The Netherlands company as a tax planning tool

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

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

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

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

5. Summary ofDutchTaxRates

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

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

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

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

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

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

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

13. DOUBLE TAX TREATY WITH UKRAINE

14. DOUBLE TAX TREATY WITH RUSSIA

15. Organigram Russiancompany dividends Oneor more BO’s Cyprus Ltd. interests loans Dutch B.V. In any country Subsidiaries

16. Example loan Loan from Russian Comp. to subsidiaries Russian company Russian company I N T R E S T Witholding tax: 0% I N T R E S T Dutch B.V. Witholding tax: 35% I N T R E S T Witholding tax: 0% Subsidiaries Subsidiaries

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

18. Comparison of Luxembourg and DutchTaxRates

19. Comparison of Luxembourg and DutchTaxRates • .

20. Comparison of Luxembourg and DutchTaxRates • .

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