Super Info Holland

Amsterdam
Doing Business in
the Netherlands
2008
Doing Business in
the Netherlands
This may qualify as “Attorney Advertising” requiring notice in some jurisdictions.

Prior results do not guarantee a similar outcome.
Editorial Contributions
Sylvia Arends Jean-Clement Meignen Marc Rijkaart van Cappellen

Jeroen Bedaux Maaike Muit Christiaan van der Meer
Misha lutje Beerenbroek Marie Louise Nuijen Judith van Gasteren
Mounia ben Abdallah John Paans Monique van Herksen
Robert Boekhorst Wouter Paardekooper Christiaan van Hogendorp
Koert Bruins Danielle Pinedo Ella van Kranenburg
Hélène de Bruijn-Jonker Laura Rietveld Geert-Jan van Rijthoven
Ruben de Wit Florian Ruijten Gooike van Slooten
Herman Huidink Remke Scheepstra Sebastiaan van Triest
Alim Jalloh Alexandra Schreuder Edwin van Wechem
Cees Kersten Jan Snel Wibren Veldhuizen
Eva Kraan Judith Steenvoorden Irene Vermeeren - Keijzers
Edwin Liem Fedor Tanke Reina Weening
Elwin Makkus Martijn van Bemmel Ricardo Wolf
Cover photo: © L.J.A.D. Creyghton / Holland Album _ Sint Maartensbrug / www.creyghton.com

Doing Business in the Netherlands
Table of Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .vii
Baker & McKenzie Amsterdam N.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .ix
I The Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1. The Country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Cities and Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. The Government. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. The Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5. Culture and the Arts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
II. International Distribution Centres / Customs Facilities . . . . . . . . .8
1. Customs value and applicable customs rate. . . . . . . . . . . . . . . . . . . 9
2. Customs Warehouses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3. Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4. Other International Customs Facilities. . . . . . . . . . . . . . . . . . . . . . . 11
5. Authorized Economic Operator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6. VAT and excises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
III. Regional Headquarters / Coordination Centers . . . . . . . . . . . . . .15
1. General Advantages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2. Tax Ruling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3. Holding of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4. Group Financing and Group Licensing. . . . . . . . . . . . . . . . . . . . . . . 18
IV. Sales Support, Distribution and Production . . . . . . . . . . . . . . . . .21
1. Liaison Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2. Sales Support. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3. Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
V. Legal forms of doing business . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
1. Branch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2. Subsidiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3. Societas Europaea (SE) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4. Branch v. Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5. Partnership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6. Formal Foreign Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7. Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8. Distributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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VI. The Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29

1. Incorporation of Dutch NV and BV . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2. Incorporation cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4. Transfer of shares and membership interest . . . . . . . . . . . . . . . . . 30
5. Shareholders’ register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6. Issuance of new shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7. Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8. Supervisory directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9. Large Companies Regime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10. Single-member companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
VII. Reporting, Auditing, and Publication Requirements . . . . . . . . . .34
1. Financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2. Director’s report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3. Accounting principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4. Other information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5. Language . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6. Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7. Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8. Exemption for group companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9. Consolidated accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10. Auditing requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11. Act on Formal Foreign Companies . . . . . . . . . . . . . . . . . . . . . . . . . . 39
VIII. Corporate Governance Code (Code Tabaksblat) . . . . . . . . . . . . . .40
1. Principles and Best Practice Provisions. . . . . . . . . . . . . . . . . . . . . . 40
2. Five Chapters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3. Compliance and Enforcement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4. Management Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5. Supervisory Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6. Shareholders and General Meeting of Shareholders . . . . . . . . . . . 44
7. Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8. Monitoring of the Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
IX. Personal Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
2. 2001 Personal Income Tax Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
3. Income from Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4. Income Tax Ruling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5. Levy of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6. Income Tax Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7. Substantial Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
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X. Corporate Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53

1. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
2. Branches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
3. Branch v. Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
4. Participation Exemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5. Capital Gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6. Limitations on Deductions of Interest . . . . . . . . . . . . . . . . . . . . . . . 64
7. Flow-Through Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
8. Dividend Stripping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
9. Tax Incentives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
10. Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
11. Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
12. Mergers and Demergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
13. Fiscal Unity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
14. Investment Companies (FBI). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
15. Exempt Investment Fund (VBI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
16. Transfer pricing regime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
17. European Economic Interest Grouping and Societas Europaea . . 79
18. EU Interest and Royalty Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
19. EU Savings Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
20. EU Parent-Subsidiary Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
21. EU Merger Directive. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
22. Summary of the Netherlands’ Bilateral Tax Treaties . . . . . . . . . . . 82
XI. Other Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .87
1. Value-added Tax (VAT) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
2. Real Estate Transfer Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
3. Withholding Tax Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
XII. Financial Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .92
1. Exchange Control Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
2. Capital/Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
3. Regulated financial activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
XIII. Visa, Residence Permit, and Work Permit
for Non-EU Nationals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .102
1. Visit to the Netherlands Not Exceeding . . . . . . . . . . . . . . . . . . . . . 102
2. Visit to the Netherlands Exceeding Three Months . . . . . . . . . . . . 102
3. Residence permit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
4. Work permit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
5. Knowledge Migrant Workers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
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XIV. Labor Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .105

1. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
2. Non-Competition Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
3. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
XV. Social Security and Pensions . . . . . . . . . . . . . . . . . . . . . . . . . . . .113
1. National Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
2. Employees’ Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
3. Sickness and Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
4. Dutch Pension System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
XVI. Competition Rules and Free Movement of Goods . . . . . . . . . . .124
1. Competition Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
2. Dutch Competition Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
3. Public Procurement Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
4. Import and Export: Free Movement of Goods . . . . . . . . . . . . . . . 134
5. The European Economic Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
6. Standardization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
XVII. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .136
1. Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
2. Copyright . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
3. Neighbouring Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
4. Protection of Databases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
5. Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
6. Designs and Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
7. Trade Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
8. IP Enforcement Directive 2004/48/EC . . . . . . . . . . . . . . . . . . . . . 142
9. Anti-counterfeit Measures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
10. Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
11. Advertising and freedom of expression . . . . . . . . . . . . . . . . . . . . . 145
12. Unfair Competition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
13. Trade Secrets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
14. Assignment, Licensing, and Pledge . . . . . . . . . . . . . . . . . . . . . . . . 147
15. Treaties and General European Legislation. . . . . . . . . . . . . . . . . . 147
XVIII.Telecommunications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .148
1. Market Situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
2. Basic Legislation and Regulatory Authorities . . . . . . . . . . . . . . . . 148
3. Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
4. Numbers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
5. Rights of Way . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
6. Significant Market Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
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7. Interoperability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
8. Universal Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
9. Privacy and Legal Interception . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
XIX. Information and Communication Technology (ICT) . . . . . . . . . .154
1. General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
2. Computer Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
3. Databases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
4. Topographies of Semiconductors. . . . . . . . . . . . . . . . . . . . . . . . . . 155
5. Technology Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
6. ICT Agreements and Standard Terms . . . . . . . . . . . . . . . . . . . . . . 156
7. Shrink-Wrap License Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 157
8. Source Code Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
9. The Internet and E-business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
10. Encryption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
11. Data Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
12. Computer Crime. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
13. Online Gambling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
14. Retention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160
XX. Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .161
1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
2. Pre-contractual liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
3. Contractual liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
4. Noncontractual Liability (Wrongful Act) . . . . . . . . . . . . . . . . . . . . . 163
5. Compensation of Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
XXI. Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .167
1. Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
2. Course of the Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
3. Summary Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
4. Prejudgment Attachment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
5. Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
6. Mediation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
7. International Enforcement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
8. European enforcement order for uncontested claims . . . . . . . . . 171
9. International payment orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
10. Collective action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
11. Class actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
12. Inspection or taking copies of certain identifiable documents
instead of full discovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
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XXII. Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .176

1. Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
2. Land Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
3. Other Rights and Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177
4. Construction and Renovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177
5. Environmental Permits and Soil Pollution . . . . . . . . . . . . . . . . . . . 178
6. Modernization of regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178
7. Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180
8. Public Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
Appendix I - Procedure for Incorporating a Dutch NV, a BV,
or a Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .190
Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190
Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190
Appendix II - Overview of Tax Rates Inbound Income Under
Dutch Tax Treaties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .192
Qualifying companies column . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195
Interest column . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195
Royalty column . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195
Appendix VI - Contact Information . . . . . . . . . . . . . . . . . . . . . . . . . . . .196
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Introduction
Doing Business in the Netherlands – Your Legal and Fiscal Guide 2008
‘Doing Business in The Netherlands’ is a highly popular guide published by
Baker & McKenzie Amsterdam. It describes the legal and fiscal environment of
the Netherlands and the rules and regulations that companies must consider when
doing business here.
The Netherlands is an attractive country in which to do business. It has a favorable
tax regime and has concluded more tax treaties with other countries around the
globe than any other country. It has an excellent logistics and technological
infrastructure, a highly skilled workforce and a stable economy. The Netherlands
is also famous for its culture and arts. Chapter one presents key facts and figures
on these subjects.
Baker & McKenzie has spent more than 50 years assisting international companies
looking for business opportunities in the Netherlands and advising Dutch and
international companies doing business here. Our firm has had a presence in the
Netherlands since 1945, and it was the first with a fully integrated civil law, tax
law and civil-law notary practice.
Our more than 180 attorneys, tax consultants and civil-law notaries in Amsterdam
all have the expertise and experience for a successful national and international
legal practice. They are sincere and intellectual professionals who understand and
serve clients with a shared set of values and high quality standards, providing
innovative solutions wherever our clients are and whatever their needs. Also,
participation in pro bono and community service is one of our core values,
which is clearly visible in various activities.
Baker & McKenzie Amsterdam sends its Doing Business guide to more than
a thousand clients and business associates, including chambers of commerce,
embassies, ministries and other governmental organizations.
We hope this guide is helpful to you and your organization. Please contact our
office if you have any questions or if you too would like help in doing business
in the Netherlands.
Mike Jansen
Managing Partner
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Baker & McKenzie Amsterdam N.V.
Baker & McKenzie Amsterdam is a leading Dutch law firm consisting of attorneys,
tax consultants and civil-law notaries, focusing on providing innovative legal services
to clients in the business community. The office was established in 1945 and joined
the Baker & McKenzie global network in 1957. We were the first law firm in the
Netherlands to join a multinational network and are now regarded as one of the country’s
leading providers of legal services. Baker & McKenzie provides high-quality advice
and legal services to a large number of the world’s most dynamic and successful
organizations.
Baker & McKenzie Amsterdam has more than 50 years of experience in international
and national legal practice and was the first firm in the Netherlands to set up a fully
integrated civil law, tax law and civil-law notary practice. With more than 180 attorneys,
tax consultants and civil-law notaries, Baker & McKenzie Amsterdam has the specialist
expertise and experience required for the successful national and international legal
practice we offer our clients. Our sincere and intellectual professionals understand
and serve clients with a shared set of values and high quality standards, providing
innovative solutions wherever our clients are and whatever their needs.
Participation in pro bono and community service is one of Baker & McKenzie’s
core values. In this respect we acknowledge the importance of cultural heritage
by sponsoring and providing legal services to the Rijksmuseum in Amsterdam.
We provide pro bono and community service including raising funds for the
Ronald McDonald Centre Only Friends, which stimulates the practice of sports
by handicapped children.
Baker & McKenzie is known for having a deep understanding of the language and
culture of business, an uncompromising commitment to excellence, and world-class
fluency in the way we think, work and behave.
ix
I. The Netherlands
The latest global business environment rankings published by the Economist
Intelligence Unit (EIU) put the Netherlands among the top five, making it one
of the best places in Europe to do business in from 2006 to 2010.
Why do companies prefer the Netherlands? One of the most important reasons
is its highly educated, flexible, and motivated workforce. Dutch professionals are
internationally oriented and are among the most multilingual in the world, enabling
them to operate successfully in companies in any industry, serving customers across
the globe. This is why more than 400 of the 500 largest companies in the world
have offices in the Netherlands.
Overview
Head of state Queen Beatrix
Head of government Prime Minister Jan Peter Balkenende
System of government Constitutional monarchy
National language Dutch
Currency Euro (€)
Total population 16,410,046
Capital city Amsterdam
Seat of government Den Haag
Total area 41,500 km²
Land 33,800 km²
Water 7,700 km²
Land below sea level 26%
The country’s central geographical position, combined with its accessibility and
excellent infrastructure and logistic services are other reasons why numerous
European, American, and a growing number of Asian companies have established
their European head offices in the Netherlands. Consider for example, the Port of
Rotterdam, one of the world’s largest seaports, and Schiphol Airport, recognized as
one of the major aviation hubs in Europe. As the gateway to Western and Eastern
Europe, the Netherlands enables companies to serve markets in the current and
future Member States of the European Union, the Middle East, and Africa.
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The Dutch themselves are a surprising people. They live, all 16 million of them,
on 41,500 square kilometers, little more than half the size of Scotland. The
Netherlands is thus one of the world’s most densely populated countries.
1. The Country
The Netherlands is a kingdom, officially known as the Kingdom of the Netherlands.
It consists of the Netherlands itself and six islands in the Caribbean Sea: Aruba and
the Netherlands Antilles.
The Netherlands is also sometimes called “Holland”. The word is featured in the
names of the two western coastal provinces, North and South Holland, which have
played a dominant role in the country’s history. The Netherlands lies on the delta
of three major rivers—the Rhine, Meuse, and Scheldt. It owes its existence to feats
of hydraulic engineering.
A quarter of the Netherlands’ land area lies below sea level. The low-lying areas
consist mainly of “polders”, flat stretches of land, surrounded by dikes, where the
water table is controlled artificially. From the 16th century, windmills were used
not just to keep the land dry, but even to drain entire inland lakes.
The Dutch are proud of their management skills. Their struggle to keep the land
dry has helped them develop a can-do attitude. And since controlling water requires
many parties to meet and plan together, it has forced them to learn how to work as
a team. That is why their European partners and the broader international community
regard the Dutch as bridge builders and often ask them to serve as such.
2. Cities and Infrastructure

The Netherlands is an important gateway to Europe because of Rotterdam, the biggest
seaport in Europe, and Amsterdam Schiphol Airport, one of the largest airports in
the continent. The Netherlands has excellent infrastructure and logistics services,
with good roads and world-class public transport services, thanks to its close-knit
network of trains and buses. The Dutch themselves like to get around by bike.
Due to its excellent logistics and technological infrastructure, the Netherlands is also
classified as one of the most “wired” countries in the world, taking part as a dynamic
force in electronic commerce, communications, and outsourcing. The Amsterdam
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Internet Exchange is the largest internet hub in Europe. After New York and London,
Amsterdam is the next most connected city in terms of broadband capacity.
Traffic and Transport

Main airport Amsterdam Schiphol Airport
Number of passengers 45,987,000
Freight tonnage 1,526,500 tonnes
Main seaport Rotterdam
Freight tonnage 377,000,000 tonnes
Main internet hub Amsterdam Internet Exchange

Capacity Largest hub of the European continent.
Each of its major cities has a distinctive character, even though they are all close
to each other. Amsterdam,The Hague, Rotterdam, and Utrecht all belong to the
Randstad conurbation, with a population of 7 million. Amsterdam attracts many
tourists, with its historic center, majestic buildings, museums and a unique ring of
canals. However,The Hague, Delft, Haarlem, Utrecht, Groningen, and Maastricht
also have their share of historic sites, museums, traditions, and attractions.
3. The Government
The Netherlands is a constitutional monarchy with a parliamentary system, in
which the government consists of the queen and the ministers. For historical
reasons,The Hague is the seat of government, but Amsterdam is the capital. The
current government is a coalition between the Christian democrats (CDA) and the
socialists (PvdA) with the help of a small Christian socialist party (ChristenUnie).
Jan Peter Balkenende (CDA) is the Prime Minister, while Queen Beatrix is the
Head of state.
The basic principle of the current coalition agreement is ‘working together, living
together’ (samen werken, samen leven) and builds on cornerstones such as economic
growth, sustainability, respect, and solidarity.
The highlights of the 2008 Budget Memorandum focus on six cornerstones:
(1) Encouraging an active and constructive role of the Netherlands in Europe
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and in the world; (2) Encouraging an innovative, competitive, and enterprising

economy; (3) Reinforcement of a sustainable environment; (4) Reinforcement
of social cohesion; (5) Investing in safety, stability and respect; and (6) Improving
public services and strengthening the cultural sector.
4. The Economy
The Dutch economy has a strong international focus, the country being one of the
European Union’s most dynamic centers of trade and industry. Due to its favourable
location by the North Sea, it plays an important role as a main port and distribution
centre for companies operating worldwide. The port of Rotterdam handles some
377 million tones of goods every year, and is one of the biggest ports in the world,
while the Amsterdam Schiphol international airport is one of the biggest airports
in Europe. That is why the Netherlands is often called the “Gateway to Europe”.
Things are looking good in the Netherlands. Its global competitiveness position has
strengthened, with a place in the top ten. According to the 2006-2007 report recently
released by the World Economic Forum (WEF), the Netherlands moved up to 9th
position in the Global Competitiveness Index (GCI), up from its 11th position in 2005.
In the decision on whether to locate in the Netherlands, high labour costs are not
the decisive factor. Although the strict legal protection against dismissal is an
obstacle, there are numerous compensating factors. These include the fact that
employment contracts are becoming more flexible, rules to admitting knowledge
workers to the Netherlands are becoming more relaxed, and, last but not least, the
government’s customized approach to tax facilities is a major advantage. Another
distinctive fact is the attractive cultural climate. Dutch people are anti-authoritarian,
innovative, and open-minded.
The Netherlands is a multicultural country, with a large diversity of ethnic groups.
Nineteen percent of the habitants in the Netherlands are of foreign origin, of which
10% are of non-western origin, mainly Turks, Moroccans, Antilleans, Surinamese,
and Indonesians.
4
Macroeconomic figures VALUE YEAR

Gross domestic product (GDP) € 560 billion 2007
GDP per capita € 37,300 2006
GDP growth 3.5% 2007
Inflation rate 1.6% 2007
Total workforce 7,606,000 2007
Unemployment rate 4.5% 2007
5. Culture and the Arts

The Netherlands is a world leader in the field of art and culture. The arts, in every
form, flourish in a country that has outstanding museums and an impressive variety
of classical and innovative music and theatre. Major international arts festivals are
held annually.
Museums
With almost 1,000 museums, the Netherlands has the highest museum density
in the world. Some of the most famous are the Rijksmuseum and the Vincent van
Gogh Museum in Amsterdam, the Museum Boijmans-Van Beuningen in Rotterdam,
the Mauritshuis in The Hague, and Het Loo Palace in Apeldoorn. Outstanding
collections of modern and contemporary art can be seen at the Stedelijk Museum
in Amsterdam, the Kröller-Müller Museum in Otterlo, and the Bonnefanten
Museum in Maastricht.
Radio, Television, and the Media

There are many independent broadcasters and print media institutions in the
Netherlands. Freedom of expression is a cornerstone of the Dutch democratic
system. The Media Act expressly provides that broadcasting organizations may
decide the nature and content of their program. The government is responsible
for creating conditions that will enable them to fulfill their vital role in keeping
the citizenry informed.
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Dutch Creative Climate and Dutch Design

Dutch design is famous around the world. The minimalist, economical approach
that characterizes Dutch design attracts many young designers, architects, and
artists who come especially to Amsterdam to work in a climate of artistic freedom,
dialogue, and innovation.
The Netherlands is also renowned for its architecture and exceptional urban
development. No less than 50,000 buildings are listed as monuments. The
government protects them and helps pay for their maintenance.
6
Typical Dutch
Did you know that…
• the International Court of Justice is at the Peace Palace in The Hague?
• the Netherlands has approximately 480 inhabitants per square kilometre?
• with only 0.008% of the world’s area, the Netherlands is the world’s third
largest agricultural exporter?
• Frisian is the second official language of the Netherlands?
• the Netherlands is a founding member of the European Union?
• the Netherlands has at least 15,000 kilometres of cycle tracks?
• Dutch is also spoken in Belgium, South Africa, Suriname, the Netherlands
Antilles, and Aruba?
• the Netherlands still has about 1,000 traditional working windmills?
• the Dutch are the tallest people in Europe?
• almost every Dutch person has a bicycle and there are twice as many
bikes as cars?
• the Netherlands has the highest number of part-time workers in the EU
(four in ten people)?
• most Dutch people speak at least one foreign language?
• language is rarely a problem for businessmen from Britain and America,
because about 75% of the population speak English?
• people from almost 200 nationalities live in Amsterdam?
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II. International Distribution Centres /

Customs Facilities
Upon importation of goods into the free circulation of the European Union, import
duties and import VAT (and, if applicable, excise duties) in principle become due.
Import duties are calculated based on the customs value of the goods multiplied
with the applicable tariff rate. The applicable tariff rate depends on the customs
classification and the (preferential) origin of the goods. Once paid, import duties
are in principle non-refundable and thus become a cost. Also, postponement of the
levying of import duties using the applicable customs procedures may present the
possibility of a cash flow advantage. Therefore, it may be beneficial to either postpone
or avoid the levy of import duties for goods that are entering the Netherlands.
One of these customs procedures is the storing of goods in a customs bonded
warehouse. In the Netherlands, several customs warehousing arrangements are
available by means of which the levying of import duties can be deferred. These
customs warehouse facilities can be useful when goods are to be re-exported (in
which case import duty and /or VAT may not be payable at all), or when there are
difficulties applying certain import licensing requirements. Using the customs transits
procedure, it is possible to transport goods under deferral of import duties between
two places in the EU.
In principle, in order to process imported goods, these goods would first have to
be brought into free circulation. This could mean payment of import duties. If no
measures are taken, these import duties paid cannot be refunded. In order to
prevent the processing of goods shifting to countries outside the EU, different
arrangements are in place to process goods with a deferral or refund of import
duties provided that the goods are being exported from the EU (Inward processing
relief - IPR). Also, it is possible to use the arrangement where the imported goods are
subject to the tariff rate of the processed goods (Processing under customs control - PCC).
This arrangement can, for instance, be beneficial for the pharmaceutical industry,
where base materials on the one hand are subject to a relative high import duty rate,
but the processed goods on the other are generally subject to a zero rate. Using the
Outward processing relief (OPR), it is possible to have products from free circulation
of the EU undergo processing or treatment in third countries and re-import these
processed goods in the EU with a full or partial relief of import duties.
8
1. Customs value and applicable customs rate

