The-Netherlands-Your-Business-Hub-for-European-Success+2012kpmg.unlocked

The Netherlands: Your Business Hub for European Success kpmg.com/nl/investmentinthenetherlands

January 2012

The Netherlands has a strong, internationally focused economy and business community and an attractive location on the seaboard of Western Europe. Historically, many multinational companies from all continents have used the Netherlands as their European business hub. Today, many industrial groups and service companies with headquarters in Amsterdam, Rotterdam or elsewhere in the Netherlands benefit from having access to Europe’s high income markets. Thanks to vigorous support from the Dutch government, the Netherlands also continues to be a prime location for the EU market entry of goods and products and for regional or global business hub functions ranging from sales, distribution and logistics to holding company, financing and intellectual property activities. Furthermore, the Dutch government’s strong commitment to facilitating R&D activities has resulted in several tax incentives. This brochure describes the features and opportunities of the Netherlands as a European business hub. It highlights the incentives available in the Netherlands to help multinational companies achieve their business objectives, the different modes of EU market entry the Netherlands has to offer, as well as the related services provided by KPMG. The Netherlands - Business climate and quality of life Business climate • European Commission (2010): NL is #1 most competitive country in Europe • EIU Global Business Environment Ranking (2008-2012): NL is #8 worldwide • WEF Global Competitiveness Report 2011-2012: NL is #7 worldwide • Newsweek (2010): The world’s best countries: NL is #8 • UNDP Human Development Index (2010): NL is #6 (out of 182) • EIU e-readiness rankings (2009): NL is #3 worldwide • World Bank (2010): NL is #3 worldwide in efficiency of customs and border procedures • Bribe Payers Index - Transparency International: Dutch companies least likely to bribe abroad Quality of life • HSBC Expat Explorer survey 2008: Netherlands worldwide #1 in longevity for expats • IMD 2010: Netherlands #4 quality of life in EU

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The Netherlands - General tax information Tax rates (2012) Corporate income tax Rate Taxable profit 20% ≤ € 200,000 25% > € 200,000 0% For qualifying dividend income 5% For qualifying innovation income

VAT Rate 0% (e.g. ships) 6% (e.g. food) 19% (general)

Personal income tax Rate Taxable income 1,95% € 0 - € 18,945 10,80% € 18,945 - € 33,863 42% € 33,863 - € 56,491 52% > € 56,491

Attractiveness of the Netherlands for headquarters functions • Geographical position of the Netherlands – gateway to Europe; • Favourable tax rules, with competitive corporate income tax, easily available advance tax rulings from the Dutch Tax and Customs Administration, no capital or stamp duties, no withholding taxes on interest and royalty payments and no or low dividend withholding taxes; • European Union membership; • Excellent infrastructure (seaports, airports) and logistics services;

• Excellent telecommunications; • Successful key industries (e.g., financial services, oil & gas, life sciences/food, financial services, creative industries, biotechnology, logistics, chemicals, information technology); • Stable and comprehensive financial services industry; • Internationally focused and open business environment; • A highly educated, multilingual workforce; • Political stability; • Attractive living conditions.

Entry mode 1: Import into and export from the Netherlands Features and opportunities

KPMG services

The Dutch authorities have been familiar with cross-border trade for centuries. The Netherlands offers excellent facilities to import/export goods into or out of Europe. As a gateway into Europe, it is therefore for many multinational companies an efficient hub in their supply chain strategy.

KPMG Tax services: • Customs and excise services • VAT services, offering supply chain optimisation including acting as fiscal representative for VAT purposes

The Netherlands offers a favourable tax and customs climate conducive to international trade and investment. For instance, when importing goods into the Netherlands, a customs duty deferral may apply, providing a significant cash flow advantage to companies. The Netherlands is also an attractive country for exporting your products from a customs bonded warehouse. In most cases, customs regimes are combined with simplified procedures reducing handling time and costs. Minor to complex handling and processing of goods is allowed and no VAT or customs duties are due if the goods are exported outside the EU.

KPMG Advisory services: • Supply chain strategy • Supporting the implementation of an efficient supply chain (e.g., warehouses, supply chain partner search) • Procurement services • IT strategy

The main tax and customs opportunities • Customs duty deferral by using economic customs regimes such as bonded warehousing, inward processing relief, temporary importation or processing under customs control • No customs duty in case of re-export outside the EU • VAT deferral upon import into NL (with fiscal representative, no cash out) • VAT shifted to NL customer • 0% VAT in case of re-export to EU or US • Easy and quick VAT refund procedure upon import Position of the Netherlands in the world Export of goods

#5

Import of services

#9

Import of goods

#7

Outward foreign direct investment

#5

Export of services

#9

Inward foreign direct investment

#8

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Entry mode 2: Sales & marketing from the Netherlands Features and opportunities

KPMG services

The Netherlands offers a favourable tax climate for further development of activities in the Netherlands relating to sales & marketing, bringing your company closer to your EU customers.

