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NETHERLANDS
NETHERLANDS
BILATERAL TRADE
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DECEMBER 2013
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Country focus Interview
Τrade with the Netherlands
Αparna Shivpuri Arya got talking to Robert de Leeuw, Consul General, Kingdom of the Netherlands in Dubai, to get his opinion on the bilateral relation between the UAE and the Netherlands.
Please give us a brief background on the trade relations between the UAE and the Netherlands.
The relationship between the Netherlands and the UAE is excellent. With roots established in the 1970s, we have been present throughout the formative years of the UAE. The Dutch being known as a trading nation, it’s not surprising that activity with the UAE has always been characterised by this occupation. The UAE is the Netherlands’ number one GCC export partner.
How have the trade relations evolved over the decades and what are the main products traded?
Along with the trade relations both countries are also pushing to strengthen their diplomatic ties as well. Government-to-government contacts have been growing in recent years. It’s a mature relationship between partners. The UAE mainly imports machinery, chemicals, and agro food from the Netherlands and the UAE on its part exports mineral fuels, manufactures of various range and chemicals to the Netherlands.
For GCC companies keen on investing in the Netherlands, what advice would you like to give them and which sectors and areas would you highlight? Set up an introductory meeting with the Netherlands Foreign Investment Agency in Dubai, to discuss opportunities and prepare a visit to the Netherlands. The NFIA, a department at the Consulate General can help with preparations and suggest meetings and useful contacts. The Netherlands is a trading hub for all sectors, but particularly the petrochemical, oil and gas and logistics sectors are interesting for GCC companies. 42
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Robert de Leeuw, Consul General, Kingdom of the Netherlands in Dubai
Are there any issues that foreign companies need to be aware of when they decide to set shop in the Netherlands? The Netherlands is one of the easiest countries in Europe to do business, with a very friendly business climate, but the legal and tax systems are different than in the GCC, so it is a good idea to prepare thoroughly with the free-of-charge information of the NFIA.
How many Dutch nationals live in the UAE and what are the kind of companies from the Netherlands in the UAE?
Currently an estimated 5000 Dutch nationals live in the UAE who have moved to the UAE mainly to explore business opportunities. The Dutch are known for their high human capital and their natural trading sense that has brought them all over the world. The entrepreneurial nature of the Dutch indeed matches the UAE environment in that sense. It’s difficult to speak of key Dutch industries in the UAE, knowing that Dutch industries are covering
such a broad spectrum of activity. Within this wide variety of industries, we are known to fulfil niche specialisations and technology. In the UAE, we are known for water and waste management, renewable energy, dredging, financial services, hospitality services, agriculture and oil & gas. Van Oord dredging company, for instance, was recently awarded the Jumana Island project just off Jumeirah beach in Dubai, reconfirming our excellence in this field. Those are however not exclusive fields for Dutch operations in the UAE. In April 2013 Shell won a large tender to develop Bab Sour Gas, the second sour gas project in Abu Dhabi. Another example of a larger presence in the UAE is Vopak Fujairah, with its leading storage and handling services for petroleum products. Our famous multinationals, such as Shell, Unilever, Boskalis, Friesland Campina, ABN AMRO, ING, Akzo Nobel and Philips just to mention a few are represented in the UAE and even have established their regional head office in this country. In addition to that, one can see Dutch presence in engineering consulting, construction, the legal field, finance, hospitality, and design.
How do you see the bilateral economic relation evolving in the coming years?
I foresee that the coming years will bring an increasing number of opportunities for Dutch companies. During the visit of Minister Kamp this November, our Minister of Economic Affairs, interesting discussions have been held and bilateral cooperation will be further developed based on MoUs and agreements that are signed with the Ministry of Energy, ADNOC and others. With the Netherlands being a major hub in Europe, and Dubai being the same in the Middle East, there will be a lot of synergies in the coming years.
Country focus Doing business
Why invest in
Holland?
