International Business Conference16 July 2009

J.P.A. Dresen

Tax efficient structures with the Netherlands

Contents

NL – introduction

NL – examples of structures

NL - introduction

NL– Tax rates Corporate income tax (CIT) rate: 25.5%

Dividend withholding tax (DWT) rate: 15%

No capital tax

No withholding tax on interest

No withholding tax on royalties & fees

Proposal Ministry of Finance: Group Interest Box - effective 5% tax rate on interest from related parties as from 2010

Why NL

Use of NL tax treaties

* almost all EU and all OECD Member States

* many former USSR countries: Russia, Armenia, Azerbaijan, Estonia, Georgia, Kazakhstan, Latvia, Lithuania, Moldavia, Tadzhikistan, Turkmenistan & Ukraine

* treaties with many Asian, African, Latin and Arab countries

Use of NL Bilateral Investment Treaties (asset protection)

Example: Russian – Dutch tax treaty

Withholding taxes:subsidiary dividends 5%portfolio dividends 15%interest 0%royalties 0%

Capital gains on shares:taxation only in state of selling shareholder

Why NL

Access to EU Directives

Dutch participation exemption / finance / royalty structures

NL for tax beneficial exit

NL - Common used vehicles Dutch BV (limited liability company):

company with capital divided into sharesminimum capital EUR 18,000tax treaty protection/EU Directives

Dutch Cooperative (Coop)commercial associationno minimum capitaltax treaty protection/EU Directives

Dutch Closed CV (Limited Partnership)partnership – no legal person (yet)tax transparentno tax treaty protection/EU Directives

NL - Participation exemption

Full exemption on dividends and capital gains from qualifying subsidiary

Participation exemption may also apply (under certain circumstances) on: Profit rights; Hybrid debt

Requirements:1. at least 5% in company with capital

divided into shares or membership of Coop; and

2. subsidiary not qualifying as low-taxed passive investment subsidiary (LTPS)

NL - Participation exemption

RequirementsAd (2): LTPS:

assets (directly and indirectly) >50% of free passive investments on an aggregate basis; and

subsidiary tax burden < 10% based on Dutch standards; and

subsidiary is not real property subsidiary (the subsidiary owns on a consolidated basis ≥ 90% real estate)

proposal Ministry of Finance: new rules that are less strict for the LPTS - effective as of 2010

NL –intragroup interest

Currently, interest from related parties could be tax free if hybrid instruments and/or entities are used

Proposal from Ministry of Finance: - Group Interest Box- 5% effective tax rate - bill expected after summer holidays, new regime in force per 2010

NL - Taxation non-resident

Non-Dutch resident having an interest in BV/Coop subject to Dutch (C)IT on income from/gains realised on sale of BV/Coop if:

interest in BV/Coop should be allocated to Dutch permanent establishment; or

non-Dutch resident has a substantial interest in BV/Coop:- interest in BV/Coop of at least 5%; and- interest in BV/Coop is not part of the business enterprise of owner

In practice this non-resident taxation very seldom applies to companies

NL - Dividend withholding tax

Dividend distributions by BV subject to 15% dividend withholding tax (unless treaty or EU Directive)

Distributions by Coop not subject to dividend withholding tax

Distributions by VBI and transparent entities not subject to dividend withholding tax

No withholding tax on interest (save certain profit sharing), royalties and fees

NL – examples of structures

NL - Holding company - general

Dutch Participation exemption on dividends and gains from subsidiaries

Often Dutch tax treaties protect against taxation on dividends and gains in country of residence of subsidiary

Generally no Dutch taxation on dividends and gains for foreign parent

Foreign parent

Foreign/NL subs

Coop / BV

5% - 100%

Asset protection structure

Dutch Antilles NV

Russian subsidiary

Dutch Coop / BV

Dutch Antilles Trust (SPF)

Beneficiaries (Russia)

Dutch STAK (optional)

Asset protection structure II

Dutch Coop/BVprotected under Dutch-Russian BIT against expropriation in Russia

Dutch STAK (STichting AdministratieKantoor) legal control over Dutch Coop / BV without economic ownershipcan be used to give certain control rights to trusted persons

Dutch Antilles Trust (Stichting Particulier Fonds – SPF)beneficiaries have no assets that can be seized as such

NL has to report a taxable remuneration Via Dutch tax treaty network source withholding

tax can be reduced/eliminated Interest is tax deductible at the level of OpCo No withholding tax on payment from NL to FinCo,

even if FinCo is resident in a tax haven

Interest payment

Interest payment

No / reduced WHT under DTT

OpCo NL FinCo

No WHT under NL domestic tax law

NL- Use of treaties: financing

Your Houthoff Buruma contacts

Jean Paul Antoine DresenTax lawyer

T: + 31 (0)20 605 6988

M: + 31 (0)6 43 550 853

E: j.dresen@houthoff.com