Import duties are calculated based on the customs value of the goods multiplied
with the applicable tariff rate. The applicable tariff rate depends on the customs
classification and the (preferential) origin of the goods.
In order to determine the customs value of goods imported into free circulation,
several methods can be used, which have to be applied in sequential order. This
means that one is only allowed to use a subsequent customs valuation method if the
previous method cannot be applied. The most common valuation method is the
transaction value of the goods. In this respect, the transaction value is defined as the
price actually paid or payable for the goods when sold for export to the customs
territory of the EU. It is noted that certain additions or deductions to the customs
value used may have to be made depending on the circumstances of the case at
hand. For valuation purposes, a ruling can be obtained from the Dutch Customs
authorities, which ruling is only valid in The Netherlands.
The tariff classification number determines the customs duty rate assessed on the
importation, whether the good is eligible for special duty privileges and whether
the good is subject to import restrictions (e.g., quota, anti-dumping or countervailing
duties, or specific licenses). Failure to correctly classify imported articles can result
in fines or penalties.
Establishing the origin of the products is relevant because it determines whether
goods are eligible for customs duty preferences and if they are subject to import
restrictions (e.g., embargoes, quotas, anti-dumping or countervailing duties, etc.).
The country of origin may be defined as the country in which the imported product
was grown, manufactured, or produced. While this may appear to be a simple
concept, the rules related to country of origin are diverse and often complex.
Certainty regarding the customs classification as well as the origin can be obtained
by means of a “Binding Information”, valid throughout the EU.
2. Customs Warehouses
A customs warehouse may either be a specific location (such as a tank, building, or
silo) or an inventory system authorized by and subject to the control of the customs
authorities for the storage of non-Community goods. Only upon removal of the goods
from the customs warehouse will the applicable import duties,VAT, and excise
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duties become due. In The Netherlands, different types of customs warehouses exist.
Each of the different types of warehouses is subject to administrative regulations
and has its individual advantages.
A customs warehouse can be a public or a private warehouse. A public warehouse
is authorized for use by warehouse keepers whose main business is the storage of goods
deposited by other traders (depositors). A private warehouse is for the storage of goods
deposited by an individual trader authorized to be a warehouse keeper. The warehouse
keeper does not necessarily need to own the goods, but must be the depositor.
Some customs warehousing arrangements also provide for a cash flow advantage for
the payment of customs duties (e.g. payment of customs duties on a monthly basis
rather than at the moment of importation).
Customs warehousing arrangements in principle only allow the storage of goods. If
approved by the customs authorities, it is allowed to perform certain usual activities
to the goods. These usual activities include actions to ensure reasonable conditions
of the goods during storage and actions that prepare the goods for further distribution
(e.g. repackaging). It is not allowed, however, to actively process or alter the goods
while stored in under the customs warehouse arrangements.
3. Authorization
In order to set up and operate a customs warehouse, it is necessary to obtain
authorization from the Customs authorities. The Customs authorities may only
authorize a customs warehouse under the following conditions:
a. The applicant is established in the European Community.
b. The warehouse is intended primarily for the storage of goods.
c. There is a genuine economic need for the facility.
d. The applicant is able to comply with the conditions of authorization and has
sufficient resources to oversee the setting up of the customs warehouse and
to carry out the necessary checks on the control systems, the records, and the
goods stored.
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Unlike Customs authorities in other countries, the Dutch Customs authorities

will verify in advance whether or not the abovementioned conditions are met. This
upfront verification provides for certainty with respect to the application of the
customs warehousing arrangements.
Single (European) authorization

Where entrepreneurs are established in several countries, EU customs regulations
provide for a special “single authorization”. In respect of customs warehousing, this
“single authorization” allows for the storage of goods in various EU Member States
while only one warehouse authorization is needed. Administrative records may be
kept centrally (i.e. at one location) and only one Customs administration, has to be
dealt with.
The prior agreement of the authorities concerned must be obtained in order
to apply for a single authorization. The application should be submitted to the
Customs authorities designated for the place where the applicant’s main accounts
are held and where at least part of the storage to be covered by the authorization
is conducted. These Customs authorities will communicate the application and the
draft authorization to the Customs authorities in the other EU Member States concerned.
The other Member States are given one month to reply and provide their input.
If other Customs administrations submit objections within that period and
no agreement is reached, the application may be rejected. Once approved, the
authorization will be issued and a copy of the agreed authorization will be sent to
all the Customs authorities concerned. As the other Member States included on the
application need to be consulted, the applicant should apply at least two months
before the intended start date of the customs warehouse authorization.
The requirements/conditions for domestic authorization as described above, apply
accordingly. In general, a single authorization is only granted if the applicant is
already authorized to operate a customs warehouse within its own Member State
and the applicant has a proven/satisfactory record of operation.
4. Other International Customs Facilities

As outlined above, the customs legislation applicable in the Netherlands has also
other customs facilities under which the levy of customs duties can be postponed
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or avoided. As mentioned, the storage of goods under a customs warehousing

arrangements in principle only allows the storage of goods. The Netherlands has
several other customs facilities that prevent the levy of import duties in the event
an entrepreneur wishes to actively process goods in or outside the EU. Below we
have briefly addressed some of these customs facilities that can be of relevance
when involved in international operations.
Inward Processing Relief

Under the so-called Inward Processing Relief, goods (e.g. raw materials or semi-
manufactured goods) can be imported into the EU to be processed for re-export
without import duties and VAT on the importation of the goods. Strict (administrative)
requirements have to be met in order for the relief to be granted. Further, a bank
guarantee is required and interest must be compensated for refined goods which
are released into “free circulation”. There are two types of Inward Processing
Relief: one allows the duty to be suspended, while the other alternative provides
for the duties to be initially paid then refunded at a later stage.
Outward Processing Relief

Under the Outward Processing Relief, goods which are already imported into free
circulation in the EU can be exported for processing in a third country (i.e. outside
EU). Upon return of the processed goods into EU, a full or partial exemption for
customs duties will be granted. The advantage is that no or less import duties will
have to be paid on the import of the treated goods. Again several (administrative)
requirements have to be met in order for an Outward Processing Relief to be granted.
Processing under Customs Control

In some cases, goods are imported into the Netherlands in order to be processed
while the goods are under Customs control. In case of processing under Customs
control, the goods may be processed into products which are subject to a lower
duty rate before they are put into free circulation. The disadvantage of this method
is that there are some economic conditions that have to be met.The administrative
conditions are minor and cause a light compliance burden.
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Customs Bonded Transport

It is also possible for goods to be transported through the EU under a customs
bond. As a result of the transport under customs bond, no customs duties and
import VAT have to be paid when the goods physically cross a border. It should
be proven, however, that all goods that are transported under the customs bond are
also declared to Customs upon arrival of the transport. If not, customs duties may
become due as a result of irregularities during transportation.
5. Authorized Economic Operator

In order to facilitate international trade and to enhance security, EU regulations
now provide for the so called “Authorized Economic Operator” (AEO) concept. An
AEO trader may benefit from more lenient administrative requirements in respect
of the import and export of goods into and from the EU. In order to qualify as an
AEO, a trader has to demonstrate compliance with solid security criteria and
controls as set by the EU regulations.
Reliable and compliant traders may benefit from simplifications in the customs
procedures and from facilitation with regard to customs controls relating to safety
and security. Secure AEO traders may further be informed that their consignment
has been selected for controls and will get priority treatment for these controls.
Authorized AEO traders may also be allowed to submit less data with the Customs
authorities, and will likely be subject to fewer controls as they would be considered
as secure partners by Customs and as their compliance and reliability would have
been thoroughly checked when the AEO Certificate was given.
There is no legal obligation to become recognized as an AEO, although being
recognized as such may constitute an added value for the operator, as it demonstrates
compliance with solid security criteria and controls. This will provide a competitive
advantage to participating companies.
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6. VAT and excises

On importation of the goods, not only import duties are levied, but also VAT
on importation and (if applicable) excises, which are levied with respect to the
(deemed) consumption of alcoholic beverages, tobacco products, and mineral oils.
At the same time, the deferral of import duties may also result in the deferral of
excise duties and VAT on importation being levied.
VAT on importation in principle becomes due at the actual moment of import of
the goods. The taxable base for VAT is the customs value to which certain amounts
are added. Provided that certain conditions are met, an import license can be
obtained as a result of which the import VAT can be reported through the periodical
VAT return, rather than actual payment upon physical importation. This license can
thus create a cash-flow advantage. In the Netherlands, the supply of goods which
are placed under customs bond is subject to a zero rate for VAT purposes.
On importation, excise goods can also be brought into free circulation for excise
purposes, as a result of which excise duties become due as well. Under certain
circumstances, however, the levying of excise goods can also be deferred. In that
case, the excise goods remain under Customs supervision using special excise
bonded arrangements. In principle, the levying of excises takes place in the EU
Member State where the goods are used or consumed. Excise goods, which are
not transferred using a deferral arrangement, are in principle subject to Dutch
excises upon importation into the Netherlands. In the event the excise goods are,
after importation, shipped to another EU Member State, the earlier-paid Dutch
excise duties can be refunded after payment of excise duties in the Member State
of arrival (and after showing proof of that payment to the Dutch authorities).
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III. Regional Headquarters /

Coordination Centers
Regional Headquarters or coordination centers are generally established to
supervise the operations of European and/or Middle Eastern subsidiaries. Sales
coordination, administration and accounting, cash management, central billing,
re-invoicing, advertising and public relations, as well as group financing and
licensing, are typical activities of a regional headquarters.
The Netherlands offers a central location in Europe, excellent airport facilities,
a sophisticated banking system, availability of adequate office spaces, as well as
several tax advantages, both for companies and for expatriates.
1. General Advantages
The Netherlands has the most extensive tax treaty network of all the EU Member
States. Regional headquarters can apply the treaties in collecting interest and
royalties from subsidiaries. The favorable tax treatment of these activities is described
below. Expatriates who are temporarily assigned to a Dutch office may qualify for
a special tax regime known as the 30% Ruling.
As a general rule, Dutch companies should report taxable income in the national
currency, i.e., the Euro. They may also report taxable income in their functional
currency, the US dollar for instance, if certain requirements are met in order to
avoid exchange gains and losses due to currency fluctuations. The main requirement
is that the company must file its financial statements in the functional currency.
In August 2004, the Dutch State Secretary for Finance announced in a decree that
headquarters in the Netherlands are allowed to provide intra-group services on a
full-cost basis instead of applying a markup or arm’s-length price. A list of activities
regarded as shareholders’ costs and which are deductible in the Netherlands, has
been published.
The Dutch corporate income tax rate is 25.5% as of 1 January 2008. However, profits
up to EUR 40,000 are subject to 20% corporate income tax as of 1 January 2008.
Profits between EUR 40,000 and EUR 200,000 are subject to 23%. The tax rate
of 25.5% is applicable to the excess profits.
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2. Tax Ruling
As in the case of service companies and branches discussed in Chapter III, the Dutch
tax authorities may approve an Advance Pricing Agreement (APA) determining the
arm’s-length return for activities performed and services rendered. A new tax
ruling practice was introduced on 1 April 2001. This change was primarily aimed
at making the ruling process more transparent and bringing it in line with the OECD
Transfer Pricing Guidelines. The Ministry of Finance also intended the new ruling
system to contribute to the improvement of the business climate for genuine economic
activities in the Netherlands, through a more precise and customized approach.
The new ruling practice consists of an APA practice and an Advance Tax Ruling (ATR)
practice. The APA practice is devoted to agreements on transfer pricing methods,
arm’s-length results, and operating in conformity with the OECD Transfer Pricing
Guidelines. The ATR practice concentrates on providing advance certainty as to the
fiscal qualification of transactions and international structures. Final APAs and ATRs
are issued in the form of determination agreements governed by Title 15 of Book 7
of the Dutch Civil Code. The agreement automatically includes approval of an exchange
of information clause allowing the Dutch tax authorities to share information with
treaty parties. It is the intention to publish issued APAs and ATRs in order to
guarantee transparency as required by the EU Code of Conduct. The format in
which publication will take place will be made anonymous or summarized if the
identity of the taxpayer could be derived from an anonymous publication. APAs
and ATRs are granted for periods of four to five years unless the facts merit a
longer or shorter term. Renewals are envisaged, absent changes in law or facts.
In order to obtain an APA, it is possible to arrange a pre-filing meeting with the
Dutch tax authorities. A pre-filing meeting is generally recommended in order
to determine whether an APA request is useful. In recent years, 80% of all APA
and ATR requests have been granted and the time it takes to obtain APAs and ATRs
has decreased.
The Dutch State Secretary of Finance has in various occasions, emphasized that
the APA and ATR practice has his full attention and is important in safeguarding
the Netherlands as a place of business for enterprises operating internationally.
It is also possible to reach an agreement with the Dutch tax authorities to provide
favorable tax treatment of central invoicing, leasing, and foreign exchange clearing
within the group.
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3. Holding of Shares
Holding companies have no special tax status under the laws of the Netherlands.
Tax benefits are available to all companies holding shares in Dutch or foreign
subsidiaries. Dutch holding companies are, therefore, quite different from holding
companies in a number of other countries, which are excluded from treaty protection.
The Dutch tax authorities are willing to issue ATRs on the applicability of the
participation exemption for intermediate holding companies in international
situations and for ultimate holding companies.
Dividends received by a Dutch company from nonresident subsidiaries are fully
exempt from Dutch income tax under certain conditions (see application participation
exemption as described in Chapter XI). The exemption also applies to capital gains
upon the disposal of shares in subsidiaries. With respect to capital losses and costs
related to the subsidiary, reference is made in Chapter XI, Section 4.
As of 1 January 2004, thin capitalization rules have been introduced in the Netherlands
(reference is made to Chapter XI, Section 7.) Tax treaties concluded by the Netherlands
generally provide that withholding tax on dividends distributed to a Dutch company
holding at least 25% of the shares in the distributing company is reduced to
a substantially lower percentage, or even to zero. Appendix II contains a chart
indicating the reduction of foreign dividend withholding tax rates under the tax
treaties concluded by the Netherlands. Those treaties also reduce Dutch dividend
withholding tax on dividends distributed by the Dutch company to its foreign parent
to a substantially lower percentage, or even to zero (Appendix V). Pursuant to the
implementation of the EU Parent-Subsidiary Directive on 1 January 1992, dividend
distributions from most qualifying subsidiaries situated in the EU to a qualifying
Dutch company are exempt from (foreign) withholding tax.
Furthermore, dividend distributions by a qualifying Dutch company to most
of its qualifying EU parent companies are exempt from Dutch withholding tax
(see Chapter XI, Section 17).
The Dutch dividend withholding tax on dividends to a foreign parent may, under
certain circumstances, be reduced by a 3% credit for foreign dividend withholding
tax paid on qualifying dividends received by the Dutch company.
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4. Group Financing and Group Licensing

The Netherlands is particularly attractive to group financing activities. The tax
treaties concluded by the Netherlands generally reduce the foreign withholding tax
on interest paid to a Dutch company to a substantially lower percentage, or even to
zero. Appendix III contains a chart with the available reductions. Moreover, the
Netherlands does not impose any withholding tax at source on interest or any
stamp duty on the issuance of bonds.
As of 1 January 2007, Dutch tax law has been providing for a special regime
for qualifying group financing activities. The new regime may create interesting
planning opportunities for cross-border finance transactions. Upon request, the
balance of interest received from group companies, and the interest paid to group
companies will be effectively taxed at a rate of 5%. The introduction of the box is
currently being cleared with the European Commission. Although the group interest
box is part of the revision of the corporate income tax regime, effective as of 2007,
the actual date of entering into force of the group interest box depends upon the
outcome of the discussions with the European Commission. Dutch subsidiaries of
foreign companies engaged in licensing (i.e., as a licensee of patents, trademarks, or
technology with the right to sublicense those intangibles) qualify for special income
tax treatment. Moreover, the tax treaties entered into by the Netherlands provide
for a reduction of foreign withholding tax on royalties to a substantially lower
percentage, or even to zero, if they are paid to a resident of the Netherlands.
Appendix IV contains the available reductions. The Netherlands does not levy
withholding tax on outgoing royalties. As a result, royalties can flow through a
Dutch company at nominal tax cost.
Pursuant to the implementation of the EU Interest and Royalties Directive as of
1 January 2004, interest and royalties payments from most qualifying subsidiaries
situated in the EU to a qualifying Dutch company are exempt from (foreign)
withholding tax.
The Dutch tax authorities are willing to issue APAs to determine the arm’s-length
income for Dutch finance companies and Dutch licensing companies. A Dutch BV
engaged in financial services can obtain a ruling regarding its Dutch tax position
only if it meets the following requirements:
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1. BV must have sufficient substance in the Netherlands. A BV is deemed to have

sufficient substance if the following conditions are met:
a. At least 50% of all authorized directors are tax residents of the
Netherlands;
b. The directors residing in the Netherlands have the relevant professional
knowledge and skills to be able to execute their obligations as directors;
c. The (main) directorial decisions are taken in the Netherlands;
d. BV’s (main) bank account is maintained in the Netherlands;
e. BV’s accounts are kept in the Netherlands;
f. BV is a tax resident of the Netherlands and is not deemed a resident of any
other country;
g. BV should have an appropriate level of equity that enables it to conduct
its business; and
h. At the time conditions a to g above are verified, the BV must have met
all the requirements for the proper filing of various tax returns.
2. The Dutch tax authorities will not issue a ruling if BV does not incur any risk
on the functions it conducts based on the ruling. Conduit financing entities meet
this condition if their equity is at least the lower of 1% of the total outstanding
loans or EUR 2 million. Please note that this equity should be at risk for the
financing activities. This safe harbor provision applies for each entity to which
the company provides loans. If more than one loan is provided to an entity, the
safe harbor provision must be prorated.
If the second requirement (i.e., no risk) is the only one that cannot be met, but there
is sufficient substance, a ruling can be obtained if the company gives the Dutch tax
authorities the liberty to provide information spontaneously to the countries from
which the interest or royalty will be received. According to the Dutch State Secretary
for Finance, the information that is spontaneously exchanged concerns structure,
functions, risks, and remuneration.
In order to determine the taxable spread to be reported, it is in principle, no longer
possible to rely on the minimum spread of 1/8% for intercompany loans. In order
to determine an arm’s-length remuneration, a functional analysis must be made
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based on the OECD Transfer Pricing Guidelines. This margin could also be lower
than the 1/8% of the “old” ruling policy. Under the situation previous to 1 April 2001,
it was not necessary to build up a file to defend the intercompany pricing. Currently,
an APA can be applied for, if desired, but there is no requirement to do so in order
to start conduit financing and licensing activities in the Netherlands.
The Dutch tax authorities can conclude an agreement with a flow-through entity
regarding the substance and risk requirements of a Dutch finance company and/or
a Dutch licensing company only if certainty in advance is also requested for the
arm’s-length nature of its remuneration.
Dutch entities that do not incur a genuine risk in respect of intra-group loans or
royalty transactions are no longer permitted to credit the foreign withholding taxes
related to interest or royalty income. The interest and royalties received and paid
are excluded from the taxable income in the Netherlands provided that:
1. The Dutch entity receives and pays interest or royalties to and from an entity
within the same group;
2. The interest and royalties received and paid relate directly or indirectly to financing
or royalty transactions that are closely connected; and
3. The flow-through company does not incur a genuine risk that could affect
its equity.
A flow-through company is deemed to incur a genuine risk in respect of a loan if
the equity is at least 1% of the outstanding loans or EUR 2 million and the taxpayer
can prove that the equity capital will be affected if a risk arises. Even though the
interest and royalty income as well as the expenses are excluded from the taxable
income, the flow-through entity should still report arm’s-length remuneration with
regard to the services relating to the loan or royalty transaction. A grandfather rule
was in effect until 1 January 2006 for flow-through entities performing transactions
before 31 March 2001.
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IV. Sales Support, Distribution and Production

A foreign company considering establishing production and/or sales operations in
the Netherlands or in Europe is likely to carry out the project in phases.
1. Liaison Office
In the initial phase, a liaison office may be opened in order to explore the market
and to establish contacts with prospective customers. The office may provide
information about the company’s products and maintain a supply of goods or
merchandise for display. Activities may include delivery, advertising, the collection
of information for the benefit of the foreign headquarters. In more general terms,
it may also carry out preparatory or supporting activities exclusively for the benefit
of the foreign headquarters. These activities are generally non-taxable under Dutch
tax treaties if conducted in such manner that the entity is not deemed to be a
permanent establishment for tax purposes.
2. Sales Support
If the start-up phase proves to be successful, the company may decide to expand the
activities of the liaison office to include sales support and distribution activities,
such as processing, packing or re-packing, (central) distribution, shipping, invoicing,
repair, marketing, promotion, etc. The Dutch tax authorities may be requested to
issue an Advance Pricing Agreement setting the arm’s length return on the services
rendered by the Dutch company (in general, companies are required to submit an
indication of an arm’s length return on services rendered on the basis of a transfer
pricing study that is in line with the OECD Transfer Pricing Guidelines). As long as
the company performs few functions and bears little risk, the arm’s length return
required may be moderate.
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3. Production
If the company enters into a third and final stage by organizing a full-fledged
production and sales operation (with the customary business risks for bad debts, etc.),
the company will be required to report an arm’s length return that allows for
remuneration for the risks being incurred. However, it will then also qualify for
the tax benefits available to Dutch companies, such as an investment allowance for
business assets, accelerated depreciation of certain assets and generous loss
compensation privileges. These facilities are described in Chapter X.
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V. Legal forms of doing business

A company can engage in business in the Netherlands through a subsidiary or a
branch. Compared with other EU countries, Dutch corporate law provides a very
flexible and liberal corporate framework for the organization of branches and
subsidiaries by nonresident companies or individuals. There are no special restrictions
on foreign-owned companies planning to start a business in the Netherlands.
1. Branch
The organization of a branch of a foreign company in the Netherlands does not
require prior government approval. The foreign head office should simply file
certain documents and data with the Trade Register of the Chamber of Commerce,
which are as follows:
For the branch:
• the trade name, a brief description of its activities, number of employees,
amount of invested funds, and full address of the branch. For the branch
manager (who need not be a Dutch resident):
• surname, first name, full address, date and place of birth, nationality, and the
extent of his or her power and authority to represent the branch; his or her
signature and certified copy of an identification card or passport which must be
deposited.
For the foreign company:
• the company’s name and legal form, the (foreign) trade register with which it
is registered, the number under which it is registered, as well as personal
details and representative authority of its managing directors and supervisory
directors;
• legalized copies of the Deed of Incorporation, Articles of Association, and
bylaws (if there are any) of the company (which may be submitted in Dutch,
English, German, or French);
• the annual accounts of the company as drawn up, audited, and disclosed
pursuant to the law of the country of origin (which may be submitted in
Dutch, English, German, or French); and
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• an original extract from the foreign trade register or document of registration,

which should not be older than one month prior to registration of the branch.
2. Subsidiary
Dutch law distinguishes two types of limited liability companies: the public limited
liability company (Naamloze Vennootschap or NV) and the private limited liability
company (Besloten Vennootschap or BV). The main differences between these two
entities are as follows:
1. BVs (as opposed to NVs) cannot issue bearer shares as well as share certificates
evidencing the shares;
2. The transfer of shares in BVs (as opposed to NVs) is always subject to the
blocking provisions as set forth in the Articles of Association, which may
contain prior approval of the general meeting of shareholders or another
corporate body as designated under the company’s Articles of Association,
or a right of first refusal of the other shareholders; and
3. BVs can be formed with a minimum issued and paid-in capital of EUR 18,000,
while NVs must have a minimum issued and paid-in capital of EUR 45,000.
A Dutch subsidiary may be established and owned by one or more shareholders,
who may either be individuals or legal entities, regardless of their nationalities.
BVs are generally the preferred vehicle for a foreign company in establishing
a wholly-owned Dutch subsidiary.
The issuance and transfer of registered shares, or the transfer of a restricted right to
the shares (for instance, a right of pledge) requires the execution of a notarial deed
before a Dutch civil law notary. This obligation does not apply to NVs whose
shares or share certificates are in bearer form or are officially listed in a regulated
stock exchange.
3. Societas Europaea (SE)