The Netherlands Foreign Investment Agency, gives us more than enough reasons to convince us about investing in Holland.
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he Netherlands provides a strategic location to serve markets within Europe, the Middle East and Africa. The central geographical position of the Netherlands, combined with accessibility and excellent infrastructure, are only some of the reasons why numerous European, American and Asian companies have established their facilities in the Netherlands. • A competitive fiscal climate The Dutch tax system has a number of features 44
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that may be very beneficial in international tax planning. These include a corporate income tax rate of 20% on the first EUR 200,000 and 25% for taxable profits exceeding EUR 200,000. In addition, the Dutch ruling practice provides clarity and certainty in advance on future tax positions. Furthermore, in respect of R&D, companies can benefit from the innovation box resulting in an effective corporate tax rate of only 5%, an R&D allowance (WBSO) taking the form of wage tax and social security contribution deductions, as well as a tax
deduction facility for R&D costs (RDA). Dutch tax law also provides the participation exemption, which states that all benefits related to a qualifying shareholding are exempt from Dutch corporate income tax, as well as the fiscal unity regime, designed to freely offset profits and losses among group members. There are also advantages in debt and loss structuring, and a wide tax treaty network, resulting in reduction of withholding taxes on dividends, interests and royalties.
Netherlands Foreign Investment Agency (NFIA) The NFIA (Netherlands Foreign Investment Agency) is an operational unit of the Ministry of Economic Affairs. The NFIA helps and advises foreign companies on the establishment, rolling out and/or expansion of their international activities in the Netherlands. Visit our regional NFIA website for the latest news on business and investment opportunities in the Netherlands (all NFIA website addresses can be found on www.nfia.nl).
for both cargo and passenger transport. The Netherlands is also classified as one of the most ‘wired’ countries in the world; a dynamic force in electronic commerce, communications and outsourcing. More than a decade of investment in high-speed internet, cable and digital communication systems, as well as the rapid adoption of state-of-the-art computer and cell phone technology, has created an ideal base for companies seeking to take advantage of modern technology.
most multilingual in the world, enabling them to successfully operate in companies across any industry, serving customers throughout the continent. What’s more, Dutch law offers employers a range of contract possibilities to flexibly procure employees.
• An international business environment The Netherlands, is an obvious choice to locate a pan-European operation - whether it’s a European headquarters, a shared services centre, a customer care centre, a distribution and logistics operation, or an R&D facility. The country’s pro-business environment creates a gateway to Europe that helps international companies succeed throughout the continent. An international outlook and openness to foreign investment is firmly ingrained in the Dutch culture, and this has yielded a wealth of world-class business partners who know how to deal with global business challenges in today’s economy.
Your chemical portal to Europe The chemical industry in the Netherlands, a priority sector of the Dutch government, is strongly focused on sustainability. The chemical industry has therefore agreed on a long-term strategy aimed at increasing productivity, doubling both turnover as well as CO2 reductions and reducing the environmental footprint. Goal is to be known as the Green Chemistry Country and to be ranked among the top three producers of high-tech materials worldwide by 2050. The competitiveness of the Dutch chemical industry lies in its internal and inter-company integration. Chemical companies purchase from – and supply to – one another. They work together on innovation and production, and take advantage of regional clustering. As a whole, the clusters are more competitive than the individual companies put together.
• A conducive innovation environment Holland’s open innovation approach and well organised public-private partnerships offer a favourable environment for companies looking for business acceleration. Together with a mind-set of creativity, collaboration and reliability - and a top scientific sector Holland is able to guarantee the most important drivers in ‘innovation location’ choices for foreign investors.
Courtesy of Amsterdam Toerisme & Congres Bureau (ATCB)
Finally, there is the 30% ruling, which is a tax-free reimbursement of 30% of the employee’s salary, provided that the employee has been recruited or assigned from abroad and has specific expertise scarce in the Dutch labour market.
