On the 7th of June last year, the Dutch government informed the cabinet about the fact, that the Russian government has officially agreed to the termination of the double taxation treaty between the Netherlands and Russia. Therefore, as of January 1, 2022, there is no longer a double taxation treaty between the Netherlands and Russia. The main reason for this to happen, is based in failed negotiations in 2021 regarding a possible new tax treaty between the countries. One of the main problems was the Russian desire to prevent capital flight by increasing the tax rate.
What was the goal of the negotiations?
The Netherlands and Russia wanted to explore, whether they could become aligned with both views. The Russians wanted to prevent capital flight, by increasing the withholding tax on dividends and interest to 15%. Only some minor exceptions would apply, such as direct subsidiaries of listed companies and certain types of financing arrangements. Capital flight is basically the outflow of capital and financial assets on a large scale from a nation. This can have various causes, like currency devaluation, the imposition of capital controls or simply economic instability within a certain nation. This is also happening in Turkey, for example.
The Dutch, however, refused this Russian proposal. This is mainly due to the fact, that access to the tax treaty would be blocked for a lot of entrepreneurs. Russia then proposed to extend the exception to private companies, provided that the ultimate beneficial owners of these companies are also Dutch tax residents. This would mean, that everyone owning a Dutch BV would be able to benefit from the double taxation treaty. However, this would still block access to the tax treaty in many situations that the Netherlands does not consider treaty abuse. Foreign entrepreneurs would not be able to benefit from the treaty, for example. Since a large chunk of Dutch private limited companies are established by foreign entrepreneurs.
The taxation of real estate companies is also a point of discussion. The termination of the tax treaty between the Netherlands and Russia could have very negative consequences for investors and trade between the two countries. A prominent example is the full exemption from dividend tax as provided for in Dutch national law. This will lapse, resulting in a 15% levy on dividend payments by Dutch taxpayers to Russian shareholders. On the other hand, Russia may levy higher taxes on dividends, royalties and interest payments. These are not deductible from Dutch taxes. The entire scenario puts a lot of business owners in unsteady waters, especially companies that deal with Russian companies.
The denunciation process
The whole process until denunciation actually took several years. In December 2020, the Russian Ministry of Finance announced the denunciation. The first practical step was taken in April 2021, when a draft bill of the denunciation was submitted to the State Duma. After this bill went through multiple stages of consideration and correction, it was completed at the end of May 2021. The bill was then also filed. In June 2021, the Netherlands received the formal notice and also responded to it. Any tax treaty can be withdrawn unilaterally, no later than six months before the end of any calendar year, by a written notification. Thus, there is no longer a tax treaty in place between the Netherlands and Russia per 1 January 2022.
Reaction of the Dutch government to these changes
Once the Dutch Secretary of Finance received the formal notice regarding the denunciation, he responded with the message that it is still preferable to look for a common solution. The negotiations about this tax treaty have been going on since 2014. There was actually an agreement reached in January 2020 between Russia and the Netherlands. However, Russia independently initiated certain procedures, aimed at amending tax treaties with several other countries as well. These include, but are not limited to Switzerland, Singapore, Malta, Luxembourg, Hong Kong and Cyprus. The Russian proposal is mostly aimed at increasing the withholding tax rate from 5% to 15%. As stated above, this only includes a few exceptions. These countries are also labelled as the Russian WHT protocol jurisdictions.
Once Russia initiated these changes, the former agreement was no longer valid, as Russia offered the Netherlands the exact same, as offered to the other countries. One of the main problems with this protocol, is the fact that it would always apply, even in the case of treaty abuse. The original treaty contained a 5% withholding rate, but with the Russian protocol this would increase to 15%. Such an increase can affect the business community very deeply, hence the apprehension by the Dutch government to comply to the Russian wishes. All company owners in the Netherlands would feel the consequences, and this is simply a risk that is too severe to take. The Netherlands tried to counter the Russian proposal with its own proposals, such as allowing non-listed Dutch businesses to use the lower rate, as well as new anti-abuse measures. But Russia rejected these proposals.
What are the consequences of this denunciation?
The Netherlands is considered a significant investor into Russia. Next to that, Russia is a very important trading partner of the Dutch. The denunciation will definitely have certain consequences, especially for companies that actively do business with the Netherlands. By far, the most significant consequence is the higher tax rate. Per 1 January 2022, all dividend payments from Russia to the Netherlands will be subject to 15% withholding tax, which was a rate of 5% before. For the taxation of interest and royalties, the increase is even more staggering: this goes from 0% to 20%. There is also the problem regarding the offsetting of these high rates with the Dutch income tax, as this might no longer be possible. This means some companies will have to deal with double taxation.
In some cases, double taxation can still be avoided after the denunciation. From 1 January 2022, it will be possible to invoke the Double Taxation Decree 2001 (Besluit voorkoming dubbele belasting 2001) under certain circumstances. This is a unilateral Dutch plan which prevents that taxpayers residing or established in the Netherlands are taxed twice on the same income, namely in the Netherlands and in another country. This only goes for a number of specific situations and also under certain conditions. For example, a Dutch business owner with a permanent establishment in Russia is entitled to an exemption. A Dutch employee, who performs work abroad and is paid for this, is also entitled to an exemption. Furthermore, all companies that are subject to corporate income tax are able to continuously apply the participation- and holding exemption.
In addition, the exemption for foreign corporate profits (under the participation exemption and object exemption) to prevent double taxation continues to apply to Dutch companies. The main consequence of the new situation, is that Russia will be able to levy (higher) withholding taxes on outgoing dividend, interest and royalty payments. These withholding taxes are no longer eligible for settlement in a treaty-free situation. Without a double taxation treaty, all payments of involved companies payments will be subject to taxation in both the Netherlands and Russia, which in effect means there might be a possibility of double taxation. This means that some businesses might get into financial trouble, without taking appropriate actions.
What does this mean for your company?
If you currently own a company in the Netherlands, the absence of the double taxation treaty might have consequences for your business. Especially if you do business with Russia. We advise you to look into the financial part with an expert on the subject, such as Intercompany Solutions. We can help you assess your situation and see, if there are any solutions to possible problems. You could make various changes in order to avoid double taxation. For example, you could look for different business partners in other countries, that still have a double taxation treaty in place between them and the Netherlands. If you import or export products from and to Russia, you could see whether you can find new distributors or clients.
If your business is very heavily tied to Russia, we can look together whether your business might fall under one of the exemptions mentioned in the Double Taxation Decree 2001 (Besluit voorkoming dubbele belasting 2001). As mentioned before; if you also have a permanent establishment in Russia, chances are you won’t have to pay double taxes. The Netherlands remains discussing this issue with Russia, and the Dutch State Secretary for Finance hopes to find a solution later this year. So it’s still not written in stone yet, although we strongly advise you to stay flexible and alert. If there is anything Intercompany Solutions can help you with, feel free to contact us with any questions you might have. We will gladly assist you with any changes your company has to initiate.
