1. The Netherlands company as a tax planning tool Globalserve Seminar November 2013 By Phani Schiza Antoniou

2. Netherlands, the country  EU member  Highly strategic commercial location that makes it the “Gateway to Europe”  Natural hub for logistics and headquarter functions  High educated, multi cultural and multi-lingual workforce  High level of infrastructure  Good economic and financial climate

3. Netherlands, the country  One of the major and reputable international Business centers  Extensive Network of double Tax Treaties; 90!!  Good Banking system  Advantageous Tax System especially with respect to taxation of dividends, royalties and interest  Tax Rulings possible  Political stability  Well organized system for monitoring and controlling financial markets and compliance through laws and regulations

4. A Dutch B.V  BV=Private company with limited liability  Set up by a notary (make up of their articles)  Official Permission of Minister of Justice  Minimum share capital is €1  Registered in the Chamber of Commerce  Director can be also legal entity  Min director/ shareholder 1  Director can be non Dutch resident but for management and control purposes Dutch director is advisable

5. Summary of Dutch Tax Rates Corporate Income Tax upto € 200000 Corporate Income T above € 200000 20% 25% Tax on Dividends received0% if participation exemption applies i.e 5% minimum shareholding in the subsidiary held as participation not as an investment Royalty income5 % Capital gains tax in the case of disposal of participation 0% if participation exemption applies i.e 5% minimum shareholding in the subsidiary, held as participation not as investment Profit from the trading in securities20-25% Withholding tax on dividends other than EU or Treaty countries 15% Withholding taxes on interest, royalties0%

6. Summary of the Dutch tax system  GENERAL  Corporate Income Tax rate=25%  Taxable income ≦ EUR 200,000=20%  Innovation box income taxed at 5%  Average ETR of Dutch multinational: Between 8% and 20%

7. Summary of the Dutch tax system  No withholding tax on interest and royalty payments  Dividend withholding tax =maximum 15%  Qualifying dividends to EU or 0% treaty country=0%  No capital taxes

8. Summary of the Dutch tax system  CORPORATE INCOME TAX SPECIFICS  Tax loss carry forward: 9 years  Tax loss carry back:1  Thin cap: 3 to 1 or the group’s debt-to- equity ratio  Interest deduction limitations when eroding the Dutch taxable basis of operating subsidiaries  These rules do not affect international structuring

9. Summary of the Dutch tax system  INNOVATION BOX  Offers attractive opportunities to lower the ETR for income allocable to intangible assets to 5% if:  The intangible assets are self developed, which includes contract research for the risk and benefit of the tax payer and participation in R&D activities by means of cost-contribution arrangements (but excludes marketing intangibles created by the tax payer, such as brand names, logos and assets alike)  The intangible assets are purchased, provided the purchased intangible asset loses its independence and is merged into a new self developed intangible asset.  At least 30% of expected income can be attribute to patents/registrations obtained for the intangible asset

10. Summary of the Dutch tax system  Test per intangible asset, to be met at the end of the first year of applying for the Innovation Box for an intangible asset  No upfront approval of Dutch tax authorities is required, so Innovation Box can be applied for by ticking a box in the Dutch corporate Income tax return. However, in order to determine income to be allocated to Innovation Box, consultation with Dutch tax authorities upfront is highly recommended.

11. Summary of the Dutch tax system  PARTICIPATION EXEMPTION  100% income (dividend income and capital gains)exempt from Dutch corporate income tax if it concerns an investment in shares of at least 5% of the nominal paid-in capital, unless it concerns a portfolio investment company(no minimum holding period)