As of 8 October 2004, it is also possible to incorporate a European company or
Societas Europaea (SE), which has a legal personality and is in many respects,
comparable to a Dutch NV.There are four ways to incorporate an SE:
1. through a legal merger between two companies based in different EU Member
States;
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2. through incorporation of an SE as a holding company for two companies based

in two different EU Member States or with subsidiaries in two different EU
Member States;
3. through incorporation of an SE as a subsidiary of:
a. two companies based in two different EU Member States; or
b. an SE;
4. through a change of corporation form from an eligible company (e.g., an NV)
to an SE.
Only legal entities can form an SE; natural persons can become a shareholder of the
SE after its incorporation.
An SE can transfer its registered office from one EU Member State to another. In
addition, a group that has companies throughout the EU can now create a uniform
management structure by forming an SE, since SEs can opt for a one-tier or two-tier
board system. Another relevant practical aspect is that the formation of SEs makes
international legal mergers possible between companies incorporated under the
laws of EU Member States.
4. Branch v. Subsidiary
The most important difference between a branch and a subsidiary is as to exposure
to liability. A subsidiary has limited liability. As a result, a shareholder in principle,
is liable only to the extent of its capital contribution. A branch is not a separate
legal entity; thus, the (foreign) company of which the branch forms part is fully
liable for all the obligations of the latter.
Manufacturing, warehousing, and rendering of services may be carried out by both
types of operations. Holding, finance, and licensing operations, on the other hand,
are better conducted by a subsidiary, since it is able to benefit from tax treaties.
The circumstances and relevant factors must be considered each time before a final
decision is made.
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5. Partnership
A partnership, whether general (Vennootschap Onder Firma or VOF) or limited
(Commanditaire Vennootschap or CV), can be formed by at least two partners, who
may either be individuals or legal entities. The parties conclude a partnership
agreement and the partnership (not the contract) must be registered with the Trade
Register of the Chamber of Commerce. The partners in a general partnership
(VOF) are jointly and severally liable for all obligations of the same. Pursuant to
a limited partnership (CV), however, the limited or “silent” partner is liable only up
to the amount of his capital contribution, provided that he does not in any way take
part in the management of the partnership vis-à-vis third parties. The limited
partner is not registered with the Trade Register.
A special partnership form is the European Economic Interest Grouping or EEIG
(Europees Economisch Samenwerkingsverband or EESV) for the cooperation between
entrepreneurs in Europe. The EEIG is a legal form based on a European Statute.
An EEIG formed under the Dutch law has a legal personality and enjoys fiscal
transparency throughout the European Economic Area. It is suitable for joint
venture activities as well as specific intra-group purposes. There are no restrictions
on foreign nationals entering into a partnership with Dutch residents. The formation
of an EEIG requires at least two partners, which may comprise partnerships, resident
within the European Economic Area.
6. Formal Foreign Companies

According to the Formal Foreign Companies Act (“FFCA”), a company incorporated
under any laws other than Dutch and which conducts its business entirely or almost
entirely in the Netherlands without having any further real ties with the state under
whose law it was incorporated, is considered a Formal Foreign Company. Under
the FFCA, the management of such company is obliged to register with the Trade
Register of the Chamber of Commerce in the Netherlands the company, its deed of
incorporation, its Articles of Association, the number under which the company is
registered, and the details of the sole shareholder (if applicable). Furthermore,
Formal Foreign Companies must file their annual accounts with the Trade Register
of the Chamber of Commerce as well as an audit statement confirming that their
issued and paid-up share capital, as well the company’s equity is at least equal to
EUR 18,000. Companies which are subject to the laws of an EU Member State or
an EEA party, however, are exempted from most provisions of the FFCA.
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7. Agents
A commercial agent is a person or company that mediates against payment with
respect to the conclusion of contracts and, possibly, concludes those contracts in
the name and for the account of the principal. Dutch agency law is based on EC
Directive 86/653/EC and is substantially mandatory in nature, particularly those
provisions that aim at protecting the agent.
For example, mandatory notice periods apply and an agent is in principle entitled
to receive a goodwill compensation upon termination. It is also important to note
that prior approval of the Dutch Centre of Work and Income may be required before
notice of termination can be given to a so-called “small” agent (i.e. an individual
who acts as agent for not more than two principals and who does not employ more
than two assistants).
Parties are free to determine the governing law of their agreement. However, a
choice for foreign law will not set aside the so-called Dutch “overriding mandatory
rules”.To date, the rules regarding goodwill compensation and the special termination
protection applying to “small” agents have been considered as such overriding
mandatory rules.
Finally, it should be noted that EU and Dutch competition rules may also have an
effect on agency agreements.This subject is thoroughly elaborated in Chapter XVI.
8. Distributors
A distribution agreement differs from an agency agreement in that the distributor
purchases products or services from the supplier and resells them to third parties
in its own name and for its own account.
Dutch law does not provide for specific provisions on distribution agreements.
Consequently, distribution agreements are governed by the general principles of
Dutch contract law. These principles are rather liberal and allow for substantial
freedom for the contracting parties.The parties are thus in principle bound by their
agreement, including the termination provisions thereof. A Dutch court may, however,
set aside a contractual provision if such a provision is deemed unacceptable in view
of the principles of reasonableness and fairness.
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When a distribution agreement is silent on termination, such agreement may

be terminated by giving reasonable notice if such infers from the principles of
reasonableness and fairness. All relevant factual circumstances need to be taken into
account in order to determine the reasonableness of a notice period (e.g. the duration
of the relationship, the dependence of the distributor, investments recently made etc.).
Depending on the circumstances, notice periods may vary from one month to more
than one year.
As a general rule, a distributor shall not be entitled to compensation if a reasonable
notice period has been granted. As an exception to this rule, a distributor may be
entitled to compensation on the basis of the principles of “reasonableness and fairness”
despite the fact that a reasonable notice period has been granted.This may, for
example, be the case if the manufacturer has given the impression that the contract
would be continued, and the distributor has made investments that cannot be
earned back.
Finally, it should be noted that EU and Dutch competition rules have a significant
effect on distribution agreements.This subject is thoroughly elaborated in
Chapter XVI.
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VI. The Subsidiary

1. Incorporation of Dutch NV and BV
A Dutch NV (Naamloze Vennootschap met beperkte aansprakelijkheid or public limited
liability company) and a BV (Besloten Vennootschap met beperkte aansprakelijkheid or
private limited liability company) are incorporated by one or more incorporators
pursuant to the execution of a notarial deed of incorporation which includes the
company’s Articles of Association.
The notarial deed of incorporation must be executed in the Dutch language before
a Dutch civil law notary in the Netherlands. Prior to incorporation, a statement of
no objection from the Ministry of Justice as well as a bank statement must be obtained.
The statement of no objection is a declaration of the Ministry of Justice that is issued
after verification of data of the parties involved either as incorporators, managing
directors, or ultimate beneficial owners. The bank statement, to be issued by a
bank which is a credit institution referred to in Section 1:1 of the Dutch Financial
Supervision Act (Wet op het Financieel Toezicht) and is registered as a credit institution
pursuant to that Act or whose business operations are subject to governmental
supervision in another Member State of the European Communities or in another
state which is a party to the Agreement on the European Economic Area, confirms
that the incorporation capital has been transferred to a bank account in the name of
the NV or the BV in incorporation.
The name of the company is followed by ‘NV’ or ‘BV’ and in case an NV or a BV
is in the process of formation the abbreviation “i.o.” (“in oprichting,” in the process
of being incorporated) is added after the name. An NV or a BV is allowed to do
business during the pre-incorporation period and the NV i.o. or the BV i.o. can be
registered with the Trade Register of the Chamber of Commerce. The persons
acting on behalf of the NV i.o. or the BV i.o. are personally liable until the NV or
the BV has ratified the actions performed on its behalf during the pre-incorporation
period.
2. Incorporation cooperative
A Cooperative is incorporated by the execution of a notarial deed in the Dutch
Language by a Dutch notary in the Netherlands. No Ministry of Justice approval
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and bank statement are required. Dutch law requires that the Cooperative is
incorporated by at least two incorporators. Unless the deed of incorporation
explicitly states otherwise, the incorporators become automatically members of
the Cooperative upon incorporation. The word ‘coöperatie’ or ‘coöperatief’ must be
included in the name of the Cooperative as well as the reference W.A., B.A. or
U.A. which indicates the level of liability of members. Upon incorporation, the
Cooperative is registered with the Trade Register of the Chamber of Commerce.
3. Capitalization
A Dutch NV and a BV must have an authorized and issued capital, divided into
a number of shares with a par value expressed in euros. Shares without a par value
are not permitted. Upon the formation, at least 20% of the authorized capital
must be issued and at least 25% of the par value of each share issued must be paid
in.The minimum issued share capital is EUR 45,000 for an NV and EUR 18,000
for a BV.
The identity of shareholders who have not fully paid their shares must be listed
with the Trade Register of the Chamber of Commerce. Managing or supervisory
directors are required to hold shares in the NV or the BV.There is no statutory
requirement for a Cooperative to maintain a minimum amount of capital.The
Articles of Association or the separate members’ agreement can oblige a member
to contribute funds or assets to acquire a membership interest in the Cooperative.
4. Transfer of shares and membership interest

An NV can issue bearer or registered shares and a BV can only issue registered
shares. Bearer shares are freely transferable upon delivery of the related share
certificates. Registered shares can be either ordinary, preferred, or priority shares.
Registered shares issued by an NV may be freely transferred, subject to any
restrictions that may be contained in the company’s Articles of Association.
The Articles of Association of a BV must stipulate limitations on their transferability.
Such restrictions require the transferor to either offer the shares to the other
shareholders (“right of first refusal”) or to obtain prior approval for the transfer
from the general meeting of shareholders or any other corporate body of the
company as specified in the Articles of Association.
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The transfer of registered shares in an NV and a BV requires a notarial deed of

transfer to be executed before a Dutch civil law notary in the Netherlands. The
transfer of shares is recorded in the shareholders’ register. The registration with
the Trade Register of the Chamber of Commerce is updated accordingly in case of
a sole shareholder.
Membership interests in the Cooperative can be held by (foreign) private individuals,
(foreign) legal entities, and partnerships. The Articles of Association may provide
that the membership interests are freely transferable or make transfers subject to
certain restrictions, such as prior consent of the management board, the general
meeting of members, or the meeting of a certain class of membership interests.
5. Shareholders’ register
The managing directors of an NV and BV with registered shares must keep a
shareholders’ register at the registered office of the company. The register contains
the company name, NV or BV number, authorized and issued share capital the
numbers of all registered shares, the names and (electronic) addresses of the
shareholder, pledgor, and usufructuary, the extent to which the par value of the
shares has been paid up as well as the particulars of any transfer, pledge, attachment,
or usufruct on the shares.
Each shareholder, pledgor, and usufructuary of shares has the right to inspect the
shareholders’ register and receive a certified excerpt. Any amendment or adjustment
of the shareholders’ register requires the signature of one of the managing directors.
6. Issuance of new shares

Upon issuance of registered shares, at least 25% must be paid up. Bearer shares
must be paid in full upon issuance. Shares may also be paid in kind, provided that
a Dutch registered accountant’s statement is obtained, confirming that the value
of the contribution in kind is equal to or exceeds the total par value of the issued
shares. The amount exceeding the total value is considered as non-stipulated share
premium.
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The issuance of registered shares requires a notarial deed executed before a Dutch
civil law notary in the Netherlands and is recorded in the shareholders’ register.
The registration with the Trade Register of the Chamber of Commerce is updated
accordingly.
7. Management
The NV, the BV, and the Cooperative are managed by a board of managing directors,
consisting of one or more managing directors who are appointed and dismissed
by the shareholders. A managing director can be a (foreign) private individual or
a (foreign) legal entity. From a Dutch corporate law point of view, none of the
managing directors needs to be a Dutch resident.
The Articles of Association state the number of managing directors and whether
a managing director is solely or jointly authorized to fully represent and bind the
company. A provision to this effect can be invoked against third parties. The Articles
of Association may provide that a number of specified acts of the board of managing
directors require prior approval of the shareholders, the board of supervisory
directors, or another corporate body. These cannot be invoked against third
parties, unless they are aware of this provision and have not acted in good faith.
8. Supervisory directors
An NV, a BV, and a Cooperative may institute a supervisory board to advise and
supervise the managing directors, but do not participate in the management. Only
a (foreign) private individual can be appointed as a supervisory director. They are
appointed and dismissed from their position through the general meeting of
shareholders and general meeting of members respectively. No person may serve
as managing director and supervisory director at the same time.
9. Large Companies Regime

An NV and a BV are subjected to the Large Companies Regime if the company,
in three consecutive years, meets the following criteria:
• The issued capital of the company, together with reserves as reflected in the
balance sheet, amounts to at least EUR 16 million;
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• The company and/or an affiliated company (i.e., an enterprise of which the

company owns at least 50% of the shares) has installed a Works Council; and
• Together, the company and its affiliate(s) employ an average of at least
100 employees in the Netherlands.
As a consequence hereof, the NV or the BV should institute a supervisory board
and the board of managing directors is to be appointed by the supervisory board.
A company may voluntarily apply to be subjected to the Large Companies Regime.
Provided certain conditions are met, a mitigated Large Companies Regime is
available.
An international holding company that restricts its activity exclusively or almost
exclusively to the management and financing of group companies and of its and
their participations in other legal persons can be exempted from the Large Companies
Regime, provided that the majority of their employees, employed by the company
and by the legal persons with which it forms one group, work outside the Netherlands.
10. Single-member companies

A single-member company is an NV or a BV in which all its shares are held by a
single legal entity or a private individual.The sole shareholder must be registered
with the Trade Register of the Chamber of Commerce and all legal acts between
the sole shareholder and the company must be in writing if they are beyond the
scope of the company’s day-to-day business and the company is represented by the
sole shareholder, who is also the company’s managing director.
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VII. Reporting, Auditing, and Publication

Requirements
1. Financial statements
The annual accounts of a Dutch NV, a BV, or a Cooperative consist of the balance
sheet, the profit and loss account, and explanatory notes and the consolidated
annual accounts if applicable. Cooperatives shall substitute the profit and loss
account for a statement of operating income and expenses.
Each year within five months after the end of the financial year of the company,
annual accounts are prepared by the board of managing directors. The annual
accounts shall be signed by all managing directors and supervisory directors. If one
or more of their signatures are missing, this shall be stated giving the reason therefor.
The annual accounts are submitted to the shareholders’ meeting or general meeting
for adoption within five months following the end of the financial year. In special
circumstances, the general meeting of shareholders or members may provide for
an extension of six months. The adoption should take place within two months
after the preparation. In case the NV or the BV is subjected to the Large Companies
Regime, the annual accounts are also to be submitted to the company’s Works Council.
The board of managing directors must file the adopted annual accounts within eight
days with the Trade Register of the Chamber of Commerce. In the event that the
annual accounts are not adopted within two months after the period permitted by
law, i.e., within 13 months (5 months + extension of 6 months + 2 months) after
the financial year, the board of managing directors should file forthwith the draft
annual accounts with the Trade Register of the Chamber of Commerce with a
reference to their draft status. In certain circumstances the annual accounts must
be accompanied by a director’s report an auditor’s report.
If a Cooperative has not installed a supervisory board and no auditor’s report is
submitted to the general meeting an audit committee consisting of at least two
persons, none of whom can be a managing director, has to be appointed annually by
the general meeting, which will report on the annual financial documents provided
by the board of managing directors.
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2. Director’s report
The board of managing directors must draw up the director’s report (small companies
are exempt from this obligation). The report gives a true and fair view of the state
of affairs as that in the balance sheet and of the course of the business during the
previous financial year. The director’s report contains information on expected
future business, particularly (unless this conflicts with legitimate interests) on
investments, financing, personnel, and the development of turnover and profitability
as well as information about research and development activities. Pursuant to the
Dutch Corporate Governance Code, Dutch NV’s that are listed on a European Stock
Exchange are expected to devote a chapter in the annual report to the broad outline
of their corporate governance structure, to the compliance with the corporate
governance code, as well as to the non-application of any best practice provisions.
If extraordinary circumstances that would not normally need to be addressed in the
annual accounts influenced the expectations of future business, an explanation of
those circumstances must be provided. The director’s report may not conflict with
the annual accounts.
3. Accounting principles
The annual accounts prepared in accordance with generally-accepted accounting
principles shall provide such a view as enables a sound judgment to be formed on
the assets and liabilities and results of the company and, insofar as the nature of
annual accounts permit, of its solvency and liquidity. If so justified by the international
structure of its group, the annual accounts may be prepared in accordance with
generally accepted accounting principles in one of the member states of the European
Communities. If the company makes use of the aforementioned possibility, it shall
make a statement in the explanatory notes of its annual accounts.
4. Other information
The annual accounts prepared by the board of managing directors may include a
proposed allocation of profits including the determination of amounts available for
dividends or the treatment of losses for the financial year, a summary of profit-sharing
certificates or comparable securities, important events that occurred after the
balance sheet date and a list of branches, and the countries where those branches
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are located. Furthermore, Dutch law contains detailed requirements for the
composition of the balance sheet, as well as the profit and loss statement and the
explanatory notes, the valuation principles, and determination of the results.
5. Language
The annual accounts and the director’s report must be written in Dutch, unless
the shareholders have resolved to use another language.The annual accounts and
director’s report must be translated into Dutch, French, German, or English prior
to the filing with the Trade Register of the Chamber of Commerce.
6. Currency
The sums quoted in the annual accounts must be expressed in euros. However,
If justified by the activity of the company or the international structure of its
group, its annual accounts may be prepared in a foreign currency.
7. Classification
The minimum reporting, auditing, and publication requirements depend on the size
of the company. It may suffice for small and medium-sized companies to publish an
abridged balance sheet and explanatory notes. A small company does not need to
publish its profit and loss accounts and other information; medium-sized companies
must publish an abridged version of their profit and loss account. Small, medium-
sized, and group companies whose accounts are included in the consolidated accounts
of another company are subjected to less stringent reporting, auditing, and publication
requirements. A company qualifies as small, medium-sized, or large if it meets
certain criteria.
Financial information on subsidiaries is used to determine the size of a company
as if the company were required to consolidate, unless it is exempt from group
consolidation requirements. A company will not be reclassified unless and until it
meets the criteria of another category for two consecutive years:
Small Medium-sized Large
Total assets < EUR 4.4 M < EUR 17.5 M > EUR 17.5 M
Net turnover < EUR 8.8 M < EUR 35 M > EUR 35 M
Employees < 50 < 250 > 250
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8. Exemption for group companies

Subject to strict requirements, a group company may be exempt from its reporting,
auditing, and publication requirements. The exempt group company has the right
to prepare an abridged version, consisting solely of its individual annual accounts;
it does not need to prepare a director’s report, nor does it have to comply with
certain auditing and publication requirements. In order to make use of the
exemption, the following requirements must be fulfilled:
• The exempt company’s financial information has been consolidated by another
company whose accounts have been drawn up;
• The consolidating company has declared in writing that it assumes joint and
several liability for any obligations arising from legal acts by the exempted
company;
• The shareholders have declared in writing their agreement to derogate from
the statutory requirements after the commencement of the financial year and
before the adoption of the annual accounts;
• The consolidated accounts, the director’s report, and the auditor’s report have
been drawn up in or translated into Dutch, French, German or English; and
• The declarations and documents are to be filed for deposit with the Chamber
of Commerce.
9. Consolidated accounts
The company solely or jointly with another company as the holding company of a
group, or as part of a group, is required to include consolidated annual accounts in
the explanatory notes to its annual accounts, showing its own financial information
and of its subsidiaries in the group and other group companies.
The obligation to consolidate is not required for information concerning:
• group companies, the combined significance of which is not material to the
group;
• group companies, the required information of which can only be obtained or
estimated at disproportionate expense or with great delay;
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• group companies, the interest in which is only held for disposal.