During the past decade, there has been an emphasis on eliminating tax avoidance by multinational corporations in the Netherlands. Due to the many benefits the country provides in terms of tax reduction opportunities, it became a tax haven for enormous oversees multinationals that abuse these rules for one single purpose: tax avoidance. Since every company in the Netherlands is bound to the countries’ tax rules, it became necessary for the Dutch government to take appropriate steps to halt this problem once and for all. Due to current incentives, this is internationally supported as well by the G7.
Direct incentives to counter tax avoidance
The current Dutch Cabinet clearly showed their support of the plan to introduce a minimum global tax rate of 15% in the G7, which includes Canada, Germany, France, Italy, Japan, the United Kingdom and the United States. This initiative is mainly proposed to discourage tax evasion worldwide, since it will eliminate differences between countries. If a global tax rate would be put in place, there would be no more need to funnel funds anywhere since there would not be any special tax benefits to profit from.
An incentive like this would force multinational tech giants like Google, Facebook and Apple to actually pay the taxes in the countries that facilitated the revenue. This list also includes the four biggest tobacco brands in the world. Until now, these multinationals found a way to omit paying taxes by funneling their profits via multiple countries. This new approach would establish a transparent order of business that actively battles tax avoidance.
Other benefits from this strategy
This approach would not only produce measures against tax avoidance, but it will also severely limit countries competing with each other to attract more multinationals to their location. This, in itself, creates so-called tax havens because countries outbid each other in terms of tax rates. The agreement has been signed by all finance ministers of the collaborating G7 countries. The State Secretary of Finance in the Netherlands clearly stated that the Dutch fully support this agreement, since it will allow for better regulations against tax evasion.
The agreement will be implemented as soon as possible in the entire European Union, as far as the leaders the Netherlands are concerned. All G7 countries already have a 15% corporate tax rate, but there are some countries in the EU that offer a lower rate. This enables somewhat unhealthy competition, which is detrimental to the overall worldwide economy. This is one of the primary reasons that the Netherlands is taking action, as the country has been deprived of billions of euros in taxes that should have been paid due to current tax regulations. As long as multinationals use certain countries as funnels to direct their money elsewhere, honest transactions will continue to be just a myth.
Need help with tax declarations?
The Netherlands provides an excellent and stable fiscal and economic climate for any ambitious entrepreneur, but it is advisable to follow the law when it comes to paying taxes. If you would like professional advice or accounting services for your Dutch company, feel free to contact our professional team anytime. We can also assist you with the entire process of company registration in the Netherlands, should you be interested in a branch office or company establishment here.
Starting a company oversees can involve many important choices, such as choosing the most profitable location and country for establishment. The Netherlands has been holding top positions in many economic and financial listings, due to the stable nature of the Dutch economy. In this article we will outline some interesting facts about the economy in the Netherlands, trending topics and current developments. This will provide you with enough information to seriously consider the Netherlands to branch out your business, or establish an entirely new business.
The current Dutch economic situation in a nutshell
The Netherlands is the sixth-largest economic power in the eurozone and the fifth-largest exporter of goods. The Netherlands, as a trade and export nation, is very open and therefore vulnerable to fluctuations in the global economy. In recent years, the recovery in the European Union (EU) has enabled the Dutch economy to grow dynamically. However, the uncertainty of world trade, the Brexit process and, above all, the spread of the COVID-19 pandemic led to a decline in the Dutch economy. In addition, exports and imports decreased by 3.9% and 5.3% respectively in 2020 compared to the previous year.
Political developments in the Netherlands in 2021
This year, acting PM Mark Rutte won the election with his center-right 'Party for Freedom and Democracy'. It is his fourth consecutive election victory (2010, 2012, 2017, 2021). He has even gained a little more with 22% of the vote compared to 2017 and has a clear lead with 34 seats in the 150-seat parliament. The big surprise of the latest elections is Sigrid Kaag of the left-liberal Democrats 66 and currently acting Minister for Foreign Trade and EZA. It became the second-strongest political force with 14.9% of the vote and 24 seats.
In the past, the formation of a government in the Netherlands took an average of three months. In 2017, it took as much as 7 months. This time, all parties, especially the VVD, want a quick result in terms of the pandemic. Until a new government is appointed, Rutte will continue to do business with his current government. This means that no new trade agreements or restrictions currently apply, enabling foreign investors and company owners to steadily do business with the Netherlands.
Many interesting opportunities for foreign companies
Many foreign companies which have generally successfully gained a foothold in different countries through a healthy product and quality policy, also find opportunities in the Netherlands. There Is a wide plethora of sectors to do business in, such as the organic products sector in particular, which shows very good absorption potential. E-commerce and online businesses are also rapidly gaining in popularity, this is partly due to the effects of Covid as well. Many small entrepreneurs are selling unique goods online, which makes the Netherlands a perfect country to invest in if you have original or handmade products to sell.
Focus sectors within the Netherlands
There are many sectors within the Netherlands that offer potential for foreign entrepreneurs. These can vary from agriculture, technology to the food and beverage industry and clean energy. The Dutch always try to be at the forefront of innovation, providing efficient solutions for interdisciplinary problems. We will outline a few sectors that are particularly popular right now and, thus, provide a stable basis for investment.
Furniture and interior design
The Dutch furniture industry is located in the middle and upper price segment, where the market demands quality and luxury. About 150,000 people are employed in the furniture industry. The furniture industry in the Netherlands had 9,656 stores in 2017. The housing sector generated 7% of sales in the retail sector in 2017, with sales of EUR 7.9 billion. The housing industry faces major challenges in the coming years. House and apartment prices in 2018 (excluding new buildings) have risen by an average of 8.9% compared to 2017. In the future, consumers expect a business to be more accessible, meaning the opportunities will continue to extend to digital communication. If you have a talent within this sector, the Netherlands offers ample opportunities in the form of both small projects and large corporations.
The food and soft drinks industry
The Netherlands is one of the world's largest producers of cheese, dairy, meat, charcuterie, fruit and other consumer goods. The majority of the smaller supermarket companies have merged into the shopping cooperative Superunie, which is part of EMD. Supermarket chain Albert Heijn (Ahold) has the largest market share of 35.4%, followed by Superunie (29.1%). Sales of Dutch supermarkets amounted to 35.5 billion euros in 2017. The Dutch consumer is currently increasingly interested in business models in which a shop simultaneously functions as a supermarket, snack bar, traiteur and an electronics or clothing store. The boundaries between LEH, hospitality and lifestyle are rapidly blurring. This makes it an excellent possibility for foreign companies to profit from this interdisciplinary approach.