KPMG Tax services: • Corporate income tax • Transfer pricing and TESCM (Tax Efficient Supply Chain Management) • Personal income tax • Payroll tax and social security • People services • VAT services • Estate planning services

The Netherlands offers a unique and efficient system of corporate income tax rulings. You can request a so-called Advance Pricing Agreement (APA), whereby the Dutch tax authorities can confirm/agree the taxable profit of the company based on the company’s activities, functions and risks, as well as any intangibles. This APA will provide advance certainty on the company’s future corporate income tax position. Corporate income tax: If you have a sales & marketing company in the Netherlands whose operations are limited to providing supporting services, a low tax base may apply. The tax base may be determined using the cost-plus method (a percentage of operating costs), but is generally determined on the basis of turnover. The taxable profit is then computed as a percentage of the net turnover of the company, which may also lead to a low effective tax burden. Personal income tax: For expatriates, an employer can pay qualifying employees a tax-free allowance of up to 30% of their total remuneration (including the allowance itself). Non-Dutch employees of a Dutch company may qualify for this tax relief, which is referred to as the ‘30% ruling’. The incentive applies to employees with specific expertise coming from abroad to work in the Netherlands and is viewed as compensation for the extra costs involved in living abroad.

KPMG Advisory Services: • Location advisory • Supply chain support KPMG Audit services: • Assurance services • Inter-office reporting • Statutory auditing • Establishment of a Dutch company • Salary accounting • Accounting/reporting • Preparation of consolidation • Preparation of financial statements

The main tax opportunities: • Corporate income tax: low taxable base (cost-plus method or % of turnover) • Corporate income tax: tax rulings available from the Dutch tax authorities, providing certainty in advance • Tax efficient supply chain structuring • Personal income tax: 30% rulings available for employees • Inheritance and gift tax: substantial exemption for business assets

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Entry mode 3: Logistics and distribution from the Netherlands Features and opportunities

KPMG services

The Dutch government is fully committed to maintaining the Netherlands’ position as a worldwide transport hub. Consequently, the Dutch tax system allows you to set up logistics and distribution activities in a tax efficient way.

KPMG Tax services: • Corporate income tax • Transfer pricing and TESCM (Tax Efficient Supply Chain Management) • Personal income tax • Payroll tax and social security • People services • VAT services • Estate planning services

As mentioned under entry mode 2, the APA practice of the Dutch tax authorities will provide advance certainty about the company’s future income tax position. The main tax opportunities • Corporate income tax: favourable corporate income tax profit computation, based on activities, functions and risks • Corporate income tax: tax rulings available from the Dutch tax authorities, providing certainty in advance • Tax efficient supply chain structuring

KPMG Advisory services: • Supply chain optimisation (= value delivering framework) • In- and outbound logistics • Location advisory KPMG Audit services: • Assurance services • Inter-office reporting • Statutory auditing • Establishment of a Dutch company • Salary accounting • Accounting/reporting • Preparation of consolidation • Preparation of financial statements

European distribution centres per country

Infrastructure

51%

The Netherlands

Ports

18%

Belgium

11%

Germany

Airports Schiphol Amsterdam: Europe’s third largest (“Best Airport in W. Europe”)

Rotterdam: third largest in the world

8%

UK

Highways NL: second highest density in Europe

8%

France

4%

Other

Internet Amsterdam: world’s number one internet hub

Brendan Howard / Shutterstock.com

Source: HIDC

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Entry mode 4: Holding / finance / treasury in the Netherlands Features and opportunities

KPMG services

The Netherlands has a well-developed infrastructure to assist companies with the KPMG Tax services: set-up of an efficient corporate and financing structure. It has a pro-business • Corporate income tax government and a strong financial sector. • Transfer pricing and TESCM (Tax Efficient Supply Chain Management) The reason why it is so attractive to set up Dutch holding companies and • Personal income tax finance companies is the combination of: • Payroll tax and social security - the extensive tax treaty network which often ensures reductions of withholding • People services taxes on dividends and interest payments, • VAT services - low taxation of treasury and equivalent operations if they are essentially support • Estate planning services services with only limited risks, - the wide scope of the Dutch participation exemption, and KPMG Advisory services: - no or low withholding taxes on dividends and interest from and to the • Finance function design Netherlands (conditions apply), leading to tax efficient repatriation of profits to • Cost optimisation and the ultimate shareholder. procurement As a result of this tax situation, a Dutch company is usually a tax efficient financial hub through which a multinational group can manage its subsidiaries and allocate funds (debt or equity) across the globe. The main tax opportunities • Corporate income tax: advance tax rulings available • 0% corporate income tax (effective rate) on dividend income from qualifying subsidiaries • Extensive tax treaty network resulting in no or low withholding tax on dividend and/or interest payments to and from the Netherlands • Optimisation of VAT position for holding and finance companies

KPMG Audit Services: • Assurance services • Inter-office reporting • Statutory auditing • Conversion from/to to Dutch GAAP /IFRS/Dutch GAAP • Holding & finance audit • Establishment of a Dutch company • Salary accounting • Accounting/reporting • Preparation of consolidation • Preparation of financial statements

Entry mode 5: EU regional headquarters Features and opportunities

KPMG services

Many multinational groups have benefited from combining a number of (aforementioned) functions in a single or several Dutch companies.