Consolidation may be omitted if:
• On consolidation, the company qualifies as a small company;
• No company to be involved in the consolidation has securities in issue officially
listed on an exchange; and
• The company has not been notified in writing by at least 1/10 of its members
or by at least 1/10 of its issued capital of an objection thereto within six
months from the commencement of its financial year.
A part of a group may be excluded from the consolidation, provided:
• The company has not been notified in writing by at least 1/10 of its members
or by at least 1/10 of its issued capital of an objection thereto within six
months from the commencement of its financial year;
• The financial information which the company should consolidate has been
included in the consolidated annual accounts of a larger entity;
• The consolidated accounts and the director’s report are prepared in accordance
with the Seventh EC Directive or similar principles; and
• The consolidated accounts, the director’s report, and the auditor’s reports are
drawn up in or translated into Dutch, French, German, or English and
submitted with the Trade Register of the Chamber of Commerce.
10. Auditing requirements

Medium-sized and large companies are required to have their annual accounts
audited. Annual accounts of group companies that do not need to be drawn up in
accordance with the legal requirements do not need to be audited. The external
auditor must examine whether the annual accounts provide the requisite legal
disclosures and whether the annual accounts, the director’s report, and other
information comply with the statutory requirements. It should also be verified that
the director’s report does not conflict with the annual accounts. The auditor must
be a certified Dutch accountant or a foreign auditor licensed to practise in the
Netherlands and is to be appointed by the shareholders. If the shareholders fail to
do so, other respective corporate bodies may be authorized to appoint the accountant.
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11. Act on Formal Foreign Companies

The Act on Formal Foreign Companies (Wet op de formeel buitenlandse vennootschappen)
entered into force on 1 January 1998, and was amended on 1 June 2005. The
purpose of this Act is to prevent abuse in respect of certain foreign companies
(i.e., companies that are formally incorporated under domestic law but that have
their actual management in the Netherlands). The advantage for the incorporators
of such companies is that the preventative supervision is avoided and, in particular,
the regulation in respect of the protection of capital is more flexible. Since the last
amendment, the Act contains substantial exemptions for foreign companies that are
governed by the laws of the European Union or the Agreement regarding the
European Economic Space of 2 May 1992. These exemptions merely relate to the
minimum capital requirements. The managing directors of the foreign companies
are to be registered the company with the Trade Register of the Chamber of
Commerce. For companies not formally governed by the laws of the European
Union or the European Economical Space, must include an auditor’s statement
stating that the issued capital and the stockholders’ equity amounts to at least the
statutory minimum share capital required for a Dutch BV. The normal reporting
and publication requirements described above apply to all formal foreign companies.
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VIII. Corporate Governance Code

(Code Tabaksblat)
The Dutch Corporate Governance Code (the “Code”), also known as the Code
Tabaksblat named after the Chairman of the Dutch Corporate Governance Committee,
applies to Dutch NV companies with an official listing in the Netherlands and/or
abroad. These companies must devote a chapter in their annual report providing
for a general description of their corporate governance structure and compliance
with the Code. In principle, they are not required to provide details in relation to
each provision of the Code. However, in case a company fails to comply with the
principles or best practice provisions, or does not intend to comply therewith
during the current or subsequent financial year, an explanation must be given in
the annual report. The Netherlands Authority for the Financial Markets (Autoriteit
Financiële Markten) will check whether the company has included such chapter and
if such chapter is consistent with other information included in the annual report.
It is up to the General Meeting of Shareholders whether the explanation of the
company is satisfactory or not.
1. Principles and Best Practice Provisions

The Code sets forth general principles, each of which are followed by specific best
practice provisions. Listed companies are to comply with each principle and provision,
or alternatively disclose in writing (in a separate chapter in the annual report) why
and to what extent it does not apply them (“comply or explain”). Considerable
attention is given to the companies’ financial reporting. The audit committee,
composed of individual Supervisory Board members, will play an active role in
supervising the functioning of the internal accounting department and the risk
management and control systems in general. The external auditor shall attend
meetings of the Supervisory Board and the audit committee at which the annual
accounts are to be approved or adopted. Detailed recommendations are given in
relation to the content of the auditor’s report and direct obligation to answer
questions posed by the Supervisory Board members and the General Meeting of
Shareholders. The Code also proposes to legally formalize the position of the
Company Secretary, who will be appointed by the Supervisory Board and whose
duty will be to assist the same.
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2. Five Chapters
The Code is subdivided into several chapters, containing recommendations in
relation to:
• the compliance with and enforcement of the Code itself;
• the Management Board;
• the Supervisory Board and its committees;
• the shareholders and General Meeting of Shareholders; and
• the audit of the financial reporting and the position of the internal auditor
function and of the external auditor.
Below are the main recommendations from each of the chapters. The full text and
further information (though limited in English) can be found on the Committee’s
website: www.commissiecorporategovernance.nl.
3. Compliance and Enforcement

The Management Board and the Supervisory Board are responsible for the company’s
corporate governance structure and its compliance with the Code. Any deviations
from the principles and best practice provisions should be specifically disclosed,
discussed, and approved during the General Meeting of Shareholders. Any major
changes in the compliance with the Code in the years thereafter should again be
disclosed to and discussed in the shareholders’ meeting following the years in which
they are implemented.
4. Management Board
• A Management Board member is appointed for a maximum term of four years,
renewable for a maximum of four years at a time.
• The Management Board is responsible for managing the company’s business
risks and drafting a risk control policy.
• The Management Board reports annually on the functioning of the internal risk
management and control systems, including significant changes and planned
improvements in that respect.
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• The Management Board must ensure that there is a way for employees to
report alleged company irregularities of a general, operational, and financial
nature to the chairperson of said board or to a designated official (“whistleblower
protection”).
• A Management Board member may have no more than two Supervisory Board
seats with listed companies and may not serve as chairman of said board of
another listed company. Membership of the Supervisory Board of other companies
within the group to which the company belongs does not count for this purpose.
• Options granted to the Management Board members have a minimum term
of service of three years and become unconditional only if they have fulfilled
predetermined performance criteria.
• Shares granted to the Management Board members without consideration must
be retained for a period of at least five years, or at least until termination of
employment with the company.
• A Management Board member shall give periodic notice of changes in his
holding of securities in Dutch listed companies to the compliance officer,
unless said Management Board member has transferred the discretionary
management of his securities portfolio to an independent third party.
• The compensation upon dismissal of Management Board members should
normally not exceed their salary for one year (based on the “fixed” remuneration
component), unless this would be manifestly unreasonable.
• The most important elements of the remuneration package, including the level
of prearranged compensation upon dismissal (“golden parachutes” and severance
packages), must be disclosed.
5. Supervisory Board
• Each Supervisory Board member must be capable of assessing the company’s
general policy, and must have the specific expertise required to fulfill tasks that
form part of the role assigned to him or her within the framework of the
Board’s profile.
• All Supervisory Board members must actively seek to obtain sufficient information
in order to form a sound and well-informed opinion.
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• Upon their appointment, Supervisory Board members follow an introduction

program which deals with general financial and legal affairs, specific aspects
that are unique to the company in question and their responsibilities. The
Board conducts an annual review to identify aspects in relation to which the
Supervisory Board members require further training or education during their
period of appointment.
• At least one member of the board must be a financial expert in the sense that
he or she has relevant knowledge and experience in financial administration
and accounting.
• No one may simultaneously serve on more than five boards of listed companies
(being the Chairman of a board counts as double).
• A Supervisory Board member may be appointed for a maximum of three
successive four-year terms.
• The Supervisory Board must prepare an annual remuneration report containing
extensive information on the Management Board remuneration policy. This
report is submitted for approval to the shareholders’ meeting.
• Each Supervisory Board with four or more members must have an audit
committee, a remuneration committee, and a selection and appointment
committee, each of which has specific detailed responsibilities.
• In the event of (suspected) accounting irregularities, the audit committee must
be the external auditor’s primary contact.
• The chairmanship of the audit committee may not be fulfilled by the Chairman
of the Supervisory Board or by a former member of the Management Board.
• The same applies to the remuneration committee, with the additional exclusion
of any Supervisory Board member who is a Management Board member of
another listed company.
• The Supervisory Board is assisted by the company secretary. The company
secretary is appointed and dismissed by the Management Board, after approval
of the Supervisory Board has been obtained.
• The Code contains detailed provisions regarding the activities of the various
Supervisory Board committees.
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6. Shareholders and General Meeting of

Shareholders
• The trust office holding shares on behalf of depositary receipt holders shall,
without limitation and in all circumstances, issue proxies to such holders who
so request.
• Decisions on important acquisitions or divestitures are subject to the approval
of the shareholders meeting.
• The profit retention/dividend policy will be placed on the agenda of the annual
meeting and changes in this policy are submitted thereto.
• Institutional investors must annually publish their policy on the exercise of voting
rights ensuing from shares held in listed companies and disclose, on request,
how they have voted on specific cases.
• Shareholders must have access to the shareholders’ meeting by webcast or
telephone.
7. Financial Reporting
• The Management Board is responsible for the quality and completeness of
publicly-disclosed financial reports.
• The Supervisory Board supervises the monitoring of the internal procedures
for the preparation and publication of all financial reports.
• The external auditor can be asked questions at the shareholders’ meeting in
relation to his statement on the fairness of the annual accounts.
• The external auditor attends the meetings of the audit committee and the
Supervisory Board in which decisions are made on the periodic external
financial reporting.
• The Code lays down instructions on the content of the external auditor’s
report to the Management Board and the Supervisory Board.
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8. Monitoring of the Code

Starting from 2005, a special committee, the Corporate Governance Code
Monitoring Committee, has monitored the Code. The Committee particularly
focused on:
• the application of and compliance with the Code;
• the attendance rate of shareholders at General Meetings of Shareholders; and
• the remuneration of Management Board members.
The Committee will publish its final report mid-2008. In this report, the
Committee will make recommendations on possible amendments to the Code.
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IX. Personal Income Tax

1. General
In the Netherlands, private individuals are subject to personal income tax. Every
individual who lives in the Netherlands (i.e., a resident) is subject to taxation on
his or her worldwide income. An individual who does not live in the Netherlands
(i.e., a non-resident) is subject to taxation only on certain income from a Dutch
source, as stipulated by law. Examples include income obtained from a Dutch business
operated by a branch in the Netherlands, income obtained from Dutch real estate,
directors’ fees, income from employment in the Netherlands, and benefits from
a substantial interest (aanmerkelijk belang) in a company located in the Netherlands.
However, a non-resident may opt to be treated as a resident taxpayer for personal
income tax purposes, provided that the individual is a resident of the European
Union or of a country that has signed a double taxation treaty with the Netherlands
containing a provision on the exchange of information. Please note that some
articles are excluded by law for non-resident who have obtained resident status.
The Dutch tax authorities (Belastingdienst) may wish to tax recipients of Dutch
source income, but whether the tax authorities can actually do so depends on the
provisions set out in a treaty for the avoidance of double taxation in many cases.
A tax treaty will be applicable only if the recipient of Dutch source income is
a resident of one of the treaty countries.
2. 2001 Personal Income Tax Act

The 2001 Personal Income Tax Act distinguishes three types of income that are
subject to personal income tax and classifies them under “Box I,” “Box II,” and
“Box III.”
• Box I income includes profits, employment income, income from other
activities, and income deemed from residential home ownership.
• Box II income includes income from shares in case of substantial interest of 5%
or more.
• Box III income includes income from savings and investments. Each box has its
own rules for determining the tax base and its own tax rate. Income from Box
I is taxed at a progressive rate with a maximum of 52%.
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Income from Box II is taxed at a flat rate of 25% and income from Box III is taxed
at a flat rate of 30%. Box III income is set at a fixed notional yield of 4% of the
taxpayer’s average equity. There are impermeable “walls” between the three Boxes:
losses that the taxpayer incurs in Box I can be set off, i.e., carried backward or
forward, against Box I income only, and the same applies to losses in Box II. The
taxable income in Box III is calculated at 4% of the fair market value of the taxpayer’s
property, minus the amount of his or her outstanding debts and minus a basic
allowance of EUR 20,315. In other words, the tax burden on savings and investments
that fall within the scope of Box III, minus debts and the basic allowance, is 1.2%
(4% of income x 30% tax rate).
3. Income from Employment

Managing and Supervisory Directors
In general, remuneration received by managing directors and supervisory directors
of companies located in the Netherlands is subject to income tax, even if they are
nonresidents and perform their duties outside the Netherlands. The company
paying the remuneration must withhold wage tax (as a pre-levy on income tax)
on payments made to the directors.
Other Employees
Employment income earned by Dutch resident employees is fully subject to
personal income tax. Employees who are residents of a non-treaty country are
subject to Dutch income tax on their employment income to the extent that the
employment is deemed to be performed within the Netherlands. Employees who
are residents of a treaty country, but who work in the Netherlands are also subject
to Dutch tax. In general – based on international tax treaties (if applicable) -
employment income is taxed in the country where the work is performed.
However, it is possible for employees to be taxed in the country of residence if:
• The employee spends fewer than 183 days per calendar year in the working
country;
• The remuneration is not paid by an employer in that working country; and
• The remuneration is not charged to a branch of the employer in that working
country.
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4. Income Tax Ruling

The Dutch tax authorities grant special tax benefits to foreign employees who are
temporarily assigned to a Dutch subsidiary or branch from abroad, i.e., employees
who are resident in the Netherlands. Under the so-called 30% ruling, 30% of the
employee’s salary may be paid out as tax-free compensation for costs, and the
employee may, at his or her request, benefit from treatment as a nonresident for
tax purposes. Consequently, he or she will not be taxed on passive income such
as interest. Please note that in general, an addendum to the employment contract
should be drafted to apply the 30% ruling in respect of the agreed-on wages.
The main conditions attached to the 30% ruling pertain to:
a. The Employee’s Professional Position;
b. The Employee’s Prior Employment or Stay in the Netherlands; and
c. Status of the Employer.
The Employee’s Professional Position

There are two conditions with regard to the employee’s professional position:
1. An employee assigned to the Netherlands (or hired from abroad by a Dutch
company or branch) must have specific expertise. The specific expertise
requirement should be understood in a broad sense. As a rule, top-level
managers of international groups, scientists, teachers at international schools,
and personnel assigned in a job-rotation plan can be deemed to comply with
this requirement (provided that in the case of the last category, they have more
than 2.5 years of experience in the company).
2. The specific expertise must be scarce or unavailable on the Dutch labor
market. The employment contract does not necessarily have to be performed
in the Netherlands; the 30% ruling also applies to income earned in relation
to employment performed outside the Netherlands, provided such income is
taxable in the Netherlands on the basis of Dutch tax law or under a tax treaty.
This may be particularly relevant with respect to directors’ fees.
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The Employee’s Prior Employment or Stay in the Netherlands

The period during which the 30% ruling can apply is reduced by the amount of
time the employee has spent working or living in the Netherlands in the last 15 years.
However, this is not the case if the employee left the Netherlands more than 10 years
prior to returning and has not worked in the Netherlands in the last 10 years. The
30% ruling is granted for a maximum period of 10 years. The 10-year period
commences on the first day of employment or prior to arrival in the Netherlands.
Status of the Employer

In order to be able to apply the 30% ruling, the employer is obliged to withhold
wage tax in the Netherlands. In order to apply for the 30% ruling, the employer
and employee should file a joint application request with the Tax Inspector in Heerlen
(the Netherlands). Standard application forms are available for this purpose. In
principle, there is no time frame in which the request for the 30% ruling should be
filed. However, the application will have retroactive effect to the date on which
employment in the Netherlands commenced only if filed within four months after
that commencing date. If that period has expired, the 30% ruling will take effect
starting on the first day of the month following the month in which the application
form is filed. If the 30% ruling is not granted, it is possible to file an objection to
the tax inspector’s decision within six weeks.
5. Levy of Taxes
Dutch personal income tax is levied by a personal income tax assessment based on
a tax return submitted to the Dutch tax authorities. Taxpayers usually receive a tax
return automatically; it must be filed before April 1 of the following calendar year.
An extension of this period can be obtained by request.Wage tax, Dutch dividend
tax, or foreign withholding taxes already paid on personal income for the taxable
year, will be set off against the personal income tax due. On balance, this may
result in a refund or a payment of personal income tax. Non-residents are not
eligible for personal deductions, e.g., for alimony payments or losses incurred on
venture capital investments. The only exception is the deduction for mortgage
interest paid on a house located in the Netherlands. Labor costs are deductible by
means of a “Labor tax credit” for both resident and non-resident taxpayers.
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6. Income Tax Rates

General tax credit
The general tax credit is not specifically related to one of the Boxes and is credited
against the combined amount of tax due in Boxes I, II, and III income. Some
specific expenses that are not related to one of the boxes, e.g., some personal
obligations or exceptional expenses are deducted by means of a reduction in Boxes
I, II, or III income. The general tax credit is EUR 2,074 for individuals up to the
age of 65 and EUR 970 for individuals aged 65 or older.
Tax Rates
(i) The following four tax rates apply in 2008 for individuals up to the age of 65
and who are residents in the Netherlands.
The rate in the first bracket (33.60%) consists of 2.45% for income tax and
31.15% for social security contributions. The rate in the second bracket (41.85%)
consists of 10.70% for income tax and 31.15% for social security contributions.
The rates in the third and fourth brackets consist only of income tax.
Rate Taxable Income

33.60% up to EUR 17,579
41.85% EUR 17,579 up to EUR 31,589
42% EUR 31,589 up to EUR 53,860
52% in excess of EUR 53,860
(ii) The following four tax rates apply in 2008 for individuals aged 65 or older and
who are residents of the Netherlands. The rate in the first bracket (15.70%)
consists of 2.45% for income tax and 13.25% for social security contributions.
The rate in the second bracket (23.95%) consists of 10.70% for income tax
and 13.25% for social security contributions. The rates in the third and fourth
brackets consist only of income tax.
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Rate Taxable Income

15.70% up to EUR 17,579
23.95% EUR 17,579 up to EUR 31,589
42% EUR 31,589 up to EUR 53,860
52% in excess of EUR 53,860
Special Rates
There are no special tax rates in the 2001 Personal Income Tax Act.
7. Substantial Interest
Generally, an individual has a substantial interest if he or she, alone or together
with his or her partner (spouse or registered partner), directly or indirectly:
• owns 5% or more of the nominal paid-in capital of a company;
• has the right to acquire 5% or more of the nominal paid-in capital of
a company; and/or
• has a profit-sharing note entitling him, her, or them to 5% or more of
the annual profits or liquidation revenue.
If an individual holds less than 5% of the subscribed capital of a company, he or she
may nevertheless have a substantial interest if certain relatives also hold a substantial
interest in that capital. If an individual holds a substantial interest, all of his or her
other holdings in the company, including stock options, claims, and other forms of
profit participation will qualify as substantial interest and will be taxed as such in
Box II.
An individual who owns a substantial interest is taxed on all the benefits derived
from that holding, including regular periodic benefits, such as dividends and capital
gains received upon the disposal of shares in the company at the rate 25%. A capital
gain or loss consists of the transfer price minus the acquisition price. A capital loss
from a subscribed capital can be deducted only from income from substantial
interests in Box II.
Notwithstanding the above, if the individual places an asset at a company’s disposal
while that individual has a substantial interest in that same company, the income
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from the asset will be subject to personal income tax at the progressive rates of Box I.
Similarly, assets placed at a partnership’s disposal will be subject to personal income
tax at the progressive rates. The net income from option rights on the company in
which the individual holds a substantial interest will also be taxed at the progressive
rates of Box I.
Fictitious Salary
An employee or manager who works in a company in which he or she has a
substantial interest has to take a fictitious salary into account, which will be taxed
in Box I. The salary earned in a calendar year is, in principle, at least EUR 40,000
per employment contract. As a result, an employee with a substantial interest has
to earn at least the fixed amount of EUR 40,000, which is treated as taxable
income. However, the fictitious salary can be higher or lower, depending on the
specific circumstances of employment. The company has to pay wage tax over this
fictitious salary. The wage tax is a deductible salary cost item for corporate income
tax purposes.
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X. Corporate Income Tax

The Corporate Income Tax Act of 1969 (Wet op de vennootschapsbelasting 1969)
distinguishes between resident taxpayers and nonresident taxpayers. Dutch
subsidiaries of foreign companies are regarded as resident taxpayers, while Dutch
branches of foreign companies are regarded as nonresident taxpayers. Please note
that, as of 1 January 2007 a tax reform (known as “Werken aan Winst”) has been
approved in the Netherlands with reference to the corporate income tax (“2007 CIT
Reform”) whose aim is to make the Dutch corporate tax system more competitive
and efficient in the EU region. Among other things, the 2007 CIT Reform has
amended the corporate income tax rate, the participation exemption regime, the
domestic dividend withholding tax rates, certain rules on the interest and cost
deductions, as well as the availability of losses. It has also introduced optional
separate tax regime for intra-group financing income as well as for the exploitation
of Dutch registered patents (i.e., Group Interest Box and Patent Box).
1. Subsidiaries
Subsidiaries are subject to corporate income tax on their entire worldwide income.
Certain statutory exemptions do however exist.
Tax Rate
As of 1 January 2008, subsidiaries are taxed at a flat corporate income tax rate of
25.5% for profits that exceed EUR 200,000. However, profits up to EUR 40,000
are subject to 20% corporate income tax and profits between EUR 40,000 and
EUR 200,000 are subject to 23%. The tax rate of 25.5% applies to the excess.
Residency
A company incorporated under the laws of the Netherlands is deemed to be a
resident of the Netherlands for corporate income tax purposes. However, for certain
corporate income tax facilities, the residency of a company is not determined by its
incorporation under laws of the Netherlands. These facilities include the merger
and the demerger facilities, and the application of the fiscal unity regime. For these
particular tax facilities and in the case of a company incorporated under foreign
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law, the place of residence for Dutch corporate income tax purposes will be
determined by factual circumstances, whereby the seat of central management of
the company is of crucial importance.
Computation of Taxable Profits

The Dutch Corporate Income Tax Act of 1969 (Wet op de vennootschapsbelasting 1969)
does not prescribe a specific method for computing annual taxable profits. It only
requires that the annual profits be determined in accordance with sound business
practices and in a consistent manner from year to year, regardless of the probable
outcome. A modification of the method used is allowed only if it is justified by
sound business practice.
“Sound business practice” is not defined by law. The Supreme Court has held that
a system of computation is in compliance with sound business practice if it is based
on generally accepted accounting principles concerning the proper method of
determining profits. A system of computation is only deemed not to be in compliance
with sound business practice, if its application is found to be incompatible with
explicit statutory provisions.
As of 1 January 1997, Dutch companies may, upon prior request and subject to certain
conditions, calculate their taxable income in the functional currency of the group of
which they are a part. In this way, currency exchange risks may be eliminated.
Since the Corporate Income Tax Act of 1969 does not contain any schedules relating
to depreciation of capital assets, valuation of inventory, capitalization, amortization
of cost, and the like, there is considerable freedom in adopting a suitable system,
as long as it is in accordance with sound business practice. Dividend distributions
by a Dutch company are subject to a 15% withholding tax rate. That rate may be
reduced to a lower percentage, or even to zero, by virtue of a tax treaty or
EU regulations. See Section 20 and Appendix V.
The Arm’s Length Principle

The arm’s length principle is codified in the Corporate Income Tax Act of 1969.
The arm’s length requirement will be deemed not to have been met if the terms
and conditions of transactions between associated entities are such that unrelated
parties would not have agreed to them. In retroactively determining the income
realized by an entity, the Dutch tax authorities have the option of ignoring terms
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and conditions that would not have been agreed to by unrelated parties.With the
codification of the arm’s length principle, entities must document the information
based on which the transfer prices between the associated enterprises have been
agreed upon. The Dutch tax authorities will provide the taxpayer with a reasonable
term in which to collect the required information and incorporate it in its
administration.
Group Interest Box

The 2007 CIT Reform has introduced an optional separate tax regime for income
derived from group finance activities The mechanism of the Group Interest Box
provides that the balance of taxable interest received and interest paid in respect of
loans to and from related companies will be taxed (separately from the general
taxable base) at the effective rate of 5%. In order to apply the regime, a Dutch
corporate taxpayer and all related companies that are subject to Dutch corporate
income tax must make a joint election. For purposes of the Group Interest Box
regime, “related companies” are defined as companies that are ultimately related
through majority (more than 50%) interests.The amount of income that is taxed at
the 5% effective tax rate is obtained by multiplying a percentage over the average
fiscal net equity of the tax payer during a fiscal year. Such a percentage is equal to
the periodically-published interest rate that is applied to liabilities owed to or by the
tax authorities. The Group Interest Box will not enter into force until a “no-state
aid” declaration has been obtained from the European Commission.The European
Commission is currently scrutinizing the compatibility of the Group Interest Box
with the EU rules on state aid. If the Commission approves these measures, the
introduction will be retroactive to January 1 of the year in which the approval
is granted.
Patent Box
The 2007 CIT Reform has introduced an optional separate tax regime for income
deriving from the exploitation of Dutch registered patents, in order to create a more
attractive environment in the Netherlands to perform R&D activities. This regime
is referred to as the “Patent Box.” The income from a patent for purposes of the
Patent Box is defined as benefits minus related R&D expenses, other charges, and
amortization of the IP.
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Through elimination of part of the income from patents from the taxable base, such
income will effectively be taxed at a rate of 10%. The application of the Patent Box
regime is fully optional and applies only to patents that were first registered on or
after 1 January 2007.
As the Patent Box has already received the “no-state aid” declaration from the
European Commission, it is effective starting 1 January 2007.
Dividend withholding tax