In the field of renewable energy the Netherlands amounts to almost 6% of the total usage nationwide. Although the use of solar energy has increased significantly since 2011, it still accounts for less than 5% of renewable energy sources(1). This has motivated the Dutch to invest in renewable energy solutions. EU Directive 2009/28/EC set a binding target of 20% share of renewable energy in energy consumption by 2020; in the case of fuels, the share of renewable energy sources should be 10%. These measures are expected to increase the share of renewable sources by 27% by 2030(2). Energy is one of the top nine sectors formulated by the Government to play a leading role internationally. The Netherlands is leading the way in the field of electro-mobility.
If you would like to become involved in the renewable and clean energy sector, the Netherlands can offer you all the tools and knowledge you need. Even though the Netherlands has a lot of catching up to do regarding renewable energy, there is an ample amount of funds being invested in new solutions and inventions. This creates opportunities for foreign companies in areas such as energy saving for new buildings, decentralized energy generation such as wind energy, smart grids and also infrastructure projects, innovative soil remediation and waste processing techniques and flood protection. The Netherlands also offers environmental subsidies for certain green technologies and investments.
Want to invest in the Dutch economy?
Next to these sectors, the Netherlands also provides opportunities in many other areas. If you are thinking about setting up a company in the Netherlands, Intercompany Solutions can assist you during the entire process. If you are not a citizen of an EU member state, we can also help you with the applications for necessary permits. Feel free to contact us for professional advice or a quote.
Nature, and especially sustaining nature, is increasingly becoming a hot topic within our entire society. Due to the exponentially large growth of the amount of world citizens, new problems have arisen that continually need the government’s attention. One of these problems is the high current CO2 emission, which is mainly caused by the bio-industry, automobiles and other factors that contribute to a lower oxygen level. The earth is blessed with trees in order to transform CO2 to breathable oxygen, but with a simultaneous cutting of trees and polluting the quality of the air, extra measures have to be taken to achieve a sustainable situation.
New guidelines for businesses and consumers
The Dutch government has announced measures in the past to further reduce CO2 emissions in the Netherlands. The Netherlands will have to reduce CO2 emissions by 25% in 2020, compared to the year 1990. This is the result of a judgment of the District Court of The Hague in the Urgenda case, which became irrevocable. The measures taken by the Dutch parliament also contribute to the reduction of nitrogen emissions in the Netherlands. In implementing the package of measures, the government also takes into account the impact of the Covid-19 crisis on CO2 emissions. A scenario study by the Dutch Environmental Agency (PBL) shows that the Corona virus could have a significant impact on emissions in 2020, whilst the longer-term impact is likely to be limited. As a view of this uncertainty, measures for the coal sector will be re-examined on the basis of the new emission figures.
With the help of an emissions cap, the government will limit the CO2 emissions of modern coal-fired power plants. In addition, the government is taking measures for consumers. A further 150 million euros will be made available for the program to reduce energy consumption, which will enable consumers to be compensated. Some examples include LED lamps or sustainable heating systems. In addition to homeowners, tenants and SMEs can also make use of this program.
Housing associations will also receive a discount on the landlord's levy if they invest in a more sustainable design of their homes. The conversion of plants and the additional reductions in nitrous oxide emissions may also be accelerated in order to implement the Urgenda ruling. Much of the cost of the package of measures is paid for with funds from the SDE incentive program. The level of investment will depend on the final measures. The government therefore expects an economic upturn in several sectors.
Innovative ideas to further reduce CO2 emission
Green and sustainable energy is very high on the Dutch agenda. Hence, many start-ups from foreign countries invest in this sector as it is constantly evolving. Further goals of the Dutch government include switching to entirely CO2 neutral resources by 2025, and put a halt to natural gas production and consumption. Currently, more than 90% of Dutch households are heated with gas and many large (production) companies too. Reducing the amount of natural gas use will substantially lower CO2 emission. The Netherlands government has formulated a new policy in the Energy Agreement and Energy Report.
Next to switching to greener solutions, the Dutch also want to completely reduce greenhouse gases before 2030. This will imply a need for inventive ideas and new ways of thinking, which in turn also offers possibilities for entrepreneurs in the clean energy sector. If you always wanted to contribute to society in a profitable way, this might be a perfect chance to do exactly that.
Intercompany Solutions can set up your company in just a few business days
If you would like to explore your options in this dynamic market, our experts are always ready to assist you. We can take care of the entire process of business registration, as well as accountancy services and market exploration. If you would like to receive more information about our goods and services, feel free to contact us anytime for advice and/or a clear quote.
The Netherlands has implemented quite a few priorities from the government’s fiscal agenda, which are combined into the 2021 Tax Plan. This includes several legislative taxation proposals, as well as the main Netherlands’ 2021 Budget. The measures are aimed at the reduction of taxation of employment income, to actively combat tax avoidance, to support a more clean and green economy and also to generally improve the Dutch investment climate for foreign entrepreneurs.
Next to the 2021 Budget, some other proposals went into effect last year. This concerns the EU Mandatory Disclosure Directive (DAC6) and the Anti-Tax Avoidance Directive 2 (ATAD2). Both the 2021 Budget and ATAD2 were implemented on the 1st of January 2021, whilst DAC6 was implemented on the 1st of July last year. Please keep in mind that DAC6 also has a retroactive effect from the 25th of June 2018. This might have implications for your already existing business in the Netherlands. If you would like to know more about this, you can always contact Intercompany Solutions for in-depth information and advice. All these taxation proposals and measures have a financial impact on foreign multinationals that own or have a subsidiary, branch office or royalty company in the Netherlands.
More information about DAC6
DAC6 is a ECOFIN Council Directive, which will amend Directive 2011/16/EU regarding administrative cooperation. This entails a mandatory and automatic exchange or information, about reportable cross-border arrangements which will enable the disclosure of potentially aggressive tax arrangements. Thus, this directive will impose an obligation to report certain cross-border arrangements with the main benefit to obtain a substantial tax advantage, by intermediaries such as tax advisers and lawyers. Other goals that are often aimed at with cross-border arrangements are satisfying hallmarks or meeting other specific hallmarks, other than obtaining a tax advantage.
DAC6 has already been implemented in 2021. If a company has made a first step towards a cross-border arrangement between the 25th of June 2018 and the 1st of July 2020, this should have been reported to the Dutch Tax Authorities before the 31st of August 2020. After that date, every attempt or first step of implementation of a cross-border arrangement needs to be reported to said authorities within 30 days.
More information about ATAD2
The implementation of ATAD2 was proposed to the Dutch Parliament in July 2019. This tax avoidance directive restores so-called hybrid mismatches, which exist due to usage of hybrid financial entities and instruments. This results in confusion, as some payments might be deductible in one jurisdiction, whilst the income that corresponds with the payment might not be taxable in another jurisdiction. This falls under Deduction/No Income - D/NI. There is also a possibility of payments being tax deductible in multiple jurisdictions, this is called Double Deduction - DD.
