founded by Piet Klynveld Revenue (2013) EUR 606 million (approx. US$ 833 million) Employees 3,131 Industry Professional services Main services Audit, tax, and advisory KPMG in the Netherlands

4 KPMG’s High Growth Market Desk Africa – multi discipline approach
AUDIT Reviewing financial accountability on behalf of third parties Corporate governance Assessing strategy, business risks and implications for the financial statements Center of excellence for international holding and finance audits TAX All the different areas of the tax field, including corporation, income, turnover and wage tax Tax Innovation Centre Import duties, international executive services, immovable property tax and environmental levies, succession planning and transfer pricing ADVISORY Transactions & Restructuring Risk Consulting Management consulting High Growth Markets desk – Africa One point of contact covering all services and client related matters

5 The Netherlands, an overview & European hub

6 The Netherlands Netherlands Facts & Figures
Netherlands facts and figures Area: 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 810,084 Rotterdam – population 618,279 The Hague (seat of government) – population 508,480 Utrecht – population 327,834 Eindhoven – population 221,101 Climate: Temperate; marine; cool summers and mild winters Netherlands Facts & Figures

7 The Netherlands Netherlands Facts & Figures Natural resources:
Natural gas, petroleum and arable land Population (January 2014): 16,825,618 Age 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 km Railways: 3,013 km Waterways: 6,237 km Netherlands 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 recover Sluggish 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 confidence As in other countries, the Dutch financial sector was not able to withstand the global financial crisis and the state intervened to prevent its collapse First indications of Netherlands economy picking up again and faster than European average Current growth is mainly export driven. Economic growth in the Netherlands GDP, in % quarter-on-quarter Source: 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 state The 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 well The 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 overhaul Participation society was proclaimed the word of the year for 2013 Prince 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 countries Life is GREAT! Income per capita Feeling good (GDP per capita, PPP, average= 100) (Better Life Index, 2012) That is 6% higher than the German average Average

11 Ranking competitiveness
The Dutch economy is based on strong fundamentals, but there is room for improvement + Quality of life Telecom / internet infrastructure Transport & logistical infrastructure Stable social and political climate Local labor skills Good competitive position of the country Plus Ranking competitiveness 5 7 - Relative small domestic market Size of the government sector Graying of the population High labor costs Inflexible labor market Open economy Minus 8 8 8 10 10 11 Source: World Economic Forum

12 Competitive Position Netherlands and Amsterdam
The Netherlands Global Competitiveness Index (WEF) #8(2013) Global business environment rankings (EIU) #16 ( ) Innovation Ambition top-5 Technological 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 2012 Lowest Cost Level in Continental Europe Amsterdam Cushman & Wakefield’s European Cities Monitor #4 (2011) Most livable city #2 (2012) IBM: Global LocationTrends Report #14 (2012)

13 Netherlands: Strong sectors
Agri-food Horticulture and propagation materials High Tech Energy Logistics Creative Industry Life sciences Chemicals Water

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 Netherlands More 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 companies Dependent on investments – so focused on creating the right legislation and infrastructure Strategic location and specialised in logistics Favourable fiscal climate Specialised industry with trust offices, specialised (tax) lawyers and auditors High level of education with focus on innovation Sales and marketing Infrastructure and Logistics Holding/Finance/Treasury Intellectual Property and R&D EU Regional HQ/Management Centre Other advantages Lower cost of operation than other countries Availability 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 2014 Business environment in Netherlands Starting or acquiring a business in the Netherlands Incentives (government grants and other facilities) Reporting, audit and regulatory environment Business taxation Logistical services and customs Immigration, employment and personal tax Exit matters In 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 Africa We invite you to do the same and start using the Netherlands as hub for your investments in Europe & the rest of the world For further credentials on sectors and experiences of other companies:

18 Tax Meijburg

19 The Netherlands a tax update
Jens Karreman

20 Tax update the Netherlands Highlights of the Dutch tax system
Domestic International 25% Corporate income tax rate (20% if taxable amount < EUR 200,000) Fiscal Unity Regime (tax consolidation) Large tax treaty network and application EU directives 100% Participation exemption (dividends, foreign exchange results and capital gains) 5% Effective tax rate on qualifying innovative income 60% Research & Development Deduction Expat Exemption (“30% ruling”) and tax return filing exemption White listed jurisdiction No stamp duties / capital contribution / net wealth tax No withholding tax on interest, royalties, technical fees Dividend withholding tax: 15%, 0% for cooperatives Effective centralized and coordinated practice to obtain certainty in advance through rulings with Dutch tax authorities Facilities 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 environment Proven track record in investment protection Large Treaty Network available Excellent legal infrastructure Quality & independency courts Company law robust, yet flexible Good logistic infrastructure Sea ports Rotterdam, Amsterdam Schiphol airport Quality work force Well trained and skilled labour force Multi lingual Experienced high quality service providers Competitive fiduciary service providers Tax / legal service providers

22 Tax update the Netherlands Dutch innovation box
WHAT Innovation 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; and Self produced Effective tax rate of 5% SAVINGS WHY 20% Innovative income taxed at effective rate of 5% No limit Available for all industries Development costs deductible at 25% HOW 1 Analysis Innovative Character 2 3 Quantify Savings Ruling tax authorities Unique track record with negotiating rulings with the Dutch tax authorities Ruling provides certainty as to tax effects and what part of income can be qualified as innovative income Tax Inno-vation box 2 5%) Normal tax 15 25%) 17 Saving 8 An Example Routine functions EBT 100 Profit from entrepreneurial functions + profit from innovation 80 20 40 Income for Innovation box Income at normal rate Tax 25

23 An extensive Tax Treaty network…

24 as well as Investment Protection Treaty network...

25 Basic holding structure Dutch participation exemption
Holdco General rules The 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 gains Losses 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 apply Advance certainty from tax authorities available (Advance Tax Ruling) Dividends Dutch Holdco (Cooperative) ≥ 5% Full exemption Dividends and capital gains Foreign Co’s Foreign Co’s Foreign Co’s

26 Basic financing structures
General rules Access to the vast tax treaty network of the Netherlands Credit for foreign withholding tax on interest on incoming interest payments No Dutch withholding tax on outgoing interest payments Low taxable spread Substance requirements to be met – Sanction: Exchange of information to source country APA available Mutual Agreement Procedure protection available Advance certainty from tax authorities available (Advance Pricing Agreement) Foreign GroupCo Dutch FinCo Foreign GroupCo Provision of loan Tax implications If 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.

27 Thank you! Q&A

28 © 2014 KPMG N.V ., registered with the trade register in the Netherlands under number , is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (‘KPMG International’), a Swiss entity. All rights reserved. Printed in the Netherlands. The KPMG name, logo and ‘cutting through complexity’ are registered trademarks of KPMG International.

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