The Dutch domestic dividend withholding tax rate is 15%. Such a percentage may
be lowered by means of the application of tax treaties and the EU Parent/Subsidiary
Directive. Furthermore, no dividend withholding tax is levied on dividend distributions
to companies residing in the European Union that have a minimum shareholding of
5% in the nominal contributed share capital of the Dutch entity, to the extent that
the EU shareholder meets the additional conditions required for the application of
EU Parent/Subsidiary Directive.
Finally, dividend withholding tax is refunded to companies residing in the European
Union and which are exempt from corporate income tax (such as pension funds), if
the exemption is also allowed under Dutch domestic rules.
2. Branches
Dutch branches of nonresident companies are regarded as nonresident taxpayers for
corporate income tax purposes.
Domestic Source Income

Nonresident taxpayers are subject to corporate income tax only on their domestic
source income. For practical purposes, the main domestic sources of income are:
• profits derived from any business carried out in the Netherlands by means of
a Branch or a Permanent Representative;
• income from a substantial shareholding as defined in Chapter 4 of the Individual
Income Tax Law of 2001 in a resident company (i.e., at least 5%), provided
that the shares are not considered business assets; and
• net income from immovable property located in the Netherlands.
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Domestic sources do not include royalties paid by domestic licensees, neither do

domestic sources include interest payments paid by Dutch branches.
Branch Profit Remittances

Branch profit remittances are not subject to withholding tax. The nonresident
company is regarded to be the taxpayer and not the Dutch branch of the company.
Computation of Taxable Profits

The Corporate Income Tax Act of 1969 does not contain any provisions on how
taxable profits should be attributed to a Dutch branch of a nonresident company.
In practice, the following principles govern the attribution:
• The branch is considered an independent entity for corporate income tax
purposes; and
• Intercompany transactions must be carried out on an arm’s-length basis.
Since the allocation of profits is difficult, the Dutch tax authorities are generally
willing to enter into agreements with taxpayers on the determination of the taxable
profits of the branch (an “Advance Pricing Agreement”), based on arm’s-length
allocation of income. These agreements are confirmed in writing in the form of
APAs and are strictly observed by the Dutch tax authorities.
Method of Taxation and Tax Rate

The determination of domestic source income is basically the same for branches
and subsidiaries. The branch is also subject to corporate income tax at the same
rate as the subsidiary, i.e., 25.5% (this is according to the rules that apply effective
1 January 2008). However, profits up to EUR 40,000 are subject to a 20% corporate
income tax as of 1 January 2008. Profits between EUR 40,000 and EUR 200,000
are subject to 23%. The tax rate of 25.5% is applicable on the excess profits.
Foreign Branch Profits

Profits earned by foreign branches of a Dutch resident company, are exempt from
Dutch corporate income tax if the branch is subject to foreign tax, regardless what
the rate might be. Foreign losses are deductible from domestic taxable profits.
However, future profits are, in principle, set off by such losses for the purpose of
applying the foreign corporate income tax exemption.
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3. Branch v. Subsidiary
As indicated above, branches and subsidiaries are taxed virtually on the same basis.
The main differences are described below:
1. Most tax treaties provide that certain auxiliary activities carried out in the
Netherlands do not constitute a branch for corporate income tax purposes and,
as a result, do not incur Dutch taxation. This exception does not apply to
Dutch subsidiaries.
2. The profit from a Dutch branch may be transferred to its headquarters free
from any withholding tax. Dividends paid to a foreign parent company are,
however, subject to Dutch dividend withholding tax at the ordinary rate of
15% (reduced to a lower percentage, or even to zero, by virtue of a tax treaty
or EU regulations).
3. Interest paid by a subsidiary on loans and royalties is, in general, tax deductible
if it is at arm’s length (however, see Section 6). Internal interest and royalty
payments are not taken into account between a branch and its headquarters.
4. Participation Exemptions
Basic Rule
Under the participation exemption regime, dividends received from a qualifying
Subsidiary and capital gains realized on the disposal of shares in such a subsidiary
are exempt from Dutch corporate income tax. The participation exemption includes
amendments to the sale or acquisition price of a qualifying participating interest.
In addition, the participation exemption includes changes in the value of a right to
installments of the sale or acquisition price of a participating interest, the number
and the amount of which installments were not fixed in the year of sale or acquisition.
The participation exemption may also apply to results on financial instruments
(including loans) covering currency exchange risks with respect to foreign participating
interests, provided a ruling is obtained in advance from the Dutch tax authorities.
Historically, the participation exemption regime resulted in the establishment of
thousands of holding companies in the Netherlands. Up to 31 December 2006, the
participation exemption was applicable if the Dutch parent company held at least
5% of the nominal paid-up share capital of a subsidiary and the shares were not
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held as inventory. With regard to foreign participations, there were two additional
requirements, i.e., that the subsidiary is subject to tax and that the subsidiary is not
merely held as a portfolio investment.
2007 CIT Reform: amendments to the requirements

As of 1 January 2007, the 2007 CIT Reform has amended the participation exemption
regime. The reform is aimed, among other things, at simplifying the regulations
applicable to the participation exemption and making this regime more “competitive”
and fully compatible with EU rules.
The 2007 CIT Reform replaces the former requirements with a simple rule, pursuant
to which the participation exemption which will apply to any participation of at least
5% in domestic and/or foreign subsidiaries or entities, unless such an investment
is considered both a Passive Investment (pursuant to an asset test on a consolidated
basis) and subject to less than 10% taxation on a stand-alone basis. Pursuant to the
new rules, an investment qualifies as Passive Investment subject to less than 10%
taxation if:
a. The assets of the subsidiary/entity, directly or indirectly, consist of more than
50% of “free” portfolio investments1; and
b. The subsidiary is not subject to tax on profits which results in a tax levy of at
least 10% on profits, recalculated according to Dutch tax standards (and without
taking into account loss carryforward, double tax, or group reliefs). In sum,
the revised participation exemption applies to any shareholding of at least 5%
in both (i) active companies (regardless of the level of taxation); and (ii) Passive
Investments that are subject to an effective tax rate of 10% or more. This extends
the possible application of the participation exemption regime to a number of
new and very interesting scenarios, as briefly indicated in item 5 below.
On the other hand, income derived from Passive Investments that are subject to an
effective tax rate of less than 10% is taxed at the standard corporate income tax
____________________
1 “Free portfolio investments” are defined as portfolio those not reasonably necessary for the
business activities of the company holding the portfolio investments.This definition includes
intra-group financing, leasing, and licensing activities, unless such activities qualify as ‘active’
pursuant to detailed safe-harbor rules.
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rate of 25.5%. However, a tax credit applies to such income. This credit is set at
5% of the gross benefits derived from the Passive Investment (i.e., capital gains/losses
and dividends). If the passive investment itself is not taxed at all, no credit is granted.
Pursuant to the EU Parent-Subsidiary Directive, when the Passive Investment is
located within the EU and certain other conditions are met, the taxpayer can opt
for a credit matching of the actual underlying tax paid.
In addition to the foregoing, as of 1 January 2007, the following additional features
have been implemented.
An important change for real estate investment subsidiaries is that the participation
exemption will always apply to these subsidiaries, provided that 90% of the assets
of these subsidiaries consist of real estate (see item f below). Generally, no exemption
is available in cases where the minimum shareholding requirement of 5% is not
met. However, the participation exemption will be applicable if another group
company (whether resident in the Netherlands or elsewhere) has a shareholding
of 5% or more in the same subsidiary. Where the Netherlands taxpayer owned,
as of 31 December 2006, an interest in a subsidiary of less than 5% in relation to
which the participation exemption applied on the basis of the old legislation, the
participation exemption remains available for three more years on this participation.
Furthermore, profit participation rights and hybrid instruments as described in
Section 6 under letter b can benefit from the participation exemption regime if
the creditor has a qualifying investment in the debtor.
Expenses incurred in relation to Participating Interests

Apart from certain provisions limiting the deduction of interest expenses (as indicated
in Paragraph 6 below), as a general rule, all expenses incurred in connection with
a subsidiary qualifying for the participation exemption are deductible. Expenses
related to the acquisition of a subsidiary to which the participation exemption
applies are added to the cost-price of the subsidiary and therefore not effectively
tax deductible.
Expenses incurred in connection with the disposal of a qualifying subsidiary are,
as of 1 January 2007, no longer deductible.
Currency losses realized on loans used to fund participations must be recognized as
soon as they are incurred, whereas a currency gain will normally be taxable upon
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redemption of the loan. For companies that fund foreign participating interests with
loans denominated in currencies other than the Euro, it is particularly important to
check whether it is possible to avoid exposure to currency exchange risks by applying
for fiscal accounting in the functional currency.
Capital Losses under the Participation Exemption

As a general rule, capital losses and a decline in value of the shares in a qualifying
participating interest are not deductible. However, subject to complex anti-abuse
rules (which will not be discussed exhaustively here), such a general rule is subject
to the following exception. Losses incurred on a completed liquidation of the
subsidiary are deductible. Generally, the deductible amount is equal to the difference
between the funds invested and the liquidation proceeds. This amount will be reduced
by dividend payments made in the previous five (or sometimes ten) years. Liquidation
losses may not be deducted if the activities of the liquidated subsidiary are continued
elsewhere within the same group. Deduction of losses incurred in the liquidation
of an intermediate holding company may be denied in certain situations. If a foreign
branch is converted into a subsidiary, the participation exemption will, under certain
circumstances, apply only once losses of the branch incurred in the past have been
recovered.
Conversion of Loans
In the recent past, a conversion into equity of a loan that had (partially) been
written off could lead to a direct realization of taxable profit for the debtor, which
might have reduced the losses that were eligible for setoff. The difference between
the book value of the loan and its fair market value would form taxable income for
the debtor. However, since this provision was met with considerable resistance
in the corporate market (especially due to its adverse consequences for internal
reorganizations and acquisition structures), a new way of taxing “conversion profits”
was introduced.
In the new system, which applies effective early 2006, under certain circumstances,
the Dutch creditor realizes a gain upon conversion of a loan to its subsidiary if this
loan has been written off by the creditor. However, this gain is not taxed immediately.
Instead, a revaluation reserve is created upon conversion, equal to the amount by
which the loan has been written off. If the fair market value of the loan increases
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again after its conversion into equity, a taxable profit is recognized for the amount
of the increase. The revaluation reserve is simultaneously written off for the same
amount of profit.
New Possible Tax Planning Opportunities as of 1 January 2007

Within the framework of the 2007 CIT Reform, the application of the participation
exemption may be extended to a number of interesting scenarios, depending on
certain facts and circumstances. Below are certain significant examples.
Active Companies located in “Tax Havens”

Active companies in tax haven jurisdiction used to be disqualified for the participation
exemption due to the subject-to-tax requirement. As this requirement was removed
for active companies, 5% or more investments in active operations that are completely
exempt from local taxation are now eligible for the Dutch participation exemption.
This renders the Netherlands more attractive than in the past for all sorts of active
investments in jurisdictions that traditionally do not levy a profit tax or grant
extensive tax holidays and that are currently referred to as “tax havens.”
Mutual Investment Funds and Private Equity Funds

In respect of mutual investment funds, the participation exemption regime used to
be available only to 5% quota holders in Dutch mutual investments funds. Presently,
provided that the active asset test is satisfied, a Dutch holding company may apply
the participation exemption to such investments regardless of the jurisdiction in
which the fund is located. This makes the Netherlands an excellent jurisdiction
for feeder companies holding larger investments in certain mutual and private
equity funds.
Hybrid Instruments
The participation exemption for proceeds from hybrid debt instruments in cross-
border situations used to be contingent on the requirement that these proceeds were
nondeductible at the level of the debtor. The rationale of this requirement was the
prevention of double dip structure resulting from mismatches in the classification of
debt instruments in the jurisdictions involved. The removal of such condition and
the extension of the participation exemption regime to hybrid instruments with
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certain characteristics (as indicated in Section 6, letter b) may open the door to
new double dip structures whereby a Dutch parent company will derive exemption
benefits from instruments leading to a deduction in the country of issuance.
Real Estate Companies

Finally, the amendments to the participation exemption regime are particularly
favorable with respect to real estate companies. If more than 90% of the property
of the subsidiary (on a consolidated basis) consists of real estate and that real estate
is not directly or indirectly owned by a fiscal investment institution, the participation
exemption applies, provided the parent company holds at least five percent of the
shares in the subsidiary.
This “90% Test” must be considered on the basis of the subsidiary’s consolidated
balance sheet, with intercompany receivables and debts being set off against each
other, meaning that they will not have any effect on the minimum real estate
percentage. The value of the assets must be determined on the basis of their fair
market value. From 2007 onwards, it is therefore important to separate, as far as
possible real estate investments from business activities such as property management.
If this is done properly, both the investment activities (real estate investment) and
the business activities would qualify for the participation exemption.
5. Capital Gains
Capital gains are generally subject to corporate income tax at the ordinary rate.
Capital losses need not be deducted from capital gains, but may be deducted in full
from business profits.
Under certain conditions, however, taxation of capital gains may be delayed:
(a) Capital gains on voluntary or involuntary disposition of tangible and certain
intangible capital assets may usually be temporarily reserved (“reinvestment
reserve”); and
(b) Capital gains earned when the capital asset is exchanged for another capital
asset that has the same economic function in the business. For assets with
a maximum depreciation period of 10 years, the acquired asset need not have
the same economic function within the business as the replaced asset.
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The gain may even be exempt:

(c) Capital gains on the disposition of qualifying equity participating interests in
resident or nonresident companies (as referred to above in Section 4 regarding
the participation exemption); and
(d) Capital gains on the transfer of assets (comprising a business or an independent
part thereof) by one corporate taxpayer to another in exchange for shares (see
Section 13 below).
6. Limitations on Deductions of Interest

This Section provides an overview of certain restrictions on the deduction of interest
expenses considering certain peculiarities of hybrid loans. Article 10a Corporate
Income Tax Act 1969 Interest payments (including related costs and foreign exchange
results) in relation to “tainted debt” are disallowed under article 10a CITA. Tainted
debt basically is debt which was incurred from a related company or individual
(e.g., the shareholder) in order to fund a profit distribution, a capital contribution
in a related entity (e.g., a participation of at least 33%) or to acquire shares in another
entity (which is or becomes a related entity as a result of the acquisition).
The interest expense in relation to these tainted loans is not deductible, unless:
• it can be demonstrated that the contribution of loan capital instead of equity
is largely based on commercial motives (i.e., business reasons; the business
reasons criterion is used to exclude tax-driven schemes from eligibility for
interest deduction, the saving of taxes therefore will not qualify as a business
reason) or, alternatively
• the interest payments are effectively taxed in the hands of the creditor at a rate
of 10% in accordance with Dutch tax standards; the so-called “compensatory
tax exception” (the use of loss carryforward or ACT credits is not allowed if the
tax inspector can argue that the payments will not be effectively taxed due to
losses or claims arising in a current year or in the near future; no compensatory
tax will be deemed to exist).
As of 2008, this “compensatory tax exception” does not apply any longer if the tax
authorities can reasonably establish that the loan, or the transaction in connection
with which the loan was given, has not predominantly been entered into for business
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reasons. This means that meeting the 10% compensatory tax threshold at the level
of the creditor does not necessarily entail the deductibility of interest at the level of
the debtor, as the tax authorities still have the opportunity to challenge a deduction
for interest on a loan if the loan came into existence without sufficient business
reasons. As the law does not include a grandfathering rule for existing loans, the
deductibility of interest on all related party loans that were until 1 January 2008
defended on the compensatory tax exception, may potentially be challenged by the
Dutch tax authorities.
Article 10, 1,d CITA Hybrid Loans

Debt is re-qualified into equity for tax purposes if the hybrid loan meets certain
requirements. As a result, the interest on hybrid loans is also re-qualified into
dividend and thus not deductible for corporate income tax purposes (or received
tax-exempt under the participation exemption, if applicable).
Debt is re-qualified into equity for tax purposes, if the following conditions
are fulfilled:
• The remuneration on the loan depends (almost) entirely on the profit of
the borrower;
• The loan is subordinated to all creditors, and
• The loan has no term, but can be reclaimed only in case of insolvency,
liquidation of debtor, or if it has a term of more than 50 years.
Conversely, the participation exemption regime applies to income and gains
received on hybrid loans, provided that:
• the creditor of the hybrid loan also has a shareholding in the issuer that qualifies
for the application of the participation exemption regime;
• a related company of the creditor of the hybrid loan has a shareholding in the
issuer that qualifies for the application of the participation exemption regime;
and
• the issuer is a related company of the creditor.
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Finally, the (non-)deductibility of the interest paid at the level of the debtor in
another country is not relevant for the application of the participation exemption in
the Netherlands at the level of the creditor. This may lead to an opportunity to tax
efficient double dip structures.
Article 10b Corporate Income Tax Act 1969

The interest paid and capital losses realized on a loan are not deductible, provided,
the following characteristics are present:
• Debtor and creditor of the loan are allied companies;
• The loan has no term or a term of more than 10 years; or
• The remuneration on the loan deviates considerably (i.e., by 30% or more)
from an arm’s-length interest rate.
If the redemption date of the loan is postponed, the term of the loan will be
deemed extended accordingly as of the date of issuance of the loan.
Thin Capitalization Rules

As of 1 January 2004, the Dutch Corporate Income Tax Act includes restrictions
on the deductibility of interest expenses in the case of companies that are largely
financed with debt. These “thin capitalization rules” can be summarized as follows:
In principle, the thin capitalization rules provide for a fixed maximum 3:1 debt-to-
equity (D/E) ratio, which means that interest (including expenses) on the excess
will not be deductible if and to the extent that the total debt exceeds three times
the total equity. Whereas debt is taken into account in establishing the D/E ratio,
only interest paid to related parties may be disallowed (and only if and to the extent
that such interest exceeds interest received from related parties). Consequently,
interest on third-party debt will remain fully deductible, although under certain
circumstances third-party debt may be considered related-party debt if guaranteed
by a related company.
The basic rules are reasonably clear: the D/E ratio is established on an annual basis
by taking into account the non-weighted average equity at the beginning and at the
end of the year. In addition, a de minimis rule is applicable, whereby interest on the
first EUR 500,000 of debt in excess of the ratio remains deductible.
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For the purpose of calculating this D/E ratio, “debt” is defined as the balance of all
loans payable and all loans receivable (e.g., for a company with 200 equity, 1400 debt,
and 800 loans receivable, and hence 600 net debt-all interest remains deductible),
to the effect that the thin cap rules will not affect the mere borrowing and lending
of funds within a group. Furthermore, “equity” is the company’s equity for tax
purposes, excluding fiscal reserves and with a deemed minimum of EUR 1. As an
alternative to applying the fixed D/E ratio, a company may from year to year decide
to apply the average D/E ratio of the (international) group to which it belongs as
its maximum D/E ratio. Unlike the fixed ratio for this purpose, the respective
D/E ratios will be established on the basis of the respective statutory (consolidated)
accounts, if possible, based on the same accounting principles. This alternative may
serve, for instance, companies active in a business with relatively high debt financing
or with a high D/E ratio due to losses.
7. Flow-Through Entities
As of 1 January 2002, Dutch entities that do not incur a genuine risk in respect of
intra-group loans or royalty transactions are no longer permitted to credit the foreign
withholding taxes related to such interest or royalty income. The flow-through
entity is in fact treated as an intermediary company. Technically, the denial of the
credit is achieved by excluding the interest and royalties received and paid from the
tax base in the Netherlands. The interest and royalties received and paid are excluded
from the Dutch tax base under the following conditions:
(a) the Dutch entity receives and pays interest or royalties to and from a foreign
entity within the same group;
(b) the interest and royalties received and paid relate directly or indirectly to a loan
or a royalty transaction;
(c) the transactions are “closely connected;” and
(d) the flow-through company does not incur a genuine risk that can affect its equity.
A flow-through company is deemed to incur a genuine risk in respect of a loan if
the equity is at least 1% of the outstanding loans or EUR 2,000,000 and the taxpayer
can prove that the equity capital will be affected if a risk arises. Even though the
interest and royalty income and expenses are excluded from the taxable income,
the flow-through entity should still report an arm’s-length remuneration with
regard to the services relating to the loan or royalty transaction.
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During informal discussions in 2005 between tax advisors and the Dutch revenue,
representatives of the Dutch revenue have indicated that a flow-through company is
deemed to incur a genuine risk in respect of the receipt and payment of royalties if
the equity of the flow-through entity is at least below 50% of the expected gross
royalty payments to be made by the flow-through company or EUR 2,000,000 and
at least 50% of that amount is paid in advance to the licensor.
8. Dividend Stripping
A refund, reduction, exemption, or credit of Dutch dividend withholding tax on
the basis of Dutch tax law or on the basis of a tax treaty between the Netherlands
and another state will be granted under the Dutch Dividend Tax Act of 1965 only
if the dividends are paid to the beneficial owner of the dividends. Using so-called
dividend stripping transactions, taxpayers subject to dividend withholding tax have
sought to benefit from tax treaty and domestic law provisions to which they would
not be entitled themselves, e.g., by transferring shares temporarily to another party
that would benefit from a full exemption from dividend withholding tax. The Dutch
tax authorities took the position in court that the parties that temporarily acquired
the shares were not the beneficial owner of the dividends. These attempts were
however unsuccessful; after the Dutch tax authorities lost a number of cases in
court, the legislator decided to introduce dividend stripping rules which basically
set out when a party cannot be considered the beneficial owner of the dividends.
A natural person or a legal entity is not deemed to be the beneficial owner if, in
relation to becoming entitled to the dividend distribution, that person or entity has
paid a consideration (in the broadest sense) within the framework of a combination
of transactions, where it may be assumed that:
(a) all or part of the dividend distributions that have been made, directly or
indirectly (for instance, due to the payment of the consideration), for the
benefit of:
1. an individual or legal entity with respect to whom or which no exemption
may be granted from the withholding obligation, whereas such exemption
may be granted with respect to the party paying the consideration; or
2. an individual or legal entity (again, usually the original shareholder) whose
entitlement to a reduction or refund of dividend tax is lower than that of
the party paying the consideration; and
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(b) that individual or legal entity, directly or indirectly, retains or acquires a