These new rules will go into effect for reverse hybrid entities on the 1st of January 2022. The directive will introduce a documentation obligation, which will be aimed at all corporate taxpayers. It doesn’t matter whether and/or why the hybrid mismatch provisions apply or not. If any taxpayer fails to meet this documentation obligation, this corporate taxpayer will need to prove that the hybrid mismatch provisions do not apply.
Proposals that have been adopted the 1st of January 2021
Amendment of dividend withholding tax and anti-abuse rules regarding statutory corporate income tax (CIT)
The Dutch 2021 Budget is partly implemented due to the fact, that the former anti-abuse rules were not considered completely in line with EU law and regulations. Therefore, the 2021 Budget proposed to amend these rules regarding topics such as dividend withholding tax and CIT purposes. This also relates to the Dutch exemption on dividend withholding tax which are made to any corporate shareholder resident that resides within the EU, in a double tax treaty country or the European Economic Area (EEA).
The only way this exemption does not apply, is when the subjective and objective test are not met. Previously, the objective test was already met when the corporate shareholder would meet the Dutch substance requirements. The objective test basically proves that there is no artificial structure. With the new proposal containing the anti-abuse rules, meeting these so-called substance requirements will no longer provide a loophole.
This provides room for two separate possibilities. When the structure is proved to be artificial, the Dutch Tax Authorities can challenge this structure and, thus, deny the dividend withholding tax exemption. The other option is not meeting the substance requirements. In this case, the company owner needs to prove that the structure is not artificial and will then fall under the dividend withholding tax exemption.
You also need to take into account the controlled foreign corporation rules (CPC), meaning that a subsidiary does not necessarily qualify as a CFC when the substance requirements apply to this subsidiary. Additionally, if a foreign taxpayer meets the substance requirements under the objective test, the foreign taxpayer rules do not apply either and it cannot be seen as a safe harbor. This is applicable for foreign shareholders who derive income like capital gains from a shareholding, that is larger than 5% in a Dutch company.
So this essentially means, that the Dutch Tax Authorities can challenge the structure from foreign taxpayers when the structure proves to be artificial and thus, can levy income taxes. This is possible even if the substance requirements are met. Alternatively, the foreign taxpayer can also prove that the structure is not artificial, even when the substance requirements are not met, which will result in no levying of income tax over income from the substantial interest.
Reduction of the CIT Rate
The current CIT rates in the Netherlands are 15% and 25%. The 25% rate is applicable to profits exceeding 245.000 euros per annum, whereas all profits below that amount are taxed by using the low 15% rate. In 2022 the maximum amount will be increased to 395.000 euros, meaning you will only have to pay 15% corporate income tax until you reach this amount. This provides for a very competitive fiscal climate, which is why the Netherlands is so popular amongst foreign investors and multinationals. Furthermore, the reduction of the CIT rate provides a budget that will be used to reduce the tax rate of employment income as well.
Restrictions for banks and insurance companies
The 2021 Budget also contains a restriction for insurance companies and banks to deduct their interest payments, but only if the debt exceeds 92% of the total of the balance sheet. In effect, banks and insurance companies need to maintain a minimum equity level of 8%. If this is not the case, these companies will be affected by the new thin capitalization rules for banks and insurance companies. On the 31st of December of the preceding book year, all equity and leverage ratios are determined for the tax payer.
The leverage ratio for banks is determined by the EU Regulation 575/2013 on prudential requirements for credit institutions and investment firms. The EU Solvency II Directive serves as a basis for the equity ration to be determined for insurance companies. If a bank or insurance company has a physical seat in the Netherlands, these capitalization rules apply automatically. This is the same for foreign insurance companies and banks with a branch office or subsidiary in the Netherlands. If you would like advice on this subject, Intercompany Solutions can aid you.
The definition of a permanent establishment has been amended
The 2021 Tax Plan follows the ratification of the multilateral instrument (MLI) in 2021, by proposing to change the way a permanent establishment (PE) is defined for CIT purposes in the Netherlands. This also includes tax wage and personal income purposes, the main reason is alignment with certain choices the Dutch have made under the MLI. So if a double tax treaty applies, the new PA definition of the applicable tax treaty will apply. If there is no double tax treaty to apply in a certain case, the 2017 OECD Model Tax Convention PE definition always applies. If taxpayers artificially try to avoid having a PE, an exception might be made.
The Dutch tonnage tax has been amended
In order to comply with current EU state aid rules, the 2021 Tax Plan also aims to amend the current tonnage tax for travel and time charters, the flag requirement and also activities that exclude the carrying of persons or goods in international traffic. This includes three separate measures, namely a reduced tonnage tax for vessels that exceed 50.000 net tons, for ship management companies and also applying the tonnage tax regime to cable-laying vessels, research vessels, pipeline laying vessels and crane vessels.
Changes in Dutch personal income tax
The way Dutch citizens are being treated by the national tax authorities largely depends on the type of income they generate. In the yearly tax declaration, the income of any tax payer is sorted in three separate ‘boxes’:
- Box 1 is every type of income that is related to employment activities, trading and home ownership
- Box 2 entail income from a substantial interest in a company
- Box 3 applies to income derived from investment and savings
The previous statutory personal income tax rate of 51.75% has been reduced to 49.5%, this will apply to all income exceeding the amount of 68.507 euros. This concerns income derived from box 1; income, a house or trading. For an income which is 68.507 euros or less, a base rate of 37.10% applies since the 1st of January 2021. Consequently, the Dutch possibility of the deduction of the payment of mortgage interest is also reduced in steps. The rate was reduced to 46% in 2020, further to 43% in 2021, 40% in 2022 and 37,05% in 2023. The 2021 Budget already contained these changes.
Other changes include the increase of the statutory personal income tax rate of 25% to 26.9% in 2021, which entails the income from box 2; income from substantial (5% or more) interest in a company. The increase in this rate is directly linked to the decrease in the CIT for profits that Dutch companies make; meaning it levels it out. Amendments of taxation of box 3, savings and investments, have also been announced by the Dutch government. This should go into effect in 2022. Assets exceeding 30.000 euros are expected to be taxed at a deemed yield of 0.09%. Also, there shall be a deduction of a deemed interest rate of 3.03%. The statutory personal income tax rate will also be increased to 33%. All these amendments and new regulations will generally have a positive effect for tax payers that also own savings. For tax payers with other types of assets, such as a vacation home and other securities, these amendments might have a more negative effect. In particular, if these assets have been financed with debt.