• A superior logistics and technology infrastructure The Port of Rotterdam is Europe’s largest and most important seaport, while Schiphol Airport is ranked as Europe’s best airport
• A solid workforce The Netherlands features one of the most highly educated, flexible and motivated workforces in Europe. Dutch professionals are also among the
• An attractive quality of life The Netherlands is proud to have a high standard of living, whilst maintaining an affordable life for its residents. The costs of living, housing, education and cultural activities are lower than in most WesternEuropean countries. Furthermore, all sorts of cultural and leisure activities are open to both Dutch citizens and visitors alike. Whether it’s spending a leisurely afternoon on the beach, enjoying culinary delights or going to one of the cities’ acclaimed theatres or opera houses, the new expatriate is soon made to feel that the Netherlands is a most welcoming and entertaining country.
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Country focus Doing business
issues certificates for gas-flow calibrations at Bergum, Westerbork and the recently opened location EuroLoop, Rotterdam. NMi certificates and test reports are accepted worldwide.
Courtesy of Courtesy of Dow
Because of its integrated nature, Holland now hosts 19 of the world’s top 25 leading chemical companies, as well as a number of world-class R&D institutes for fundamental and applied research.
Sustainable Energy The Netherlands has embraced a courageous vision: by 2050, the country will have a sustainable, reliable and affordable energy system. As part of this, the Dutch aim to cut CO2 emissions by half, and to generate some 40% of our electricity from sustainable sources such as wind at sea and biomass by that time. The Dutch have leading expertise in offshore wind energy, co-combustion of biomass in coal-fired power plants, methods to pre-treat biomass, the use of landfill gas, and the use of heat pumps combined with heat and cold storage. An electric car uses an electric motor for propulsion instead of the common internal combustion engine, which runs on gasoline. These battery-powered cars cause significantly less pollution. They have been developed in answer to growing climate change, rising gasoline prices and environmental awareness. Oil & Gas The Netherlands has established itself as a pivotal player in the European gas market. The country is not only a major natural gas producer and the source of advanced gas 46
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Courtesy of NL Agency
technology, it is also Europe’s leading gas broker. Fifty years of experience in organising public-private partnerships to manage the gas business turned the country into a European gas hub. The Dutch have unmatched capacity to cope with seasonal fluctuations in gas demand, providing North Western Europe with much needed flexibility. In addition, the Netherlands is establishing itself as a leader in green gas.
Large-scale distribution system for natural gas Billions of cubic metres pass annually through modern large-scale systems for the production, transport, and distribution of natural gas. Measurement results are the basis for costs and revenues. An incorrect measurement by one tenth of a percentage can make a difference of millions of Euros annually. Accuracy of results requires traceability to international standards. NMi, the Dutch independent metrology institute,
The Netherlands is a key logistics hub connecting global markets The Netherlands plays a key role in our globalised economy, by connecting producers and consumers worldwide. Our success is based on an alignment of cutting-edge infrastructure and world-class service providers, and our coastal location at the heart of Europe. Exemplary for our position are the Port of Rotterdam, Europe’s largest port by far and the world’s fourth-largest, and Amsterdam Airport Schiphol, a major European cargo and passenger hub. Both are supported by world class logistics service providers and an extensive network of road, rail, waterways and pipelines. This powerful combination has allowed us to become the Gateway to Europe, accounting for significant parts of European road and water transport. The Netherlands also makes extensive use of IT to deliver optimised supply chain solutions, for example in time critical areas like food and flowers. In addition, the country is making pioneering efforts in environmentally sustainable logistics and silent logistics. Amsterdam Airport Schiphol was Europe’s fourth largest airport in passenger numbers and third in cargo volumes in 2011, welcoming 51 million passengers and processing more than 1.5 million tonnes of cargo. A total of 103 airlines offer direct flights from Schiphol to 313 destinations all over the globe. It is also one of the two European home bases of Air France-KLM and the SkyTeam alliance. Schiphol is also renowned for its outstanding baggage handling system. Furthermore, the airport has won more than 176 national and international awards since 1980. Schiphol is home to a museum which is the first of its kind in the world and features exhibits that include paintings by old masters such as Vincent van Gogh and Rembrandt. It’s also the first airport in the world with a library and a park.