position in stock, profit-sharing certificates, or profit-sharing bonds that is
similar to its position in such stock, profit-sharing certificates, or profit-sharing
bonds before the date on which the combination of transactions referred to
above commenced.
Certain factors reduce the chance of a dividend stripping situation arising, such as
the period between the moment of the transfer and the dividend distribution, the
character of the dividend (regular, incidental, or liquidation distribution) and the
duration of the transfer.
The Dutch tax authorities are responsible for providing proof of dividend stripping
under the new provision. In the event of a dividend stripping transaction, the
Dutch company has to withhold 15% withholding tax on its dividend distribution.
Regrettably, if the conditions for dividend stripping have been established, no
reduction of the 15% withholding tax is provided even if the deemed economic
owner would have been entitled to a certain credit, reduction, or refund (e.g., 10%
instead of 15%).
9. Tax Incentives
The following measures provide tax relief to taxpayers:
Investment Allowance
The investment allowance (investeringsaftrek) is limited to small investments
(EUR 2,100 to EUR 236,000) and comprises a deduction of a percentage (in a
degressive scale from 25% to 1%) of the invested sum from the profits of the year
in which the investment was made. In addition, an investment allowance of 44%
is available for energy-saving investments (EUR 2,100 to EUR 111,000,000).
Furthermore, an investment allowance of 15%, 30%, or 40% is available for certain
qualified environment investments (but not if an energy investment has already
been applied for).
If, within five years after the beginning of the calendar year in which the investment
took place, more than EUR 2,100 in assets for which an investment allowance was
claimed is disposed of, a proportionate percentage would be added to the company’s
profit (divestment addition or desinvesteringsbijtelling). Withdrawal from an asset is
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deemed to be a disposal in this respect. Assets that are used for the operation of a
business to which a regulation to prevent international double taxation applies are
excluded from the investment allowance.
Random Depreciation
Random accelerated depreciation (e.g., in one year) can be claimed for certain
environmental-friendly assets that are on a list of assets and regions compiled by the
Ministry of Environmental Affairs. In addition, other assets on a list compiled by
the Ministry of Economic Affairs are eligible for random depreciation.
Furthermore, the motion picture industry may also claim random depreciation or
apply for an investment allowance.
Tax-free Reserves
A tax-free allocation of profits to a reserve is permitted in two instances, provided
that proper accounting records are maintained. Such reserves may be made (a) for
the purpose of spreading intermittently recurring costs (“equalization reserve”);
and (b) for replacing tangible or intangible capital assets in case of voluntary or
involuntary disposition (“reinvestment reserve”).
10. Losses
As of 1 January 2007, a tax loss incurred during a fiscal year can be carried back to
the preceding or carried forward to the nine subsequent years, subject to certain
detailed anti-abuse provisions. This means, for example, that a tax loss in 2007 can
be credited with taxable profit of the year 2006 or with the years 2008 up to and
including 2016. As a transitional rule, all tax losses incurred up to and including
2002 can be carried forward for compensation with taxable profit of the years 2007
up to and including 2011. This means that tax losses incurred before 2003 will
expire as of 2012.
The amount of tax losses that may be carried back or forward has to be determined
by the Dutch tax authorities, which they will do after the taxpayer files its annual
corporate income tax return. In sum, the anti-abuse provisions restrict loss
compensation if both (i) at least 30% of the ultimate shareholders in a company
have changed as compared to the oldest year in which the losses were incurred; and
(ii) the change of control has occurred after the company terminated or largely
reduced its former business activities.
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Losses incurred in years during which the taxpayer qualifies as a holding company
(i.e., during 90% of the year, 90% or more of its work consists of holding or group
financing activities) can be set off only against profits derived in years during which
the taxpayer also qualifies as a holding company. This rule should prevent purely-
holding companies from initiating active operations with the (exclusive) aim to set
off their (holding) losses against operating profits.
In addition, holding company losses may neither be carried forward if a holding
company increases the balance of its intercompany loans and liabilities (compared
to the balance in the year when the loss was incurred) aimed at generating additional
interest income which is to be set off against previous losses. The law provides for
a safe harbor rule: companies with at least 25 full-time employees who are not
engaged with the holding (management) of subsidiaries or the financing of affiliates
are deemed not to be holding companies for loss compensation purposes.
11. Liquidation
Capital gains arising from the liquidation of a company are subject to corporate
income tax at normal rates, unless an exemption applies (e.g., participation
exemption to capital gain on qualifying shareholding).
Liquidation distributions to shareholders are treated as follows:
(a) Repayment of paid-in capital, including share premiums and capitalized profits,
but excluding retained earnings, is tax-free (with certain exceptions); and
(b) Any other payment is deemed to be a dividend, and therefore subject to
dividend withholding tax. Dividend withholding tax will not be levied if the
recipient is
(i) a Dutch resident company that qualifies for the participation exemption;
(ii) an EU resident company that qualifies for the EU Parent-Subsidiary
Directive and at the time of the liquidation holds at least 5% of the issued
and paid-in capital of the distributing company; and/or
(iii) a recipient that may benefit from an exemption based upon a tax treaty.
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12. Mergers and Demergers

Business Merger
Taxation of capital gains, realized on the transfer of the assets and liabilities (comprising
a business or an independent part thereof) of one company to another (existing or
newly incorporated) company may be “rolled over” under the “merger exemption”
if the business is transferred in exchange for shares in that other company. This
exemption is subject to the following conditions:
(a) The only compensation received by the transferring company consists of shares
in the receiving company;
(b) The future levy of corporate income tax is assured. This condition implies that
for tax purposes, the transferee company must take the same basis in the assets
and liabilities the transferring company had immediately prior to the transfer;
(c) None of the companies suffered losses eligible to be carried forward prior to
the merger;
(d) Both companies are subject to the same tax regime. This would not be the case
if, for instance, one company is an regular taxpayer while the other company
qualifies as an investment institution and is therefore subject to a 0% corporate
income tax rate; and
(e) The shares acquired by the transferring company are not disposed of within
three years.
Under Dutch tax law, mergers and demergers can be exempt from Dutch corporate
income tax provided certain requirements are met. In general, the legal merger
and demerger exemption does not apply if the merger/demerger is predominantly
pursued with the aim of avoiding or deferring taxation.
The Ministry of Finance issued several regulations in the form of “standard conditions”
that must be met for the merger exemption to apply if some of these conditions are
not met. This exemption has undergone only technical changes as a result of the
implementation of the EC Merger Directive. For instance, the exemption is also
applicable if a permanent establishment of a nonresident company is converted into
a resident company. In principle, this exemption will apply only insofar as the transfer
of assets leads to a full financial and economic integration of the business involved.
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Merger by Share-for-Share Exchange

As a result of the implementation of the EC Merger Directive, it is possible for a
nonresident taxpayer (e.g., an individual) holding shares in a Dutch corporation to
exchange those shares for shares in another EU corporation without triggering
Dutch corporate income tax. Once again, specific requirements must be fulfilled.
One of the most relevant conditions is the condition that both EU corporations
involved in the merger must be qualified corporations. Furthermore, the (acquiring)
corporation must acquire more than 50% of the voting shares in the Dutch
corporation.
Legal Merger
The Corporate Income Tax Act of 1969 also provides for the “legal merger” facility,
whereby the assets and liabilities of the absorbed company are passed on to the
absorbing company, and the absorbed company itself ceases to exist. The shareholders
in the absorbed company receive shares in the absorbing company. The two companies
are basically amalgamated into one, without the necessity of liquidating the absorbed
company. Alternatively, a new third company can absorb the assets and liabilities of
the two former companies.
One of the conditions for a legal merger is that both companies involved must be
either NVs or BVs. In practice, the tax treatment of a legal merger will be similar
to that of a business merger.
Demerger
In general, the legal demerger of companies allows the transfer of all or part of the
property, rights, interest, and liabilities of one legal entity to one or more other
legal entities by means of a universal transfer of title, i.e., without the separate
transfer of all of the assets and liabilities.
The main principle is that the shareholders of the legal entity being demerged all
become shareholders of the transferee-company (i.e., the acquiring company or
companies). In general, two main types of demerger may be distinguished:
• a full demerger whereby the property, rights, interests, and liabilities of a legal
entity that ceases to exist on completion of the demerger are acquired by two
or more other legal entities; and
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• a partial demerger involving a split whereby all or part of the property, rights,
interests, and liabilities of one legal entity are acquired by one or more other
legal entities (the original legal entity does not cease to exist on completion
of the demerger). Demergers can be effected without corporate income tax
being incurred under certain conditions, which is quite similar to the condition
for the transfer of assets.
13. Fiscal Unity

The Dutch Corporate Income Tax Act of 1969 provides for a fiscal unity regime
that, subject to certain conditions, permits companies that are members of a fiscal
unity to file a consolidated tax return. Upon request, companies that are tax residents
of the Netherlands (an NV, BV, a cooperative, or a mutual guarantee association)
may form a fiscal unity with subsidiaries in which a participation of at least 95% is
held. The main advantages of the fiscal unity regime are that profits and losses may
be freely set off among the members of the fiscal unity and members can avoid the
realization of income on transactions between them. After the formation of a fiscal
unity, only the parent company is in fact recognized as a taxpayer for Dutch corporate
income tax purposes. Any income or expense at the level of the subsidiary company
is automatically aggregated at the level of the parent company.
The most important characteristics of a fiscal unity are:
(a) To opt for fiscal unity, a parent company must own at least 95% of the shares of
a subsidiary;
(b) Under certain conditions, qualifying subsidiaries may enter into a fiscal unity
with the parent company during the fiscal year (e.g., as of the date of acquisition
of the subsidiary);
(c) Fiscal unities may be ended towards one or more consolidated subsidiaries
during the course of the fiscal year (e.g., as of the date of disposal of the
subsidiary);
(d) A company leaving the fiscal unity may, under certain conditions, retain losses
that have not yet been set off and that were incurred during the fiscal unity
period, provided that these losses were attributable to that company; and
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(e) Under certain conditions, Dutch permanent establishments of foreign companies

may enter into fiscal unity with a Dutch (resident) company or another Dutch
branch of a foreign company, provided that there is a shareholding of at least
95% between the companies.
14. Investment Companies (FBI)

Investment Companies (Fiscale Beleggingsinstelling, hereinafter referred to as “FBI”)
enjoy a beneficial tax regime if certain requirements are met. Based on this regime,
profits are not subject to tax, under the obligation to distribute the net investment
income within eight months of the following financial year. Furthermore, capital
gains are not mandatorily distributed and can instead be transferred to a tax-free
“reinvestment reserve.” Please note that profit distributions (except for a distribution
of the reinvestment reserve) will trigger the application of a 15% Dutch dividend
withholding tax, unless reduced by an applicable tax treaty or the Parent Subsidiary
Directive.
Recently, certain requirements of the FBI regime (i.e., accessible to foreign legal
entities, shareholders’ requirements, and real estate development activities) have been
amended. The changes were mainly intended to remove certain features from the
regime that represent potential infringements to EU law. Furthermore, the scope
of the regime with respect to real estate development activities has been amended.
In order to qualify as an FBI, the following cumulative requirements must be met
throughout the entire tax year:
1. The FBI must be set-up as a Naamloze vennootschap (“NV”), besloten vennootschap
(“BV”), Fund for Joint Account, or any other Dutch resident entity established
under the laws of the Netherlands Antilles, a European Union Member State or
any other state in case a Double Tax Treaty has been concluded with that other
state, provided the legal form of these foreign entities is comparable to the NV,
BV, Fund for Joint Account;
2. The (statutory and actual) activities are collective passive investments;
3. Debt is maximized at 60% of the tax book value of real property investments
and 20% of the tax book value of other investments;
4. The net investment income must be distributed within eight months of the
following financial year;
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5. The net investment income must be distributed pro rata to all participants.
Furthermore, there cannot be any differences in distribution rights (e.g., income
and accumulation shares);
6. If the vehicle is quoted on a financial market under the Financial Supervision
Act, or the vehicle/its trust has a license under the Financial Supervision Act or
has been exempt from being licensed:
• the interest is not held for 45% or more by an entity which is subject to
a profit tax (excluding qualifying investment institution) or by two or
more of these entities if they are related as defined in the law; and
• individuals cannot have an interest of 25% or more in an exempt
investment company quoted on a financial market under the Financial
Supervision Act or in a non-quoted exempt investment company which
has a license under the Financial Supervision Act;
7. If the vehicle is not quoted on a financial market under the Financial Supervision
Act, or the vehicle/its trust does not have a license under the Financial
Supervision Act or has not been exempt from being licensed:
• at least 75% of the interest must be directly or indirectly held by individuals
or exempt investors, or by investment institutions quoted on a financial
market under the Financial Supervision Act; and
• individuals cannot hold an interest of 5% or more;
8. The interest in the vehicle is not held for 25% or more by Dutch resident
companies via a nonresident corporate shareholder; and
9. A director or more than half of the members of the supervisory board cannot
be a director, a member of the supervisory board, or an employee of an entity
which holds (alone or together with related entities) 25% or more of the shares
in the vehicle, unless this latter entity is quoted on a financial market under the
Financial Supervision Act.
With regard to the requirements (6) and (7), we note that under certain conditions,
the Dutch tax authorities accept that these requirements are not yet fulfilled during
the two years following the incorporation of the FBI. Fiscal reserves or goodwill
will be taxed at the moment the FBI regime becomes applicable. However, the
regime cannot apply automatically.
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Real estate development activities are now allowed by the FBI or by 100%
subsidiaries of an FBI, under the following limitations:
• The FBI is allowed to hold shares in a subsidiary that conducts real estate
development activities. Such subsidiary will be taxed against the regular
25.5% corporate income tax rate. The FBI is explicitly not allowed to develop
real estate in the FBI itself;
• If the FBI wishes to develop its own real estate investments, the subsidiary
may develop the real estate held by the FBI in exchange for an arm’s-length
remuneration. The result is a taxable development activity at the level of the
subsidiary and exempt passive investment income at the level of the FBI;
• The renovation of real estate by the FBI itself is also allowed, as long as the
costs related to the renovation stay within 30% of the fair market value of the
real estate.
As from 1 January 2008, a new credit mechanism was introduced for FBI’s. Based
on this credit mechanism, Dutch dividend withholding tax that should be paid by
the FBI to the tax authorities can be reduced by the Dutch and foreign withholding
tax levied on investment income of the FBI.
15. Exempt Investment Fund (VBI)

Currently, investments are pooled via the FBI regime mentioned above, or via
a transparent entity. The main advantage of the FBI is that the proceeds from
the investments are not subject to corporate income tax. However, the profits
(excluding capital gains) realized by the FBI must be distributed to the participants
annually and, consequently, become subject to 15% Dutch dividend withholding
tax. In order to create a more favorable regime (i.e., no mandatory distribution of
dividends, no dividend withholding taxation in the Netherlands) a second investment
vehicle (Vrijgestelde Beleggingsinstelling, herein referred to as “VBI”) has been
introduced as from 1 August 2007.
Any taxpayer in the Netherlands that is subject to corporate income tax can opt for
the application of this VBI regime, provided the following requirements are met:
• The VBI must be set up as a Naamloze vennootschap (“NV”), Fund for Joint Account,
or any other Dutch resident entity established under the laws of the Netherlands
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Antilles, a European Union Member State or any other state in case a Double
Tax Treaty has been concluded with that other state, provided the legal form of
these foreign entities is comparable to the NV, BV, Fund for Joint Account;
• The VBI should be set up as an open-end investment fund, meaning that the
fund should allow the repurchase of shares at regular moments;
• The VBI regime is stricter towards the allowed activities. It is only allowed to
invest in so-called “financial instruments” as defined in the MiFID, e.g., shares,
bonds, options, futures, swaps. It is allowed to invest in Dutch and foreign real
estate indirectly, i.e., via a (non-transparent) Dutch or foreign entity or a real
estate investment fund. In addition, it is possible to invest in foreign real estate
through a transparent or non-transparent entity or partnership, while the
limitation is only focused at Dutch real estate.
Please note that due to the lack of tax treaty protection, withholding tax levied by
the investor country will be actual costs for the investment fund. Interest bearing
investments (instead of dividend generating investments) are therefore most
interesting, since less countries levy interest withholding tax;
• The VBI has no specific shareholders requirements, thus individuals, corporations,
and institutional investors can invest via a VBI. However, in order to meet the
collective investments test, the VBI regime may not be used as a portfolio
investment company that was primarily set-up for one shareholder; and
• The VBI should be diversifying risks, meaning it cannot invest in one asset only
(apart from feeder funds).
The VBI regime does not have any distribution obligations. However, Dutch
(corporate and individual) investors do have to revaluate their interest to fair
market value every year, as a result of which the underlying (realized and
unrealized) income will be taxable at the level of the Dutch shareholders.
Note that the Dutch participation exemption does not apply to a shareholding in a
VBI. Furthermore, a VBI cannot credit withholding taxes incurred, as it is not
subject to tax. For the same reason,VBIs do not have access to the Double Tax
Treaty network of the Netherlands.
Conclusively, the VBI is an attractive vehicle for structuring investments like
interest bearing investments, since inbound interest flows are usually not subject to
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withholding tax. In such case, the proceeds derived from investments are received
without any Dutch tax burden by the ultimate shareholder, as the income of the VBI
is not taxed in the Netherlands and neither is a dividend distribution from the VBI
to its shareholders.
16. Transfer pricing regime

The Netherlands transfer pricing regime is covered by a series of six relevant
transfer pricing decrees that address roughly anything from advanced certainty to
observations regarding the appropriate cost base and competencies.
Most important are the decree IFZ2004/680M (which contains information on
Group services and shareholder activities; “Support” services; Contract research;
Cost Contribution Arrangements (CCA); Arm’s-length prices in case valuation is
uncertain; Crediting or offsetting withholding taxes) and IFZ2004/126M on the
former flow-through entities (FTE).
The Dutch tax authorities aim to be the premier service providers in that they
strive to provide for rapid advance certainty in a mutually agreed period of time.
17. European Economic Interest Grouping and

Societas Europaea
EEIG
Since July 1989, it is possible to form a European Economic Interest Grouping or
“EEIG” (in Dutch: Europees Economisch Samenwerkingsverband or EESV) in the
Netherlands. An EEIG must be registered with the Trade Register of the Chamber
of Commerce. An EEIG with official address in the Netherlands is considered a
legal entity under Dutch law. A regulation has been published with respect to the
taxation of EEIGs. The following general rules apply:
(a) EEIGs are “tax-transparent” and therefore not subject to Dutch corporate
income tax. The profits resulting from the activities of an EEIG are taxable
only in the hands of its members;
(b) “Tax transparency” does not apply to other taxes (e.g., wage tax);
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(c) Foreign members will be subject to tax in the Netherlands only if the business
in the Netherlands is run via a permanent establishment or a permanent
representative;
(d) The EEIG itself does not have access to the Dutch tax treaty network, as it does
not qualify as a Dutch resident; and
(e) No capital tax is due in the absence of any capital divided into shares.
Societas Europaea
As of 8 October 2004, it is possible to incorporate a European company or Societas
Europaea (SE). The SE has legal personality and is in many respects comparable to a
Dutch NV or BV. For Dutch tax purposes, an SE that has its registered office in the
Netherlands is treated similarly to a Dutch NV (a public limited liability company).
This means that SEs are subject to the same taxes as Dutch NVs and that SEs have
access to the same tax facilities available to NVs, such as the fiscal unity facility and
the participation exemption. SEs are also eligible for the benefits of the EU Parent
Subsidiary Directive, the EU Interest and Royalties Directive, and the EU Merger
Directive. There are four ways to incorporate an SE:
(a) through a legal merger between two companies based in different EU Member
States;
(b) through incorporation of an SE as a holding company for two companies based
in two different EU Member States or with subsidiaries in two different EU
Member States;
(c) through incorporation of an SE as a subsidiary of:
(i) two companies based in two different EU Member States; or
(ii) an SE; and
(d) through a change of corporation form from an eligible company (e.g., an NV)
to an SE.
Although there are rules restricting the way an SE may be incorporated, anyone can
become a shareholder.
An SE is able to transfer its registered office from one EU Member State to another.
In addition, a group that has companies throughout the EU can now create a uniform
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management structure by forming an SE, since SEs can opt for a one-tier or two-tier
board system. Another relevant practical aspect is that the formation of SEs makes
international legal mergers possible between companies incorporated under the
laws of an EU Member State.
18. EU Interest and Royalty Directive

The EU Interest and Royalty Directive took effect on 1 January 2004. Referring
to the Directive, companies that are directly related and are able to meet certain
conditions are no longer subject to withholding tax on interest and royalty payments.
Furthermore, EU Member States have the option not to apply the Directive if
companies do not meet a direct shareholders’ test for an uninterrupted period
of two years. The Directive is effective for the EU Member States. Since the
Netherlands does not levy a withholding tax on interest and royalty payments, the
effects of the implementation of the Directive in Dutch legislation are limited.
19. EU Savings Directive

The EU Savings Directive took effect on 1 July 2005. The aim of the Directive is to
enable taxation of savings income in the form of interest payments. Payments made
in one Member State to beneficial owners who are individual residents for tax
purposes in another Member State fall under the scope of the Directive. After the
obligatory exchange of information from the Member State where the payment
originates to the Member State of which the beneficiary is a resident, the income
may be taxed in accordance with the laws of the latter Member State. In principle,
a zero withholding tax rate applies for payments between Member States. However,
a transitional period is observed for Austria, Belgium, and Luxembourg.
20. EU Parent-Subsidiary Directive

The Directive gives complete relief from double taxation in the EU on dividend
income by abolishing dividend withholding tax on dividends flowing from a
subsidiary to its parent company (or to a permanent establishment of the parent
company) within the EU, provided that the companies have a qualifying parent-
subsidiary relationship. As of 1 January 2007 (and in 2008), participating interests
in a parent-subsidiary relationship of 15% or more qualify for the provisions of the
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Directive. Starting 1 January 2009, this percentage will be lowered to 10%. The
withholding tax exemption may be applied under the Directive if all the following
criteria are complied with:
(1) The parent company holds a minimum of 15% of the capital of the subsidiary;
(2) Both the parent and subsidiary have one of the legal forms listed in the Annex
to the Directive;
(3) The parent and subsidiary are companies that, according to the tax laws of their
respective countries, are considered resident in their respective countries for
tax purposes and under the terms of a double taxation agreement concluded
with a third country. Neither is considered to be a resident for tax purposes
outside the EU.
(4) The parent and subsidiary are companies that are subject to one of the taxes
listed in the Directive, without the possibility of being exempt or having an
option to be exempt.
As of 1 January 2007, Dutch domestic law provides for an exemption from
dividend withholding tax on distributions made to 5% or more shareholders in the
EU. This means that the Dutch rules are more favorable than required by the EU
participation exemption.
21. EU Merger Directive

The EU Merger Directive is implemented in Dutch law and is described under
Section 12.
22. Summary of the Netherlands’ Bilateral Tax Treaties

The Netherlands has one of the most extensive tax treaty networks in the EU. The
treaties generally provide for substantial reductions of withholding tax on dividends,
interest, and royalties. Appendices II-V contain lists of the treaties currently in
force and under negotiation as well as the treaty reductions for withholding taxes.
Most tax treaties negotiated by the Netherlands relating to income and capital are
based on the draft models published by the Organisation for Economic Co-operation
and Development (OECD) in 1963, 1977, and 1992-2000.
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Tax treaties are currently in force in the following countries:

• Albania • Germany • Moldova
• Argentina • Ghana • Mongolia
• Armenia • Greece • Morocco
• Aruba • Hungary • Netherlands Antilles
• Australia • India • New Zealand
• Austria • Indonesia • Nigeria
• Bangladesh • Iceland • Norway
• Barbados • Ireland • Pakistan
• Belarus • Israel • Philippines
• Belgium • Italy • Poland
• Brazil • Japan • Portugal
• Bulgaria • Jersey • Romania
• Canada • Jordan • Russia
• China (excluding • Kazakhstan • Singapore
Hong Kong and
• Korea • Slovak Republic
Macau)
• Kuwait • Slovenia
• Croatia
• Latvia • South Africa
• Czech Republic
• Lithuania • Spain
• Denmark
• Luxembourg • Sri Lanka
• Egypt
• Macedonia • Suriname
• Estonia
• Malaysia • Sweden
• Finland
• Malta • Switzerland
• France
• Mexico • Taiwan
• Georgia
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• Thailand • Ukraine • Vietnam