Reduction of the wage tax
The Dutch ‘werkkostenregeling’ or WKR, which can be translated to the work-relaxed expenses provision, has also be amended. The previous budget for provision of work-relaxed costs and tax free reimbursements has been increased to 1.7%, from 1.2%. This concerns the total wage cost of any Dutch employer, up to 400.000 euros. If the total wage costs exceed the amount of 400.000 euros, the previous percentage of 1.2% will still apply. Certain products or services from a company of an employer will be valued at market value for this exact purpose.
Proposals that have been adopted the 1st of January 2021
An increase of the CIT rate for innovation box income & the abolition of the payment discount for provisional CIT assessments
The Dutch government increases the effective statutory corporate tax rate of 7% for innovation box income to 9% in 2021. The government also announced that the discount that is currently available to corporate tax payers, who pay income tax due on a provisional CIT assessment, will be abolished.
An increase of the real estate transfer tax
If someone wants to invest in non-residential property, they need to be mindful about the fact that the real estate transfer tax rate will be increased from 6% to 7% in 2021. This only applies to non-residential property, as the rate for residential real estate remains unchanged at 2%. Nonetheless, the Dutch government did announce that the real estate transfer tax rate for residential buildings might also be increased in the near future, when the property is rented to third parties, as this implies gaining income.
Amendments to the conditional withholding tax on royalty payments and interests
The 2021 Tax Plan includes a Withholding tax law, that proposes to introduce a conditional withholding tax on interest and royalty payments. These payments concern payments made by either a Dutch tax resident entity, or a non-Dutch resident entity with a Dutch PE, made to other so-called related parties that reside in a low-tax tax jurisdiction and/or in case of abuse. This withholding tax rate is expected to be 21.7% in 2021. The main reason for installing this conditional withholding tax, is to discourage the use of a Dutch subsidiary or resident entity as a funnel for both interests and royalty payments to jurisdictions with very low to 0 tax rates. In this case, a low tax jurisdiction means a jurisdiction with a statutory profit tax rate below 9%, and/or inclusion in the EU list of non-cooperative jurisdictions.
Any entity can be seen as related for this purpose, if:
- The paying entity has a qualifying interest in the recipient entity
- The recipient entity has a qualifying interest in the paying entity
- A third party has a qualifying interest in both the paying entity as well as the recipient entity
An interest that represents at least 50% of the statutory voting rights is considered a qualifying interest. It can also be called a direct or indirect controlling interest. Furthermore, take into account that corporate entities can be related as well. This happens, when they are acting as a cooperative group that holds a qualifying interest in a corporate entity, either directly, indirectly or jointly. In certain abusive situations, the conditional withholding tax will also apply. This entails situations such as via indirect payments to recipients in certain low-tax jurisdictions, mostly funneled through a so-called conduit entity.
New restrictions concerning liquidation loss and cessation loss deduction
The Dutch government decided to limit the deduction of liquidation and cessation losses per the 1st of January 2021. This is due to an earlier proposal with the intention to deduct liquidation losses regarding foreign participation, next to cessation losses on foreign PE’s. Such liquidation losses should only be tax deductible, if the corporate tax payer in the Netherlands holds a minimum interest of 25%, opposed to the current low 5%, in the foreign participation. This also accounts for any foreign participation being resident of either the EU or the EEA. The liquidation of a foreign participation is completed within three years following the discontinuation of the participation. The limitation of the deduction of both liquidation losses and cessation losses will be roughly the same. In both cases, the limitations do not apply to losses lower than 1 million euros, since these will remain tax deductible.
Advice for both foreign and international Dutch companies and investors
Since all these measures entail a lot of changes, both Dutch and foreign entrepreneurs should monitor these closely. If you run an international business in Holland, these changes might very well apply to you too. In any case, we have prepared a few points of advice if you are currently doing business in the Netherlands.
If you are considered as a foreign tax payer that invests in shareholdings in companies in the Netherlands, you should monitor whether your income and capital gains continue to be exempt from dividend withholding tax and capital gains tax, since the instalment of the amended CIT anti-abuse rules and dividend withholding tax purposes. This is due to the fact, that meeting the substance requirements is not longer considered as a safe harbor. Next to that, if you own a subsidiary or branch office of a foreign bank or insurance company in the Netherlands, you will need to find out whether the thin capitalization rules apply to your business. If this is the case, you might face a serious disadvantage compared to other similar institutions that are not affected by these rules within their home jurisdictions.
If you happen to own an international business that has set up structures with so-called hybrid entities or instruments solely to reduce your tax costs, then you will closely need to monitor these entities and also possibly amend them. This is necessary in order to work around tax inefficiencies, that might exist after the implementation of ATAD2. Furthermore, certain multinational corporations that provide funding to debt platforms like financing companies, need to assess and monitor whether possible royalty and interest payments made by these companies would become subject to the Dutch conditional withholding tax. If this is the case, these multinational companies need to restructure if they want to mitigate any tax inefficiencies that follow after the implementation of the Dutch conditional withholding tax.
Furthermore, both Dutch holding companies and foreign multinational holding companies with a Dutch subsidiary or branch offices that are relying on an unlimited deduction of liquidation losses on foreign participation, need to be watchful regarding the tax deduction of such losses. It would be wise to assess how this might possibly affect them adversely. Last but not least; all international businesses should find out whether they have any new reporting obligation under DAC6, regarding tax optimization schemes which were implemented or changed after the 25th of June 2018.
Intercompany Solutions can clear up all your fiscal difficulties
These changes imply a lot of new ways to work and structure your business. If you are in any way uncertain about how these fiscal regulations are going to influence your business in the Netherlands, please always feel free to contact our professional team. We can sort out any financial and fiscal problems you might encounter along the way, as well as provide you with advice withing the fields of company registration in the Netherlands, accountancy services for foreign multinationals and solid business advice.
With constant news spreading about global warming, rapidly thinning fossil fuel sources and oceans filled with plastic debris, it’s no wonder that there are more and more innovative entrepreneurs who want to contribute to a healthier and safer planet. If you are considering pitching your environment-friendly idea anywhere in the world, the Netherlands might be your best bet. The country is known for its innovative and unique solutions, using sustainable power sources and utilizing established methods to gain completely new goals. Next to that, many crossovers between sectors give room to an interdisciplinary approach that is unique in its kind. Read on for more interesting information about the clean energy and technology sectors in the Netherlands.
The clean technology sector in the Netherlands
During the past few years the clean technology industry in the Netherlands has grown exponentially. This is largely due to the massive demand for renewable and clean energy, in order to establish a halt to the usage of fossil duels and other exhaustible raw materials. There is also a notable rising trend in certain niches such as a circular and sharing economy, conscious consumption and green mobility.