KPMG Tax services: • Corporate income tax • Transfer pricing and TESCM (Tax Efficient Supply Chain Management) • Personal income tax • Payroll tax and social security • People services • VAT services • Estate planning services

If your company starts up a multi-function Dutch entity, numerous tax incentives may apply, depending on the detailed business functions of the company. Incentives are available for corporate income tax, personal income tax, and VAT and/or withholding tax areas. The main tax opportunities Corporate income tax: • 25% in general; • 0% on qualifying dividends; • 5% on qualifying innovation income; • Tax efficient supply chain structuring.

KPMG Advisory services: • Headquarters governance structure

Withholding taxes: • No or low withholding taxes on dividends, interest and royalties from and to the Netherlands (conditions apply). Personal income tax: • 30% rulings • Inheritance and gift tax: substantial exemption for business assets

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KPMG Audit services: • Assurance services • Inter-office reporting • Statutory auditing • Conversion from/to Dutch GAAP/ IFRS/US GAAP • Establishment of a Dutch company • Salary accounting • Accounting/reporting • Preparation of consolidation • Preparation of financial statements

Entry mode 6: Intellectual property and research and development Features and opportunities

KPMG services

The Netherlands has a long history of promoting the development of know-how and over the course of many years of experience this has resulted in a number of tax incentives for research and development and innovation:

KPMG Tax services: • Corporate income tax • Transfer pricing and TESCM (Tax Efficient Supply Chain Management) • Personal income tax • Payroll tax and social security • People services • VAT services • Estate planning services

Firstly, a 5% effective corporate income tax rate is available for income from qualifying know-how (e.g. royalty income). For corporate income tax, immediate tax deductions (no capitalisation required) are available for R&D costs incurred in producing intangible property.

Furthermore, an additional R&D corporate income tax deduction is available, offering a 40% tax deduction for qualifying R&D expenses and capital expenditure. Payroll expenses for R&D personnel on qualifying R&D projects are subsidised KPMG Advisory services: with a tax credit of up to 60% against the payroll tax obligations of the employer. • MC sourcing The main tax opportunities • Corporate income tax: 5% effective corporate income tax rate for innovation income available for companies with successful R&D, i.e. having self-developed know-how (patented and non-patented) and advance tax rulings available • Corporate income tax: R&D expenses immediately deductible and a further 40% deduction for R&D expenses and capital expenditure available • Payroll tax: tax credits available for R&D personnel

KPMG Audit services: • Assurance services • Inter-office reporting • Statutory auditing • Conversion from/to Dutch GAAP/ IFRS/US GAAP • IP/royalty audits • Establishment of a Dutch company • Salary accounting • Accounting/reporting • Preparation of consolidation • Preparation of financial statements

Innovation Number of patents in force 1 United States 2 Germany 3 The Netherlands 4 Japan

Knowledge Economy Index, World Bank 2010: Netherlands ranked worldwide 4th Times Higher Education Ranking 2011-2012: Netherlands ranked 3rd worldwide (after US, UK)

5 France 6 UK 7 Switzerland 8 Italy 9 Sweden 10 Belgium Source: The Netherlands Patent Office

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Integrated approach If your company is considering starting up activities in Europe, you may well be able to realise significant tax savings by having these activities carried out in or via the Netherlands. An integrated advisory approach will ensure that your company fully benefits from the opportunities and will minimise the time and cost involved in doing so. KPMG’s international network is ideally placed to assist you in evaluating the Netherlands as a holding company location for your business. In addition, we can assist you in deciding on the best way to invest in activities involving imports into and exports out of the Netherlands, and in dealing with the Dutch tax authorities. In doing so, we put into the practice the motto of our firm:

“Cutting through complexity” Please feel free to get in touch with your contact at KPMG and/or KPMG Meijburg & Co. kpmg.com/nl/investmentinthenetherlands

Contact us

Elbert Waller Head of High Growth Markets Practice

KPMG N.V. Laan van Langerhuize 1, 1186 DS Amstelveen P.O. Box 74500, 1070 DB Amsterdam, The Netherlands Phone +31 (0)20 656 7009 Mobile +31 (0)6 5120 6176 E-mail: waller.elbert@kpmg.nl

Vinod Kalloe Director Strategic & Public Affairs KPMG Meijburg & Co. Laan van Langerhuize 9, 1186 DS Amstelveen P.O. Box 74600, 1070 DE Amsterdam, The Netherlands Phone +31 (0)20 656 1657 Mobile +31 (0)6 5045 8566 E-mail: kalloe.vinod@kpmg.nl

kpmg.com/nl/investmentinthenetherlands

The information contained in this brochure is of a general nature and does not address the specific circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2012 KPMG Accountants N.V., registered with the trade register in the Netherlands under number 33263683, 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. 010_0112 © 2012 KPMG Meijburg & Co, Tax Lawyers, is an association of limited liability companies under Dutch law, registered under Chamber of Commerce registration number 53753348 and is a member of KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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