• Tunisia • United Kingdom • (former) Yugoslavia
• Turkey • United States • Zambia
• Turkmenistan • Uzbekistan • Zimbabwe
• Uganda • Venezuela
Tax treaties are still in force in the following countries after split or separation from
the (former) Soviet Union:
• Azerbaijan *
• Kyrgyzstan *
• Tajikistan *
• Turkmenistan
(former) Yugoslavia:
• Bosnia-Herzegovina
• Montenegro (Fed. Republic)
• Slovenia
• Serbia (Fed. Republic)
* Treaty unilaterally applied by the Netherlands.
** Signed on 8 December 2006. Treaty is not yet in force.
* See (b) for application treaties with the former Soviet Union and formerYugoslavia.
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Negotiations are underway or will be held regarding the conclusion of

tax treaties with:
• Algeria • Germany • Peru
• Australia • Hong Kong • Saudi Arabia
• Azerbaijan * • Indonesia • Slovakia
• Brazil • Iran • Switzerland
• Canada • Isle of Man • Tanzania
• China • Japan • Turkmenistan *
• Cuba • Kenya • Turkey
• Cyprus • Kyrgyzstan • United Kingdom
• Costa Rica • Libya
• France • Mexico
Tax treaties with regard to the profits from air and/or sea shipping are currently in
force in the following countries:
• Argentine air/sea • Croatia air
• Armenia air • Cuba air
• Albania air • Czech Republic air
• Azerbaijan air • Egypt air
• Bahrain air • Estonia air/sea
• Barbados air • Georgia air
• Belarus air • Hong Kong air/sea
• Brunei air • Hungary air
• Canada air • Iran air
• Cape Verde air • Korea sea
• China (People’s Rep.) air/sea • Latvia air/sea
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• Lithuania air/sea • Slovak Republic air

• Macau air • Slovenia air
• Macedonia air • South Africa air
• Malawi air • Sudan air
• Maldives air • Suriname air
• Mexico sea • Syria air
• Oman air • Togo air
• Poland sea • Ukraine air
• Panama air/sea • United Arab Emirates air
• Qatar air • Uruguay air
• Russia sea • Uzbekistan air
• Saudi Arabia air • Venezuela air/sea
• Senegal air • Vietnam air
• Seychelles air
Negotiations are underway regarding the conclusion and/or amendment of tax

treaties with regard to the profits from air and/or sea shipping with:
• Angola • Guatemala
• Colombia • Haiti
• Faroe Islands • Iran
• Gabon • Ivory Coast
• Ghana • Jamaica
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XI. Other Taxes

1. Value-added Tax (VAT)
Taxable Persons
In general, taxable persons are all entities or individuals that perform taxable supplies
of goods and services, or intra-Community acquisitions, in the course of a business,
in the Netherlands. If a foreign business supplies goods and services within the
Netherlands, it is considered a taxable person for Dutch VAT purposes.
Taxable Transactions
VAT is imposed on the following transactions:
• the supply of goods or services by a taxable person in the course of a business;
• the intra-Community acquisition of goods from other EU countries by a
taxable person or a non-taxable legal person in excess of a certain threshold;
• the intra-Community acquisition of new means of transport by anyone; and
• the importation of goods from outside the EU by anyone.
Dutch VAT is due if these transactions can be located in the Netherlands.
If a foreign business (without a fixed establishment in the Netherlands) supplies
goods or services to a taxable person or a nontaxable entity established in the
Netherlands, a reverse charge mechanism generally applies. Pursuant to the
reverse charge mechanism, the Dutch VAT due is levied on the taxable person or
nontaxable entity receiving the goods or services.There is no VAT registration
threshold in the Netherlands.
Place of Supply
Goods are supplied (and VAT is due) in the country where the goods are located at
the time the right to dispose of the goods has transferred. If the goods are transported
in relation to the supply,VAT is due in the country where that transport commences.
Services are generally deemed supplied (and are therefore subject to VAT) in the
country where the service provider is established.Various exceptions to this general
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rule exist, e.g. advisory services, financial services, and telecommunication services
are deemed to take place (and are taxed) in the country where the (VAT-taxable)
recipient of the service is located. As of 1 January 2010, the rules for the place of
supply will change. As of that date, the general rule for business-to-business supplies
of services will be that services are deemed to take place in the country where the
recipient of the service is established. In cross-border situations, the liability to pay
VAT is shifted to the (VAT-taxable) recipient. Exceptions to the general rule for
business-to-business services will continue to exist.The general rule for business-
to-consumer services will not change.
A taxable person who sells and transports goods to a taxable person located in
another EU country performs an intra-Community supply in the EU country of
dispatch of the goods.The receiving taxable person performs a taxable intra-
Community acquisition in the EU country of arrival of the goods. Non-taxable legal
persons are treated as taxable persons for their intra-Community acquisitions if
such acquisitions exceed an annual threshold (EUR 10,000 in the Netherlands) in
the current calendar year, or exceeded this threshold in the previous calendar year.
Exempted Activities
VAT exemptions include the following categories:
• exemptions for public policy reasons in the fields of education, culture, or
social welfare;
• exemptions based on a policy to avoid administrative complications for the
supplier (such as postal services, banking, and other financial transactions); and
• exemptions related to the supply of Dutch real estate. In principle, the supply
of Dutch real estate is exempt from VAT.There are three exceptions:
(i) the supply of a building and accompanying land up to a period of two years
after the first use of the building is subject to VAT;
(ii) the supply of “building land” is subject to VAT. Building land can be
described as undeveloped land intended for building purposes.VAT on the
supply of such property is due only if at least some activities have been
carried out to make the land more suitable for building activities or if a
building permit is issued; and
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(iii) the supply of real estate may also be subject to VAT if the seller and the
purchaser have opted for a VAT-taxed supply through a joint request.This
request can be granted only if the purchaser uses the real estate for more
than 90% of the taxable activities.
Rates
The general Dutch VAT rate is currently (2008) 19%. A reduced rate of 6% applies
to a number of essential goods and services, such as food, gas, electricity,
pharmaceutical products, and the like.
A zero rate generally applies to supplies of goods not cleared through Customs
(either because they are merely passing through the Netherlands or because they
are in storage in the Netherlands), supplies of goods that are exported out of the
EU, intra-Community supplies, and services connected to such supplies.
Payment, VAT Returns, and Administrative Requirements

VAT is due on the aggregate value of the goods and services sold during the preceding
period. A special scheme exists for qualifying sales of used goods, works of art,
antiques, and collectors’ items. Under this scheme,VAT can be calculated on the
profit margin.
Depending on the amount of turnover,VAT returns must be filed monthly, quarterly,
or annually.VAT returns must be submitted and the VAT due must be paid within
one month after the filing period.Taxable persons established in the Netherlands
must file their VAT returns electronically (i.e. online or using a designated
software program).
Taxable persons performing intra-Community supplies must also file quarterly EC
Sales listings, stating the names and the VAT identification numbers of their customers
in other EU countries. In addition, taxable persons have to provide the Dutch Central
Bureau of Statistics with information regarding their intra-Community trade if their
intra-Community supplies or acquisitions exceed the threshold of EUR 400,000
(INTRASTAT filings).
The VAT system is built around invoices and the obligation to issue them. Invoices
have three functions in the VAT system:
(i) They contain information as to which VAT regime is applicable;
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(ii) They enable the tax authorities to carry out audits; and
(iii) They enable taxpayers to prove, whenever necessary, their right to recover
input VAT.
There are several mandatory items that must appear on invoices.Taxable persons
must have copies of all their sales invoices and originals of all purchase invoices in
their records at all times.
2. Real Estate Transfer Tax

The acquisition of Dutch immovable property, including the acquisition of beneficial
ownership, is subject to a real estate transfer tax of 6%.The transfer tax is calculated
on the purchase price or the market value, whichever is higher. Under the law,
transfer tax is to be paid by the purchaser, but it is customary for the buyer and the
seller to agree on who will effectively bear the tax.
The acquisition of (the beneficial ownership of) rights to real estate, shares belonging
to a substantial interest in a real estate company, and certain certificates entitling
the holder to a proportionate share of immovable property are, under certain
conditions, also subject to the 6% transfer tax.
Acquisitions by way of inheritance and gifts (except for gifts of shares in real estate
companies) and acquisitions by a company within the scope of an internal reorganization
qualify for an exemption from transfer tax under certain conditions. Furthermore,
an exemption may apply if the acquisition of the supply of immovable property is
subject to VAT.
3. Withholding Tax Dividends

Dividends and other distributions of profits (including interest on loans which are
considered to be equity and liquidation payments in excess of the paid-in capital)
paid by companies that are resident in the Netherlands are subject to 15% dividend
withholding tax in the Netherlands.
Under certain circumstances, the rate of 15% is reduced. Reference is made to
Sections 4 (0% under the participation exemption), 17 (0% under the EU Parent
Subsidiary Directive), and 19 (the rate is reduced under bilateral tax treaties to
usually 0%, 5%, or 10%).
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A dividend tax return must be filed with the local Tax Inspector by the distributing
company, and the dividend tax withheld must be paid to the Tax Collector within
one month after the date on which the dividend becomes payable.The Tax Inspector
may impose a penalty for late filing of a dividend tax return.
Interest and Royalties

There is no Dutch withholding tax on interest and royalties paid by companies that
are resident in the Netherlands.
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XII. Financial Regulations

1. Exchange Control Regulations
No license is required for payments in euros between residents and nonresidents.
However, pursuant to the 1994 Foreign Financial Relations Act (Wet financiële
betrekkingen buitenland 1994) and the 2003 Reporting Provisions (Rapportagevoorschriften
betalingsbalansrapportages 2003), certain designated residents are required to report
some payment information to the Dutch Central Bank (De Nederlandsche Bank, “DNB”)
for statistical purposes.
The information to be provided depends on the type of institution that has foreign
financial relations. DNB has set specific profiles, which lists the information to be
provided. Some institutions may be designated as “reporting institutions” by DNB
if certain criteria, e.g., regarding the scope or frequency of international payments,
are met. DNB may also request specific information from institutions that are not
designated institutions. Finance companies established or active in the Netherlands
are required to notify this to DNB within three weeks after they have been established.
Pursuant to the 2003 Reporting Provisions, finance companies are, in general,
required to report their activities within two weeks of starting business operations
in the Netherlands. Please also refer to section 3.1 Banking activities below.
2. Capital/Loans
No license is required for the repatriation of capital, loans, interests, dividends,
branch profits, royalties, and fees, as long as the requirements of the 2003
Reporting Provisions are observed.
3. Regulated financial activities

The Financial Supervision Act (Wet op het financieel toezicht, the “FSA”) has come
into effect on 1 January 2007. The FSA encompasses practically all the rules and
conditions that apply to the Dutch financial markets and their supervision. In total,
the FSA replaces eight former supervision acts (i.e., Dutch Banking Act, Securities
Trade Supervision Act, Insurance Undertakings Acts, and the like.).The extensive
system of supervision of financial institutions is therefore now regulated by one
single act, supplemented by implementing regulations based thereon. Under the
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FSA a clear distinction is made between the supervision tasks of DNB (prudential
supervision) and those of the Autoriteit Financiële Markten (the “AFM”) (supervision
of conduct of business).
The following description does not intend to be exhaustive but rather to give a high-
level overview of the most important activities that are regulated under the FSA.
Banking activities
Any company that in the conduct of its business or profession obtains “repayable
funds” outside a restricted circle from (legal) persons, other than from so-called
“professional market parties,” pursuant to section 1:1 of the FSA and grants loans
for its own account qualifies as a “credit institution” (bank).
In order for any company to act as a credit institution in the Netherlands, a license
requirement applies, subject to a general exemption being applicable or an individual
dispensation being granted by DNB. “Repayable funds” comprise any monies that
must be repaid, for whatever legal reason, if it is clear beforehand what the nominal
repayable amount is and in which manner any remuneration (such as interest) is to
be calculated. Professional market parties include, inter alia, licensed institutions
such as banks, investment funds and large corporations. A “restricted circle” is
deemed to exist between persons and/or companies that belong to an objectively
limited group, the criteria of access to which are determined in advance, such as to
ensure that access to such group is not easily realizable. In addition, a “restricted
circle” presupposes and requires the existence of a legal relation between the person/
company that attracts repayable funds and the persons/companies that provide such
funds at the point in time where the aforesaid funds are attracted.The legal relation
implies that the “members” of such restricted circle must reasonably be aware of the
financial situation of the person/company attracting the repayable funds.
As the definition of “repayable funds” could entail more than just the borrowing of
the monies, some caution is required when assuming that a company does not qualify
as a “bank” as it is not attracting “repayable funds.” It is possible that monetary
obligations which are created in the context of complex financing structures but
which do not necessarily constitute an obligation to repay borrowed monies could
be deemed to be “repayable funds” in the context of the Financial Services Act.
“Non-banks” (such as certain finance companies and cash-pooling hubs) may also
qualify as credit institutions. An exception from the license requirement is available
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for group finance companies that technically qualify as “banks” if the conditions of
that exception can be met. A company may not operate as a bank or use the term
“bank” without the proper license and registration. Banks and credit institutions
that have been established in the European Union do not require a new license to
act through branch offices in other countries within the European Union. They
may rely on the license of their home state (“home state control”) pursuant to a so-
called “European Passport.” The “European Passport” can be relied upon once the
relevant notification requirements have been fulfilled.
DNB closely supervises the administration, liquidity, and solvency of all Dutch
banks. An exception is made for the supervision of the administration and solvency
of Dutch branch offices of banks that have their corporate seat in another EU
country, in which case the supervision remains with the banking authorities in the
bank’s country of origin. Dutch banks are generally involved in a wide range of
financial activities, including:
• granting loans;
• effecting domestic and international money transfers;
• exchanging foreign currency;
• brokering publicly-listed securities; and
• assisting in the introduction of companies for the application of listing on
Eurolist by Euronext Amsterdam NV.
The FSA also regulates the activities of so-called “financial institutions” in the
Netherlands, i.e., companies whose main business it is to perform one or more of
the activities listed in Appendix I of Directive 2006/48/EC2 or to acquire or hold
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2 Being the following activities: (i) acceptance of deposits and other repayable funds; (ii) lending;
(iii) financial leasing; (iv) money transmission services; (v) issuing and administering means of
payment (e.g., credit cards, travelers’ cheques, and bankers drafts); (vi) guarantees and commitments;
(vii) trading for own account or for account of customers in: (a) money market instruments
(cheques, bills, certificates of deposit, and the like); (b) foreign exchange; (c) financial futures and
options; (d) exchange and interest-rate instruments; and (e) transferable securities; (viii) participation
in securities issues and the provision of services related to such issues; (ix) advice to undertakings
on capital structure, industrial strategy and related questions and advice as well as services relating
to mergers and the purchase of undertakings; (x) money broking; (xi) portfolio management and
advice; (xii) safekeeping and administration of securities; (xiii) credit reference services; and
(xiv) safe custody services.
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participating interests and that do not also qualify as “credit institution” (as defined
above). EU-based financial institutions that are authorized to act as such in their
home state on the basis of a certificate of supervised status, may rely on such
certificate to provide the same services in the Netherlands (either via branch or
cross-border), subject to prior notification to the DNB.
For non-EU financial institutions, a DNB license may be required, depending on
the specific nature of the services provided.
Securities
Pursuant to the FSA, it is prohibited to offer securities3 to the public in the
Netherlands or to or have securities admitted to trading on a regulated market
(within the meaning of Directive 2004/39/EC) situated or operating in the
Netherlands unless a prospectus drafted in accordance with Directive 2003/71/EC
(the “Prospectus Directive”) has been approved by the AFM prior to such offering
or admission to trading. The implementing regulations promulgated pursuant to
the FSA contains several grounds for exemption from the prospectus requirement
(e.g., offerings of securities with a consideration lower than EUR 2.5 million,
which limit shall be calculated over a period of 12 months), offerings targeting
exclusively-qualified investors, offerings to less than 100 persons not being
qualified investors in the Netherlands, offerings of securities with a minimum
consideration per investor/minimum denomination per security of EUR 50,000).
Once a prospectus has been approved by the competent authority of a Member
State, a simple notification to the competent authority of another Member State
is in principle sufficient in order for the issuer to be allowed to offer the securities
at hand in such other Member State. Pursuant to current Dutch law, it is also
prohibited to make a public bid for securities that are listed on a securities exchange
in the Netherlands unless an offering document, which must meet certain specific
criteria, has been made public by the bidder in the Netherlands prior to such public
bid. The legislative proposal implementing Directive 2004/25/EC, which came
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3 Being: (i) tradable shares or other tradable securities or rights equivalent to tradable shares;
(ii) tradable bonds or other forms of negotiable securitized debt; or (iii) other tradable securities
issued by a legal person, company or institution through which securities meant under (i) or (ii)
may be acquired by the performance of the rights pertaining thereto or by conversion or that is
settled in money.
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into effect in the Netherlands on 28 October 2007, introduced a compulsory bid

requirement for any (legal) person who/which, acting alone or in concert, acquires
a participating interest of 30% in a public company the shares of which are admitted
to trading on a Dutch stock exchange.
Investment firms (i.e., brokers, dealers, “market-makers” and portfolio managers)
must have a license to offer or render investment services in the Netherlands.
To obtain such license, investment firms must comply with certain financial,
administrative, and organizational requirements. The daily policy makers of such
firms must also pass certain reliability and solidity tests. The requirements that
securities institutions have to fulfill are quite elaborate and the institutions are
closely monitored by the AFM for compliance. As a result of the implementation
of the Markets in Financial Instruments Directive (“MiFID”) in the Netherlands
as of 1 November 2007, commodity derivative contracts now fall within the scope
of the definition of “financial instruments” under the FSA. Intermediation activities
relating to these “new” types of financial instruments are therefore, inter alia,
subject to the aforesaid license requirement. Furthermore, investment firms are
obliged to classify4 their clients in accordance with the MiFID rules prior to any
investment services being provided. Based on such classification, different regimes
apply, notably in respect of the level of protection and pre-contractual information
due to clients. Pursuant to the new best execution rules introduced by the MiFID,
investment firms are required to draft an execution policy describing, for each
type of financial instruments, the procedures and arrangements they have in place
with a view to providing best execution their clients. Under the MiFID rules,
investment firms, including portfolio managers must implement (and regularly
review) adequate measures and procedures to tackle, prevent, channel, and manage
conflicts of interest. They must inform their clients in respect of the measures they
have taken in order to tackle conflicts of interest. For EU-based investment firms
holding a permit to offer their services in another Member State, a notification to
the AFM is sufficient for them to offer their services in the Netherlands, either
through a branch or “cross-border” (though several Dutch additional rules will still
apply to branches).
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4 Clients can be classified as either “professional client,” “eligible counterparty,” or “nonprofessional
client.”
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Entities that operate a regulated market or a Multilateral Trading Facility5 (“MTF”)

are also required to have a license in order to be lawfully active as such in the
Netherlands. Licenses are granted by the Ministry of Finance. Several Euronext
entities,6 as well as MTS Amsterdam NV and European Energy Derivatives
Exchange NV currently hold a license to operate a regulated market in the
Netherlands. In addition, the aforementioned Euronext entities also hold a license
to operate Alternext Amsterdam, which is the only MTF currently active in the
Netherlands.
The Market Abuse Directive has been fully implemented in the Netherlands.
The AFM is responsible for the enforcement of the relevant provisions of the FSA,
along with the Public Prosecution Service. It is prohibited to effect a transaction
in or from the Netherlands involving listed securities (either in the Netherlands
or in a regulated market in another Member State) or similar instruments while
having inside information about a company that issued the said securities or
instruments. Inside information is specific information about a company that has
not been published and, if published, can be expected to influence significantly
the price of the issued securities (or linked financial instruments), regardless of
whether the price goes up or down. Issuers are obliged to maintain and regularly
update insider lists. It is also forbidden to manipulate any regulated market
(i.e., worldwide) on which securities are traded that are also admitted to a regulated
market in the Netherlands.
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5 “Multilateral trading facilities” are trading platforms operated by an investment firm or a market
operator, which bring together multiple third-party buying and selling interests in financial
instruments in the system in accordance with non-discretionary rules, in a way that results in
a contract.This is often referred to as ‘in-house matching’. As a result of the implementation of
MiFID cross-EU/EER, any entity holding a license to lawfully operate as a multilateral trading
facilities in a member State may use such license as a so-called ‘European passport’
6 Including, inter alia, NYSE Euronext (International) BV, NYSE Euronext (Holding) NV, Euronext NV,
Euronext (Holding) NV, NYSE Euronext (International) BV, and NYSE Euronext (Holding) NV
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Major disclosure reporting