The Netherlands is very densely populated in some regions like the Randstad, which covers the area with the four largest cities in the country. This calls for extra measures in order to lower the CO2 production rapidly, as the Dutch produce more CO2 than is allowed in the EU standard. Next to that, the country is also behind on the EU directed schedule of CO2 reduction. By initiating Smart City initiatives the Dutch hope to change this in a short amount of time, together with other incentives such as Utilities transformation, which pushed several tech innovations in order to clean the air as fast as possible. The Dutch government is actively seeking innovations and ideas to make this happen.
Extra information about clean technology
The Netherlands also has good positions, such as being the 2nd country in Europe with the highest amount of electric cars. The Dutch are now also experimenting with electric busses and logistic vehicles, in order to limit CO2 emission. Furthermore, the Dutch are avid buyers of electric bicycles, as driving a bicycle is deeply ingrained into Dutch society. A Finnish company named Solnet is also exploring possibilities to partner up with Holland, to transform used energy into renewable energy. If you happen to have interesting ideas on this subject, there is a large possibility you could contribute within the sector of clean technology.
Some interesting current trends in this sector
The Netherlands is working on a few hot topics within the clean technology industry, such as:
- E-transport and transport sharing as well as remote working, in order to reduce the amount of daily traffic and traffic density
- The re-usage of water and water management
- Advanced filtering methods for the cleansing of water
- Smart, clean and sustainable farming with a reduced amount of gas usage, since this will also substantially limit CO2 production
- Infrastructural changes such as electric vehicles, charging stations and led-lighting that will be installed on Dutch roads
- Interdisciplinary and crossover cooperation within Research and Development, with the ambition to become one of the most innovative forerunners within this field
- Energy and cold/heat storage for communal heating, since there are limited resources to use in the country
- Transformation of the gas-roundabout, which will be transformed into an energy hub by using ground-breaking knowledge about energy distribution
All these ideas also require stable financial solutions, to be able to provide clean tech adoption. This also entails the search for investors and entrepreneurs with ground-breaking knowledge, ideas and expertise. This also entails the transformation of current companies that heavily rely on industrial needs and resources, in order to create a more sustainable future. Since the government offers its full support in this case, the investments in clean technology have grown immensely in the Netherlands. This provides an ample amount of opportunities in the clean technology arena. Because the Dutch don’t just need investors; they are looking for knowledge in this area too. Thus, they are open to any kind of interesting collaboration within this sector.
Energy solutions in the Netherlands
Next to clean tech, green and sustainable energy has been very high on the Dutch government’s agenda. They have announced that the Netherlands want to transition from natural gas to only resources that are CO2 neutral by 2025. This is a decision that impacts almost every Dutch citizen, as a lot will need to be changed. More than 90% of all Dutch households are currently heated with natural gas, furthermore most companies also use gas in their production centers due to the low price of gas. The government has formulated this new policy in a new Energy Agreement and Energy Report. The main target is the swift and substantial reduction of CO2 emission.
If the impact of our current society on climate change is to be minimized, new solutions need to be found for long existing problems. Topics like CO2 reduction, energy neutral and climate neutral are now more important than ever before. Next to lowering the CO2 emission, the Dutch also want to reduce greenhouse gases to 0% by 2030. That is quite an ambitious goal, which requires collaboration and crossovers between sectors and nations to reach. The largest amount of energy consumption in the Netherlands is due to generating heat, which is about 45% of the total amount. The Netherlands has natural gas resources, but in the past decades there have been issues with tremors and sinkholes in the northern part of the country, which reduced the production of gas significantly. On top of that, the natural resources will be exhausted in the near future, making it necessary to look for alternatives rapidly.
Some interesting current trends in this sector
The main topics in the energy sector include:
- Renewable energy
- Solar energy
- Heat distribution
- Storable energy and heat
- Lowering the consumption of natural gas
The main reason for all these goals is sustainability. This started as a trend a few decades back, but now proves to be a necessary effort if we want to continue to live on this planet in a healthy way. It’s not just the Dutch government that is taking action; many corporations are taking the matter seriously and actively become involved in the process of improvement. These companies are also reliant on the generation of heat, so figuring out alternatives is in everyone’s best interest. Thus, thinking up ideas within the lines of environmental services and products is very welcome in the Netherlands. This has made the clean energy sector also a very profitable sector. Other subjects that the Dutch are currently working on include, amongst others:
- The transition from central to decentralized sources of energy. This means coal power plants and gas production will be shut down eventually
- Multiple renewable and decentralized energy sources are being researched, such as solar energy, wind, geothermal, biomass, energy storage and the tides
- The reduction of all CO2 emission by 40% in 2030, and by 80-95% in 2050. This underlines the need for CO2-low energy sources and technologies
- Some goals that are aimed specifically at the energy transition are renewable heat, energy savings, generation of clean electricity, biomass and the collection of CO2
- There is an ‘Energy Top Sector’ which has offered more than 130 million euros in investments and funding annually, especially for research, development and projects focused on energy innovation
- The Netherlands also works close with Finnish companies in fields such as renewable and clean energy
If you have innovative ideas in the clean tech or energy sector, or maybe both, then it might be a good idea for you to consider setting up a branch office in the Netherlands. There is a good chance that you can profit from diverse sources of funding, both governmental and private. Next to that, the Netherlands offers a very stable fiscal and economic climate, plus there is the added bonus of being an EU member state and having access to the European Single Market.
How can Intercompany Solutions assist you?
If you want to set up a company abroad and especially the Netherlands, you will need to go through an official procedure in order to get your company registered and up and running. Intercompany Solutions has many years of experience in the establishment of Dutch companies within every imaginable sector. We can also help you out with a wide array of other services, such as setting up a bank account, accountancy services and plenty of general information on running a business in the Netherlands. We have assisted companies in the clean tech and energy sector before, and can provide you with useful and practical information to support your entry in the Dutch market.
Due to Brexit a lot has changed for the UK. Many company owners are becoming restless, since trade with the European Union has become significantly more complicated when a company solely operates from the UK. This is the main reason that the amount of companies wanting to settle oversees keeps rising; and one of the most popular countries in this regard is the Netherlands. Companies and organizations want to keep serving their clients in the EU and thus, try to open new (branch) offices in countries they consider appropriate.
The Netherlands offers a stable and profitable business climate
The Netherlands has a wide plethora of assets available for entrepreneurs who decide to settle here, open a branch office or outsource services such as logistics or tax services. Holland has been an economically very stable country for decades, meaning there is little risk involved financially. There are plenty of other benefits when you decide to set up your company in Holland, such as a skilled and highly educated bilingual workforce, fantastic (IT) infrastructure and many business opportunities in various fields.
Why start a business in the Netherlands?