Country focus Legal
The Netherlands re-invented
For decades, the Netherlands has gained international fame as a favourable location for holding and financing activities. Jan Bart Schober, Partner–Tax, Head of Dubai office and Marieke Vreeburg, Senior Associate, Corporate Law, Loyens & Loeff, talk about the regulations and the potential that R&D activities offer.
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etherland’s participation exemption, which provides for a full exemption on qualifying dividend income and capital gains, the abolition of the thin-capitalisation rules as per 1st January 2013, its strong and flexible legal framework, its extensive network of bilateral investment treaties and double tax treaties, as well as its central geographical position has attracted business from all over the globe to set up shop in the Netherlands. What is perhaps less known, is the fact that the government of the Netherlands has put substantial effort into further stimulating the Dutch knowledge-
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based economy. In addition to some favorable regimes that have been in existence for a long time, over the past years the Dutch government introduced a number of additional incentives that add to the attractiveness of the Netherlands for innovative business activities. The key incentives are summarised below.
Innovation box The so-called innovation box is a facility granted to companies carrying out R&D activities. Pursuant to this regime, the corporate income tax liability on qualifying
ABOUT Jan Bart Schober is a member of the International Tax practice group. He advises multinational companies, financial institutions and funds on cross-border transactions into, or through, the Netherlands and Luxembourg. Jan Bart has extensive experience in structuring investments in E&P assets by oil and gas companies, as well as on acquisitions, joint ventures and corporate restructurings in the energy industry. Furthermore, he has a strong focus on financing transactions, such as securitisations and repackagings. Before heading the Dubai office, he worked in the Amsterdam and London offices of Loyens & Loeff.He can be contacted at jan.bart.schober@loyensloeff.com
up to 15%. The RDD is connected to a rebate that applies to the amount of wage tax due in respect of certain R&D-related wages. This wage tax rebate is discussed hereafter. income derived from certain intangible assets that are created or further developed by R&D is substantially reduced. In fact, the effective corporate income tax liability on qualifying income may be as low as 5%, instead of the ordinary tax rate of 25% (20% for the first EUR 200,000 of taxable profits). Tax losses resulting
R&D deduction In addition to the innovation box regime, the Dutch government introduced the so-called R&D deduction (“RDD”). The RDD is a facility to promote certain costs and investments that are attributable to R&D activities. This incentive comes on top of the other incentives that apply
Highly-skilled migrants inter alia are employees (not self-employed persons) whose income lies above a certain level and is in line with the prevailing market. For 2013, this minimum income is EUR 52,010 for those over the age of 30. For those under the age of 30, it is EUR 38,141. from qualifying innovation box assets/activities may however be offset against tax profits of the nine coming years against the statutory Dutch corporate income tax rate of 20%-25%.