12. Summary of the Dutch tax system  SUBSTANCE REQUIREMENTS Focus should be on substance requirements set by the jurisdiction that pays to a Dutch holding company;  Presence of local operations  Key executives 'agenda for travel to the holding company jurisdiction  The Dutch tax authorities published the following list with minimum substance requirements that should be met by so-called financing flow-through ruling companies:  At least 50% of the Board of Directors(BOD) MEMEBRS SHOULD BE Dutch residents(live and work there)and of a certain professional level and the company has adequate staff (itself or from 3 rd parties)for performing the functions  All key strategic/material decisions of the BOD should be taken in the Netherlands, such as the entering into contracts and signing of documents  The main bank account should be held in the Netherlands  The bookkeeping is maintained in the Netherlands  The address of the company should be in the Netherlands and the company is not considered a resident in another state on the basis of a tax treaty  The company has sufficient equity considering its activities and the risks to be absorbed by the company.

13. DOUBLE TAX TREATY WITH UKRAINE DIVIDEND *o% applies if min shareholding 50% and at least $300000 investment ** 5% applies if at least 20% shareholding In all other cases 15% 0%*/5**%/15% INTEREST *2% rate applies to interest paid on loans granted by a banking institution and financial or to interest paid by the purchaser of machinery and equipment to the seller in connection with a sale on credit; the 10% rate applies in all other cases. 2*/10% ROYALTIES * 0% rate applies to royalties paid for a copyright of scientific work, a patent, trademark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience. The 10% rate applies to royalties paid for the use of, or the right to use, a copyright of scientific work, (including cinematograph film and films or tapes for radio or television broadcasting). 0*/10%

14. DOUBLE TAX TREATY WITH RUSSIA DIVIDEND If 25% ownership in the subsidiary Russian company and minimum investment of € 75000 5*%/15% INTEREST 0% ROYALTIES0%

15. Organigram Russian company Cyprus Ltd. In any country One or more BO’s dividends loans interests Subsidiaries Dutch B.V.

16. Russian company Subsidiaries Russian company Dutch B.V. Subsidiaries Example loan INTRESTINTREST Loan from Russian Comp. to subsidiaries INTRESTINTREST INTRESTINTREST Witholding tax: 0% Witholding tax: 35%

17. Russian company Subsidiaries (EU country without treaty) Russian company Dutch B.V. Subsidiaries (EU country) Example dividend Dividend from subsidiaries in Argentina to Russian holding Witholding tax: 0% Witholding tax: 15% Cyprus Ltd Witholding tax: 0%

18. Comparison of Luxembourg and Dutch Tax Rates Luxembourg companyDutch company CapitalIt has minimum amount and has to be paid in advance according to the type of company No minimum Corporate tax 28.8%20 % upto € 200000 25% above € 200000 Tax on Dividends received O% if participation exemption applies i.e 10% minimum shareholding or a minimum of € 1.2 m investment For at least 12 months EU co or if non EU to be taxed at tax rate at least equal to 10.5% 0% if participation exemption applies i.e 5% minimum shareholding in the subsidiary held as participation not as an investment Royalty income5.85%5 %

19. D Comparison of Luxembourg and Dutch Tax Rates . . Luxembourg companyDutch company Capital gains tax in the case of disposal of participation O% if participation exemption applies i.e 10% minimum shareholding or a minimum of € 6 m investment For at least 12 months EU co or if non EU to be taxed at tax rate at least equal to 10.5% 0% if participation exemption applies i.e 5% minimum shareholding in the subsidiary, held as participation not as an investment Profit from the trading in securities 28.8%20-25% Thin capitalisation rules15:85 equity /debt1:3 equity /debt Withholding tax on dividends other than EU or Treaty countries 15%

20. D Comparison of Luxembourg and Dutch Tax Rates . . Luxembourg companyDutch company Tax loss carried forwardindefinite9 years EU dividend, interest and royalty directives Yes Extensive network of DTT6490 DTT with Russia : WHT on dividend 5%*/15% *10% participation And € 80000 investment 5%*/15% *25% participation And € 75000 investment WHT on royalty and interest 0% Exchange of informationYes Limitation of treaty benefits Will not apply provided substansive business in one of the states

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