Since Brexit took effect, the UK can no longer profit from the free movement of goods and services in the EU. The UK did come to a trade agreement with the EU, though this is much more restricted than the previous situation. Especially transporters suffer from large amounts of paperwork and delays, which can be extremely detrimental to any international business. Companies from the UK now also have to deal with a staggering amount of 27 different VAT rules, which makes the process of invoicing a lot more complicated and time-consuming.
The newspaper the Guardian stated in a report, that all these issues have resulted in the UK Department of Commerce giving companies the advice to open branch offices in EU countries. This means that most companies will probably look for a country nearby, such as Ireland or the Netherlands. During 2019, already a total of 397 international companies opened new offices or branch offices in the Netherlands. 78 of these companies moved due to reasons related to Brexit. This amount grew significantly in 2020, as a spokesperson for the NFIA mentioned.
Right now, the NFIA is communicating with more than 500 businesses that want to expand or relocate to the Netherlands. Around half of this number are British companies, which is the triple amount of companies that moved in 2019. That’s a very large increase in such a short timeframe. Setting up a branch office in Holland makes it possible to continue your business activities the usual way, as opposed to being tied to enormous amounts of new rules and regulations.
Intercompany Solutions can help you every step of the way
With many years of experience regarding setting up foreign companies in the Netherlands, we can assist you during the entire process. From the registration of your company to acquiring a Dutch bank account and VAT number; we are here for all your company’s needs. If you would like to receive more information or a quote, feel free to contact us anytime.
Tax evasion is a worldwide problem, which makes it necessary for governments to actively monitor this problem and deal with it accordingly. In the Netherlands this has also been a hot topic during the past few years, which instigated some government reforms in order to impose stricter rules. However, since these government reforms do not seem to stretch far enough in reality, Dutch lawmakers have initiated an inquiry on how to make (large) multinationals and other tax avoiding companies pay their legally expected share of tax.
This happened just after some harsh public criticism regarding the reforms not being severe enough. Multiple multinationals pare their tax bills by using the Netherlands as a funnel, but the Dutch are not exactly amenable to minimizing company tax. The interesting fact is that minimizing company tax is legal and has been unchallenged for a long time, although this is starting to change. One of the main instigators is Royal Dutch Shell, who acknowledged that the company had paid almost no Dutch corporation tax in the year 2018.
The root of the problem
Shell refused to release any details regarding their choice in a hearing of a parliamentary panel on taxation. One of the main factors of anger is the fact, that every single Dutch citizen is expected to pay a rather large amount of income tax in relation to their wages. Even people who earn the minimum wage. Seen from this perspective, it’s absurd that a multibillion company would not pay taxes. After extensive research the government’s data shows, that there are assets parked within a very large amount of so-called letter box companies in the Netherlands. These assets have a cumulative value of more than 4 trillion euros. Many of these are exploited to funnel profits via the Netherlands to low-tax countries. And the Dutch government has had enough.
No more shady deal making
The Dutch government now wants to introduce new reforms, in order to break with this dark image of back-door deal-making. There is a certain shady quality about tax evasion, especially if the working class gets hit by the problem. Menno Snel, the Dutch official in charge of this issue, stated that companies that solely establish a business here to channel away capital to foreign countries are made very unwelcome in the near future.
Dutch lawmakers have stated that they feel the government still falls short in regulating tax avoidance, and want more details published when it comes to tax rulings such as the company name. According to a member of parliament, a lot of Dutch citizens feel duped, since they feel they paid for the financial crisis in a way. And due to the issue, citizens also have to pay higher taxes like VAT, whilst corporate taxes are lowered simultaneously. This obviously provides a stable basis for confusion and, in the worst case, corruption.
Intercompany Solutions assists you in all financial matters
Whether you want to establish a new company in the Netherlands, set up a branch office or just want to know more about tax regulations and laws; we are here to help you in any way we can. We can provide you with all necessary information in order to run a successful company legally, whilst making the most out of your business at the same time. We can also assist you with company accounting requirements.
Entrepreneurs are invaluable. They are the engine of the Dutch economy. We owe our jobs, prosperity and opportunities for development to a large extent to creative self-employed persons, innovative startups, proud family businesses, global companies and a large, varied and robust small and medium-sized company.
Space for entrepreneurs
Legislation and regulations are being modernized so that companies can better respond to social and technological changes with their services and products. Regulatory pressure and administrative burdens are limited, for example by expanding the current business effects test with an SME test.
The various inspections will cooperate better so that better enforcement is associated with fewer administrative and supervisory burdens. Appropriate rules and more space will be created for companies with social or societal goals while maintaining a level playing field. The possibilities for regional and sectoral pilot projects, legal experimental space, test locations (for example for drones) and rule-free zones will be increased. Minimum requirements and appropriate supervision apply.
In order to take advantage of regional opportunities, the national government seals 'deals' with decentralized authorities, in which the parties undertake to work together on new solutions.
In vocational education, professionals, technology and craft are given priority, revaluation and a new impulse. The Technology Pact and the Beta Technology Platform will be continued.
The cabinet invests 200 million euros a year in fundamental research. In addition, 200 million euros per year will become available for applied research. This includes an extra investment at large technological institutes that demonstrably meet market needs and public-private partnerships at universities and colleges with a focus on beta and technology.
Credit and banking sector
The cabinet is continuing the establishment of a Dutch financing and development institution, InvestNL, in accordance with the set-up that has already been started with three main objectives (see Parliamentary Paper 28165-nr266) and is making 2.5 billion euros available as equity.
Financial technological innovations (Fintech) contribute to innovation and competition in the financial sector. The entry of these innovative companies is simplified by introducing lighter banking and other licenses while ensuring sufficient protection of the customers.
Well-capitalized banks are crucial for lending. As soon as the stricter requirements of Basel IV come into force, the requirement for the leverage ratio is brought into line with European requirements.
A level playing field for entrepreneurs
An open economy is difficult to relate to the barriers that Dutch entrepreneurs too often encounter in other countries outside the European Union. This also applies to foreign companies that are (partly) state-owned or that benefit from state aid. The Netherlands wants to make agreements at European level and with third countries for a better balance.
To prevent improper and unwanted competition between governments and private parties, the general interest provision in the Market and Government Act is being tightened. For activities that are developed by governments and that are otherwise not or insufficiently offered by market parties, such as sports, culture, welfare and reintegration services, there remains a possibility to provide these by governments.
Additional franchise legislation will be introduced to strengthen the position of franchisees in the pre-competitive phase.
A competitive business climate
We want the Netherlands to be a country where it is attractive for companies to settle and from which Dutch companies can trade all over the world. The Netherlands benefits from this because these companies add employment, innovation and strength to our economy. Many people work at internationally operating companies and at companies that supply them. The Netherlands is an attractive country of residence for many internationally operating companies. Measures are needed to keep it that way in an increasingly globalizing world.
In September 2019, the government of the Netherland announced bad news for large companies in the form of 1.5 billion more tax.