to R&D activities. For 2014, the additional deduction has been set at 60% of the total amount of qualifying expenses. This may result in a net corporate income tax saving of
Wage tax rebate Companies that carry out qualifying R&D activities may be entitled to a rebate on wage tax payable in respect of wages related to the relevant R&D activities. This facility is generally referred to as the “WBSO”. Wage tax has to be withheld from the employee’s salary and remitted by the employer to the tax authorities. The employee can credit the wage tax withheld against his personal income tax liability. Under the WBSO, the employer’s obligation to remit the wage tax due is reduced, but the employee remains entitled to credit the full amount of wage tax. In this way, the company’s cost of labour relating to R&D activities is effectively reduced. For 2014, the rebate of wage tax may amount to 35% on the first EUR 250,000 of qualifying wages, and to 14% for qualifying wages in excess of EUR 250,000. Start-up entrepreneurs can deduct no less than 50% from the wage costs in the first bracket. Self-employed entrepreneurs who spend at least 500 hours of their time on qualifying R&D activities in a calendar year DECEMBER 2013
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Country focus Legal
can benefit from a fixed rebate from their personal income tax basis of EUR 12,310. 2013 self-employed entrepreneurs with employees can come into consideration for both the deduction of wage tax paid on the employees’ wages and the rebate from their personal income tax. For the year 2014, the maximum amount of the rebate per company amounts to EUR 14 million. Highly-skilled migrants In order to attract foreign talented professionals with the skills required to carry out the innovative business activities, the Netherlands allows an expeditious and simple procedure for obtaining work and residence permits for so-called highly-skilled migrants. Highly-skilled migrants inter alia are employees (not self-employed persons) whose income lies above a certain level and is in line with the prevailing market. For 2013, this minimum income is EUR 52,010 for those
ABOUT Marieke Vreeburg is a member of the Corporate practice group of Loyens & Loeff. She specialises in corporate law, including mergers and acquisitions, joint ventures, and corporate restructurings. Before joining the Dubai office, she practiced corporate law at a Dutch law firm in Rotterdam and London. She can be contacted at marieke.vreeburg@loyensloeff.com
30% Ruling Living abroad may attract some additional expenses. In order to compensate employees for this possible burden, the Dutch government introduced the so-called 30%-ruling. Under this regime, qualifying employees are entitled to receive 30% of their taxable employment income as a fixed, tax free allowance for extraterritorial expenses. As a result, only 70% of the employment income
Furthermore, if the 30% ruling applies, any income derived by the employee from work carried out, or wealth held, outside the Netherlands, is not taxable in the Netherlands (irrespective of such income being remitted to the Netherlands or not). over the age of 30. For those under the age of 30, it is EUR 38,141. The 2014 amounts have not been determined yet. Foreign nationals from outside the territory of the EU and EEA member states (including Switzerland), who wish to reside in the Netherlands for longer than three months need a residence permit. Highly-skilled migrants receive a five-year residence permit if they have an employment contract for an unlimited period of time. If they have an employment contract for a limited period of time, the residence permit is granted for such period, with a maximum of five years. A residence permit is also granted to married partners of a highly-skilled migrant (or to a non-married registered partner of at least 21 years, if they can prove a durable and exclusive relationship). 50
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is subject to Dutch income tax. In addition, the employee remains entitled to receive a tax free allowance from his employer to cover school fees for the employee’s children attending international primary or secondary schools. Furthermore, if the 30% ruling applies, any income derived by the employee from work carried out, or wealth held, outside the Netherlands, is not taxable in the Netherlands (irrespective of such income being remitted to the Netherlands or not). The 30%-ruling is generally valid for a maximum period of eight years. Flex BV Innovative businesses may require innovative legal frameworks. Last year, the Netherlands introduced an important
simplification and flexibility to the rules governing private limited liability companies. The new rules allow for more flexibility in respect of, inter alia, voting rights, decision making, profit distribution, transfer of shares, capital requirements and appointment/dismissal of managing and supervisory directors, in an effort to meet the needs of the present-day national and international practice. In summary, it could be said that the new regime is based on guidelines rather than mandatory rules, that it give parties more freedom to act, and that it aims to reduce administrative burdens. The new regime is generally referred to as the “Flex BV” regime. Hospitality is key The Dutch government realises that economic stability and favourable tax and legal regimes and incentives are not sufficient to make a business flourish. The Netherlands realises that hospitality of, and accessibility to, authorities are key to offering foreign innovative businesses a fertile place for growth. In order to create a successful international business environment, the Dutch government literally goes out of its way to welcome foreign investors. The Netherlands Foreign Investment Agency (NFIA), an operational unit of the Dutch Ministry of Economic Affairs, is present in many countries outside the Netherlands (including the Middle-East) to guide companies in setting up activities in the Netherlands. Together with the favourable tax regimes, the open and business-oriented approach of the authorities render the Netherlands the location of choice for R&D activities.