Very large companies will have to pay more tax in the coming years. A number of advantageous schemes for large companies are being revised and an intended tax cut is not being made.
This is evident from the Tax Plan, which is part of the Budget Day documents. The biggest blow to large companies and the biggest blow to the tax authorities is reversing an intended reduction in profit tax.
Profit tax reduction will be reduced
The government planned to reduce the tax rate for corporate profits above 200,000 euros next year from 25 percent to 21.7%. The lower tax rate is set to decrease to 15% in 2021.
The ministry estimated that this change in policy will benefit large companies nearly 1.8 billion euros next year, on the other hand, this means less income for the treasury that was not previously expected.
In 2021, the higher rate of the corporate income tax will drop to 21.7 percent, but it was previously planned to drop to 20.5 percent. This smaller reduction means that from 2021 the Tax and Customs Administration will structurally receive 919 million euros more income from profit tax than previously estimated.
More setbacks: innovation tax and Groenlinks law
However, that is not the only setback for large companies. More setbacks are planned from 2021 onwards. Corporate profits achieved through new innovations are now taxed at 7 percent, that rate goes up to 9 percent. This is expected to generate 140 million euros more annually for the state.
And the cabinet is accepting a proposal from Groenlinks, whereby companies such as Shell can no longer deduct unrestrained foreign losses resulting from the closure of a subsidiary from the tax owed in the Netherlands. In 2021 this will generate additional income of 38 million euros for the state, but in time this will yield 265 million a year.
A disappointment for Multinationals: the loss of the VPB discount
And with that, the poisoned chalice for companies is not yet completely empty. The discount that multinational companies now receive if they pay their corporate tax in advance at once, after they have received a provisional assessment, will also disappear. As a result, companies are estimated to miss out on around 160 million euros a year in discounts.
As a result of these measures, the burden on business will increase structurally by almost 1.5 billion euros. That money is used to pay for part of the tax relief for citizens.
For the latest advice on taxation for multinational companies in the Netherlands, contact Intercompany Solutions whoo are on hand to answer any tax-related questions you might have.
A 'no deal' Brexit is looking more and more likely with both sides at a stalemate and the UK set to crash out of the EU on 31st January 2021. This means that an increasing number of businessmen are feeling anxious and uncertain and looking for new havens, and the Netherlands is especially popular, despite the recent measures introduced by the Dutch government to combat tax evasion by multinationals. And this number is predicted to become significantly larger as another 325 companies and organizations are actively considering moving to the Netherlands in the near future.
The increase is most clearly visible in the financial media, biotech and IT sectors. Companies in these sectors are mostly drawn to Holland due to the excellent employment market in combination with lenient financial opportunities and permits. It’s not just UK companies that decide to settle here: a large Japanese bank like Norinchukin and the American CBOE also made the same decision.
Not every company is ready to take action just yet
Many UK companies are still a tad hesitant because it is still very unclear how Brexit will take shape and what the exact effects will be on the business community. It might pose some risks for your company though if you do not consider at least one branch office in an EU country before an eventual hard Brexit goes into effect. This surely might have consequences, such as:
A substantial delay in all business activities due to obligatory border formalities and the necessary documentation you will need now. You will no longer be able to take part in the free EU market, this will make much more difficult to hire freelancers or buy and sell products from and to other countries in the EU.
You can pretty much count on establishing a backlog in your services very fast due to all the new requirements and paperwork. You are at risk losing clients from all over the EU, simply because it will be easier for them to find a competitor who is still based in the EU.
Intercompany Solutions can help you avoid such consequences
The list is much longer than this, as every single business will be subjected to certain extra disadvantages linked to a specific sector. If you want to avoid such consequences, it would be wise to consider opening a branch office in Holland. Intercompany Solutions can realize this for you in just a few business days, plus you won’t even need a physical location immediately as it is also possible to establish a subsidiary or branch office. Please feel free to contact us anytime with questions, we will try to assist you in every possible way we can.
Intercompany Solutions gets Brexit related requests on an almost daily basis currently and has assisted many companies to make the transition.
In 2019, the Council of the EU today adopted a new framework for the screening of foreign direct investment into the European Union, completing the legislative process on this proposal.
As a result, the new framework will enter into force in April 2020. The new framework, based on a Commission proposal presented by President Juncker in his 2017 State of the Union address, will contribute to protecting Europe's security, public order and strategic interests as it concerns foreign investment in the Union.
Commenting on the Council's decision, President Jean-Claude Juncker said: "The decision taken today demonstrates the EU's ability to act quickly when the strategic interests of our citizens and our economy are at stake. With the new framework for investment screening, we are now much better equipped to ensure that investments from non-EU countries actually serve our interests I have pledged to work for a Europe that protects both trade and other areas, with these we are fulfilling a crucial part of our promise with the new legislation. "
Cecilia Malmström, Commissioner for Trade, said that she was very pleased with the decision made by the Council as the EU benefits greatly from foreign investment, which plays a crucial role in the economy. However, there has recently been an increase in investment in strategic sectors, which has led to a healthy public debate on this topic. This new framework provides a much better position to oversee foreign investment and protect Dutch interests. She is now looking forward to working closely with the Member States for the effective implementation of this new legislation.
Within the new framework:
A cooperation mechanism will be set up to allow the Member States and the Commission to exchange information and raise concerns regarding specific investments;
The Commission will be able to deliver opinions if the security or public policy of more than one Member State is compromised by an investment or if an investment could affect a project or undermine a program of EU-wide importance, such as Horizon 2020 or Galileo;
International cooperation in investment screening will be encouraged, including through sharing experiences, best practices and information on common concerns;
certain requirements will be established for the Member States wishing to maintain or introduce a screening mechanism at the national level. Member States also still have the final say when the question arises whether or not to authorize a specific investment operation in their territory;
The need to work within short, business-friendly timeframes and with strict confidentiality requirements will be taken into account.
Following the approval by the Member States in the Council and the positive vote in the European Parliament on 14 February 2020, new EU legislation establishing an EU framework for investment screening will enter into force in the coming weeks, 20 days after its publication in the Official Journal. Member States and the Commission then have 18 months to make the necessary arrangements for the application of this new mechanism. Preparations are already underway, including the regular exchange of information and best practices with the Member States in the dedicated expert group established in 2017.
Currently, 14 Member States have national screening mechanisms in place. Although they may differ in their design and scope, they have the same objective of maintaining security and public order at a national level. The several Member States are reforming their screening mechanisms or adopting new ones.
The EU has one of the most open investment schemes in the world, as recognized by the OECD in its Investment Restrictivity Index. The EU is the world's leading foreign direct investment destination: at the end of 2017, foreign direct investment into the EU by investors from third countries amounted to EUR 6 295 billion.