Chapter 5.3 of the FSA contains amended7 reporting requirements in respect of
major holdings in Dutch public companies (i.e., the so-called NV’s) the shares of
which are listed on an EU regulated market (“Issuing Institutions”). This includes:
(i) reporting requirements applicable to Issuing Institutions themselves in respect
of their issued share capital (e.g., reporting requirements for each change of
1% or more compared with previous notification made);
(ii) initial and ongoing reporting requirements for managing directors and supervisory
directors of Issuing Institutions in respect of their voting rights and participating
interest in both the Issuing Institution at hand and so-called “related Issuing
Institutions”; and
(iii) ongoing reporting requirements for shareholders and other persons holding
a right to vote in the shareholders’ meeting of an Issuing Institution.
The scope of the below overview is limited to the above category under (iii). Pursuant
to the FSA, any person or entity acquiring or losing control over shares in the issued
capital of a Dutch public company the shares of which are listed on an EU regulated
market must report that change pursuant to the Disclosure Act if the change in
control leads to a transgression of one of the thresholds laid down in the FSA.
The following thresholds are applicable: 5, 10, 15, 20, 25, 30, 40, 50, 60, 75, and
95%. The reporting requirements are applicable to changes in both the participating
interest (i.e., shares) one holds and the total number of votes one is entitled to cast
in the general meeting of shareholders of the relevant Issuing Institution. The FSA
contains a very elaborate regime for the determination of both the entity obliged to
disclose and the calculation of the relevant participating interests and/or total votes
held. Section 5:45 FSA lays down several general criteria based on which imputation
of the participating interests and/or voting rights takes place.
For example, in general terms, a parent company is deemed to hold both the
participating interests and the voting rights held by its subsidiaries; a subsidiary
is deemed not to hold any participating interests or voting rights. This rule may
result in the parent company being obliged to aggregate and disclose different
participating rights and/or votes held in the same Issuing Institution by different
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7 The new provisions implement EU Directive 2001/34/EC in the Netherlands.
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subsidiaries. Similarly, in principle, a person is deemed to indirectly hold the

voting rights that a third party holds if such person has entered into a durable
(i.e., for more than one shareholders meeting) voting agreement with such third
party (and vice-versa). The obligation to report changes also applies to indirect
control held through (security) interests (e.g., right of pledge, right of usufruct).
Section 5:45 FSA also contains specific provisions with regard to participating
interests and votes held by collective investment schemes and/or their management
companies. In certain cases, (temporary) exemptions may apply. The disclosure
of major holdings in listed companies is enforced by the AFM.
Investment Funds
Pursuant to the FSA, it is prohibited to offer a participating right in a collective
investment scheme the management company of which does not have a license
granted by the AFM. A collective investment scheme is an investment company or
a unit trust that solicits or obtains monies or other goods for collective investment
in order to allow the holders of participation rights to share in the income of the
investment. A license to operate as (the management company of) a collective
investment scheme in or from the Netherlands can be obtained from the AFM if
certain financial, administrative, organizational, reliability, and solidity criteria are
met. An exemption from the requirement to obtain a license may apply if, for
example, the participation rights are exclusively offered to, and any monies or
goods are obtained exclusively from qualified investors or if such offer does not
exceed 100 investors, not being qualified investors. An exemption may also apply
to venture capital companies (participatiemaatschappijen).
(Management companies of) so-called Undertakings for Collective Investments in
Transferable securities (“UCITS”) incorporated and duly licensed as such in a
Member State of the European Union may offer their participation rights in the
Netherlands subject to notification to the AFM, either cross-border or via a Netherlands
branch. The AFM maintains a special register of these UCITS. Collective investment
schemes (not being EU-based UCITS) having their seat in a country where adequate
supervision is exercised (being currently, subject to change:
Guernsey, Ireland, Jersey, Luxembourg, Malta, and the United States of America)
which intend to offer their participation rights in the Netherlands are obliged to
inform the AFM of such intention, providing the AFM in due course with a so-
called “certificate of supervised status” issued by the regulator of the relevant
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“adequate supervision country.” The AFM may reject such application if either the
contemplated offering or the related distribution scheme is not in accordance with
the applicable Dutch provisions. The AFM maintains a register of these “adequately
supervised” collective investment schemes.
Other regulated activities

In short, the FSA also regulates, among others, the following activities/entities:
(i) insurance and reinsurance activities (including (re)insurance intermediation
and advising on insurance-related products);
(ii) the offering, advising on, and intermediation in respect of individual
investment objects;
(iii) the offering, advising on and intermediation in respect of financial products to
consumers (in most cases) in the Netherlands;
(iv) advertisements in respect of financial products in the Netherlands;
(v) the recognition and operation of securities exchanges in the Netherlands;
(vi) clearing institutions (i.e., entities whose business it is to conclude contracts
regarding financial instruments with a central counterparty that acts as an
exclusive counterparty in respect of these contracts, of which the provisions
indicating the essence of the performance correspond to the provisions forming
party of contracts concluded by third parties or by the party itself in its
capacity as a party to the contract, on a market in financial instruments and
which indicate the essence of the performance in the latter contracts; and
(vii)the acquisition of a qualified holding (i.e., 10% or more) in a bank, collective
investment scheme management company, UCITS, investment firm or insurer
established in the Netherlands.
Money Laundering
Pursuant to the Disclosure of Unusual Transactions Act (Wet Melding Ongebruikelijke
Transacties), any company that renders financial services on a professional basis
(e.g., banks and brokers) or other services involving the sale, or the mediation in
the sale, of means of transport, precious stones and metals, objects of art, antiquities,
jewelry, jewels, and other precious objects to be designated by governmental decree
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must report “unusual” transactions to the Unusual Transactions Disclosure Office

(Meldpunt Ongebruikelijke Transacties) of the Ministry of Justice. The Ministry has
established certain objective indicators to allow companies to judge whether
a transaction is deemed unusual and should be reported.
Furthermore, pursuant to the Services Identification Act (Wet Identificatie bij
Dienstverlening), any company that renders specific (financial) services on a
professional basis must verify the identity of a client before those services may be
rendered to that client in or from the Netherlands. Parties to transactions involving
the sale, or mediation in the sale, of means of transport, precious stones and metals,
objects of art, antiquities, jewelry, jewels, and other precious objects, which are
partly or wholly paid in cash must be formally identified under the Services
Identification Act. The identification requirements and reporting requirements
also apply to other professionals, including attorneys, notaries, and tax advisors.
In order to implement the Third Money Laundering Directive, the Dutch legislator
has proposed to change the Disclosure of Unusual Transactions Act and the Service
Identification Act. The new regulations will be ‘principles based’. Financial
institutions had indicated that the very specific requirements for customer
identification were unnecessarily confining. Instead of prescribing the exact process
of gathering the relevant information, the new rules will focus on the goal, rather
than the means.
Customer identification requirements will be based on a ‘risk oriented approach’.
Service providers must consider the client, relationship, product or transaction in
order to determine the risk involved. The Disclosure of Unusual Transactions Act
will include, inter alia, the responsibility to identify transactions of which the
obvious objective is money laundering or terrorist financing and to refrain from
facilitating such transactions. How institutions will determine these factors is, in
theory, up to them. The Dutch financial regulator has taken the view that institutions
will develop their own policy in this regard, which will be subject to their scrutiny.
Another proposal has been made to combine the two separate Acts into one coherent
Act. Both proposals are currently being debated in the House of Representatives
(“Tweede Kamer”). No expected implementation date has been published.
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XIII. Visa, Residence Permit, and Work Permit

for Non-EU Nationals
1. Visit to the Netherlands Not Exceeding
Three Months
Many foreign nationals do not require a tourist or a business visa to enter the
Netherlands if their stay will not exceed three months. It is advisable to check with
the Dutch Embassy or Consulate whether a visa is required. The visa is issued for a
maximum period of 90 days, and is not extendible. Furthermore the holder of the
visa may remain no longer than 90 days within half a year within the Schengen
Area. Member States of the Schengen Area are: Austria, Belgium, the Czech
Republic Denmark, Estonia, Finland, France, Germany, Greece, Iceland, Italy,
Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Norway, Poland, Portugal,
Spain, Slovakia, Slovenia, and Sweden.
2. Visit to the Netherlands Exceeding Three Months

A foreign national intending to remain in the Netherlands for more than three
months must apply for a residence permit.The conditions for obtaining a residence
permit depend entirely on the purpose of coming to the Netherlands. In this
chapter, a residence permit for the purpose of work will be handled. A foreign
national intending to work and reside in the Netherlands must, usually, obtain three
types of documents:
(i) A temporary residence permit (Machtiging tot Voorlopig Verblijf or “MVV”), which
enables the holder to enter the Netherlands. Please note that an MVV is not
required for citizens of the European Economic Area, the European Union and
Switzerland, Japan, Canada, Australia, Monaco, and New Zealand.
(ii) A residence permit, which enables the holder to live in the Netherlands; and
(iii) Under certain conditions, a work permit, which enables the holder to work in
the Netherlands.
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There are two different procedures for applying for an MVV:

(i) The foreign national can apply in the country where he or she lives; or
(ii) The employer in the Netherlands or the person with whom the foreign national
will be staying in the Netherlands can apply on his or her behalf.
Depending on the purposes of stay, obtaining an MVV can take between two weeks
to six months. For employment purposes, and if the Dutch employer applies by
means of the expedited procedure, the MVV will usually be granted within two to
three weeks. Please note that during the MVV procedure, the foreign national is
not allowed to enter or reside in the Netherlands.
3. Residence permit
A foreign national who intends to stay in the Netherlands for more than three months
and who has gained entrance to the Netherlands, is required to obtain a residence
permit (verblijfsvergunning). Please note that a residence permit will not be granted
if the foreign national was first required to obtain an MVV. The residence permit is
generally issued for a maximum of one year and if no changes of circumstances have
occurred, it is extendible on a yearly basis. After having been in the possession of
a residence permit for five years, the foreign national may apply for a permanent
residence permit.This permanent residence permit is renewable every five years.
4. Work permit
An employer who wants to recruit an employee from outside the EU/EEA usually
needs to apply for a work permit for that employee. For completeness’ sake, please
note that the Netherlands has (temporarily) opted out for the full mobility of the
workforce in respect of two new EU members. In this respect, for those nationals
from Romania and Bulgaria, work permits are usually required.
There are different procedures for applying for a work permit. The applicable
procedure depends entirely on the applicant’s specific circumstances and the nature
of the company he or she is being posted from and the nature of the company
where he or she will be working in the Netherlands.
Generally, the Dutch employer must prove that the labor market has been scanned
for workers who have priority. In this respect, the employer must prove that the
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vacancy has been reported to the Centre for Work and Income and, usually, to the
European Employment Service (EURES) for at least five weeks prior to the work
permit application. Furthermore, the employer is required to advertise the job in a
Dutch national newspaper, a professional journal, and must have engaged a recruitment
office. If a company is unsure whether it is subject to the said reporting obligation,
the company is advised to consult our office in advance. In order to avoid unexpected
refusals, companies should be cautious about assuming that a job does not need to
be reported to the various authorities. Please note that application procedures for
different types of employment require extensive preparation.This is not only necessary
for the application as described above, but also for those who want to stay in the
Netherlands as self-employed, or for those who want to work in a university, the
field of sports, or elsewhere. Several exceptions exist, and for this reason, it is
advisable to contact our office timely.
5. Knowledge Migrant Workers

Skilled and highly educated foreign workers do not require work permits to work
in the Netherlands. This regulation is applicable to those who hail from Romania
and Bulgaria and those countries which are not members of the European
Economic Area.
As of 1 January 2008, a knowledge migrant worker is one employed in the Netherlands
and receives an annual salary of at least EUR 47,565 (from the age of 30 onwards)
or EUR 34,881 (up to and including the age of 29). Knowledge economy workers
will not be covered by the Dutch Foreign Employment Act but are expected to
comply with the rules of the Immigration and Naturalization Service (IND). The
knowledge migrant worker must therefore apply for the required residence permit
and the IND will decide whether to grant the residence permit. This decision will
be taken within a short period (approximately two to three weeks) assuming that
the IND receives a complete application.
An important requirement for admission as a knowledge migrant worker is that
the future employer has a contract with the IND. For completeness’ sake, please
note that the IND will sign the contract only with an established legal entity in the
Netherlands where the knowledge migrant worker will be employed. Consequently,
no contracts will be signed with entities established in a foreign country.
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XIV. Labor Law

1. Term
An employment contract may be concluded verbally or in writing. A written contract
may take the form of an agreement or letter signed by both parties. In either case,
the employer is obliged to inform the employee in writing of the conditions applicable
to his or her employment. The information to be provided by the employer is
based on peremptory law and must include, but is not limited to the following:
• the parties’ identities and places of residence;
• the place of work;
• the length of the employee’s normal working day or week;
• the initial base salary and any other pay components, vacations, and the notice
period; and
• whether a pension arrangement is in place.
An employment contract may be concluded for an indefinite term (as in an open-
ended contract), for a specified term (as in a fixed-term contract), or for a specific
task or project. If no term (or special task) is specified, the contract will be deemed
open-ended.
Probationary Period
Parties to a contract may agree on an initial probationary period in writing only.
The length of the probationary period must be the same for both parties.The
statutory maximum probationary period for an employment contract for an indefinite
term is two months. The statutory maximum probationary period for a fixed-term
employment contract is one month if the contract covers a period of less than two
years, and it is two months if the contract covers a period of two years or more.
Deviations to the detriment of the employee are possible pursuant to a collective
labor agreement. If the maximum period is exceeded, the probationary period will
be invalid altogether. During the probationary period, either party may terminate
the contract at any time, without observing a notice period and without any liability
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for severance pay unless the termination is, for instance, for discriminatory reasons.
At the employee’s request, the employer must provide the causes for termination of
the employment contract during the probation period.
2. Non-Competition Clause
Non-competition clauses, applicable for a certain scope of activities, certain
geographical area, and for a certain number of years, are quite common in the
Netherlands. In order to validly restrict an employee from accepting competing
employment after termination of the employment contract, the non-competition
clause must be agreed upon in writing and signed by both parties and the employee
must be at least be 18 years of age at the time of signing. The mere reference to
a non-competition clause in a collective labor agreement and/or internal rules and
regulations will not suffice. A request for enforcement of the non-competition
clause by the employer can be restricted or denied by the court. The court might
deny the request of the employer for enforcement of the non-competition clause
when an employee becomes too restricted by the non-competition clause in finding
a new job as a consequence of this clause which is too broad. A non competition
clause may become invalid if the responsibilities ensuing from the employee’s
position are substantially amended in the course of employment.
3. Termination
Open-ended Contracts
An employer must obtain approval from the Dutch Center for Work and Income
(“CWI”) before terminating an employment contract. After obtaining approval
from the CWI, the employer may terminate the employment contract, with due
observance of the statutory or agreed-on notice period, unless there is a ban on
termination imposed by law (e.g., illness or pregnancy). Any dismissal by an
employer without the approval of the CWI is void. This procedure usually takes
about four to eight weeks, depending on the circumstances of the case.
Under certain circumstances, this approval of the CWI is no longer required. Due
to new legislation in 2006, the CWI will no longer subject the business economical
necessity for dismissal to a test if the employer and the trade unions have reached
an agreement on that subject.
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Fixed-term Contracts
An employment contract entered into for a specified term or for a specific project
ends by operation of law upon expiration of the term or completion of the project,
without giving any notice thereof.
Within three years, an employee can be given no more than three consecutive
fixed-term contracts that end by operation of law (and therefore require no notice
of termination). If more than three fixed-term employment contracts are concluded
between the same parties at intervals not exceeding three months or if the total
duration of successive contracts is three years or longer, the last employment
contract will be deemed to be a contract for an indefinite period, i.e., an open-
ended contract.
A fixed-term employment contract of three years or longer may be extended once
immediately after it expires (for no more than three months) without giving rise to
an open-ended contract and therefore without giving any notice of termination.
Termination by Mutual Consent

All employment contracts may be terminated at any time by mutual consent, with
or without observance of the statutory or agreed-on notice period and with or without
payment of compensation. It is important for the employer to make sure that the
employee’s consent to the agreement is unambiguous. It is therefore recommended
that the employee seeks legal advice in this respect before accepting it.
Immediate Termination for Urgent Cause

A party to an employment contract may be confronted with a situation in which he
cannot reasonably be expected to continue the employment relationship (urgent
cause). If the employee causes the situation, the employer is entitled to terminate
the contract effective immediately. The employee has a similar right. The law sets
forth a number of examples of “urgent causes,” such as gross negligence in the
performance of duties, divulging trade or professional secrets, theft, fraud,
embezzlement, or crimes involving a breach of trust. However, only the competent
court can determine whether the facts of a given case actually constitute urgent cause.
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Termination by the Court

An employer or an employee may request the Cantonal Division of the competent
court to dissolve an employment contract. Courts handle employment matters and
operate quite independently of the CWI.
Employers and employees have the right to file a petition for dissolution of an
employment contract. The Cantonal Division of the competent court will dissolve a
contract only for serious cause. A serious cause may be an “urgent cause” (i.e., reasons
such as those described in subsection [4] above or a “change of circumstances” that
justifies termination of the contract on short notice. Dissolution by court order may
be requested at any time, whether the contract is on a fixed term or open-ended,
and even if the employee is pregnant, sick, or disabled. The employer must, however,
be able to prove that dissolution of the employment contract is not in any way
related to the employee’s illness. In the case of termination on the ground of a
change in circumstances, the competent court may decide to award compensation
according to the principle of reasonableness. Whether compensation is awarded
and how much is awarded depends on several circumstances (e.g., the employee’s
age, position, future prospects, number of years of employment, and the like).
According to the commonly used “Cantonal Court Formula,” severance pay is
calculated by multiplying the number of weighed years of service by the gross
monthly salary and an “adjustment factor.” Years of service up to the age of 40 are
multiplied by one, years of service between 40 and 50 are multiplied by 1.5 and
years of service from the age of 50 and over are multiplied by two.
The basis is the fixed (gross) monthly salary plus all fixed and agreed-on salary
components, such as structural bonus payments. Other perquisites, such as pension
premiums, are in principle not taken into account. Case law, however, shows that
under some circumstances, courts consider stock benefits to be part of the employee’s
salary and for that reason, take the rights under a Stock Option Plan into account
when calculating severance pay and may even rule to continue a Stock Option Plan
after termination of an employment contract.
In a “neutral” situation, the adjustment factor is set at one. If the termination of the
employment relationship can be blamed on the employer, the factor will be higher
than one. If the employee is to blame, the factor will be less than one.
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Manifestly Unreasonable Dismissal

Even if an employer has terminated an employment contract with due observance
of the notice period after first obtaining permission from the CWI, the dismissal
may nevertheless be manifestly unreasonable. A dismissal is considered “manifestly
unreasonable” if, for instance, the consequences of termination are unreasonably
harsh for the employee (in view of the severance payment, if any, awarded by the
employer and the likelihood that the employee will find other types of suitable
employment) compared with the interests of the employer. If an employee believes
that his or her dismissal was manifestly unreasonable, he or she may petition the
competent court for damages.
Managing Director
Terminating the employment contract of a Managing Director appointed pursuant
to the Articles of Incorporation (“statutair directeur”) is different from terminating an
employment contract with an ordinary employee, because a Managing Director has
a twofold relationship with the company: a corporate relationship and an employment
contract. Depending on the company’s Articles of Incorporation, the shareholders’
meeting is, in most cases, authorized to dismiss a Managing Director from his or her
corporate position as Managing Director. The Managing Director must be given
timely notice of the meeting and his intended dismissal and be given the opportunity
to defend himself against the intended dismissal. The employment contract of the
Managing Director may in principle also be terminated during the same meeting of
shareholders. The employer may terminate the employment contract without the
prior approval of the CWI. In the case of dismissal, the notice period should in
principle be observed. However, this is not a legal requirement. The company may
replace it by paying (at least) the equivalent of the salary due during the applicable
notice period.
Payment of additional compensation may be required, depending on the
circumstances. If no compensation is offered, the termination may be deemed
manifestly unreasonable, in which case, damages may be awarded. The court rules
in cases involving Managing Directors, whereas the Cantonal Division of the court
is usually competent in labor cases.
As stated above, a distinction must be made between the corporate and employment
relationship of Managing Directors. After the aforementioned requirements have
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been met, the Managing Director’s corporate position and civil position (as an
employee) will be terminated. This is different, however, if the Managing Director
reported ill before having received the invitation for the shareholders’ meeting.
If a Managing
Director were to become ill, the meeting of shareholders could dismiss him from
his position as Managing Director under corporate law, but termination of his
employee status would not be permitted, as the Managing Director would be
protected by the prohibition to give notice during illness. In such cases, the
employer is obliged to petition the competent Court to dissolve the civil law
employment relationship.
In the event that the company has established a Works Council and the Managing
Director is the consultation partner of the Works Council (i.e., “bestuurder”
within the meaning of the Works Councils Act), the Works Council should be
requested for its prior advice regarding the intended dismissal of the Director
before seeking termination.
4. Works Council
Under the Dutch Works Councils Act, enterprises with 50 or more employees
must establish a Works Council. Part-time employees and those who are hired in
or out are, in principle, also counted when determining the number of employees.
The purpose of the Dutch Works Councils Act is to promote consultation between
management and employees with regard to the business and policies of the company.
The members of the Works Council are chosen directly by the employees from
among their own ranks. The number varies from three to 25, depending on the
number of employees in the company. One of the members is appointed chairperson.
A Managing Director cannot be a member of the Works Council. The Works
Council has no executive power and, in general, may only advise management in
connection with the company’s business. The management of the company and
the Works Council meet at least twice a year. During those meetings, discussions
about subjects concerning the company that either management or the Works Council
believes merit deliberation are held. The management has an obligation to provide
the Works Council with the necessary data and documentation (such as the financial
results and the legal structure of the company) and to inform it about the results
and the prospects of the company. As of 1 September 2006, the Works Council also
has a right to information on the height and content of the terms and conditions of
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employment with respect to different groups of employees, the income development

between the different groups of employees in the company, and the development
in relation to the previous year. The management has an obligation to provide the
Works Council with this information.
The management must furthermore consult the Works Council in connection
with a number of important subjects, such as a transfer of control of the company,
termination of or a major change in the company’s activities, major investments,
significant reorganizations, mergers, takeovers, changes of location or major
workforce layoffs, and dismissals. In principle, the Works Council must also be
consulted on the appointment and dismissal of a Managing Director if the latter
has sole authority, or shares joint authority with others, over the workforce.
The Works Council has a power of veto over a limited number of decisions
that directly affect employment conditions, such as pension plans or in-house
employment regulations.
Members of the Works Council are obliged to observe strict confidentiality with
respect to what they learn during meetings with management. In principle, they
cannot be dismissed from employment during their membership without the
court’s permission.
Enterprises with at least ten but fewer than 50 employees that do not have a Works
Council, are required to set up a “personnel representation committee” if the
majority of the personnel so requests. Management must consult with the personnel
representation committee on a number of subjects, such as proposed decisions
that may result in job losses or in major changes in the working conditions of at least
a quarter of the employees.
Small enterprises with fewer than ten employees may also set up personnel
representation committee on a voluntary basis.The committee has the same
facilities at its disposal as a personnel representation committee in an enterprise
with ten to 50 employees. However, its powers are more limited.
If an enterprise with at least ten but fewer than 50 employees has neither personnel
representation committee nor a Works Council, it is obliged to give its employees
the opportunity to meet with the owner twice every calendar year. The Dutch
Works Councils Act also provides the personnel with certain advisory powers.
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It is impossible to give an exhaustive overview of Dutch labor law in this

publication. (Please do not hesitate to contact us if you require further information
or if you would like to receive updated information.)
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XV. Social Security and Pensions

With respect to social security within the Netherlands, a distinction should be
made between:
• national insurance and
• employee insurance.
With respect to social security system within the Netherlands, a distinction should
be made between:
• national insurance and
• employee insurance.
1. National Insurance
The types of insurance in the national insurance system apply to all residents of the
Netherlands, irrespective of their nationality. The following Acts fall under this
category:
• General Old Age Pensions Act (Algemene Ouderdomswet or AOW).
The obligation to pay premiums ends at the age of 65;
• General Surviving Relatives Act (Algemene Nabestaandenwet or ANW);
• General Child Benefit Act (Algemene Kinderbijslagwet or AKW);
• Exceptional Medical Expenses (Compensation) Act (Algemene Wet bijzondere
ziektekosten or AWBZ).
Premiums
In general, all premiums paid within the national insurance system are levied with
and part of the personal income tax rates. As of 1 January 2008, 17.9% is levied
for the AOW premiums, 12.15% for the AWBZ and 1% for the ANW premiums.
The AKW premium is 0% because it is funded by the government.
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2. Employees’ Insurance
Performing employment activities in the Netherlands in general, leads to compulsory
insurance in compliance with the following Acts:
• Sickness Benefits Act (Ziektewet or ZW);
• The Work According to Labour Capacity Act (Wet Werk en Inkomen naar
Arbeidsvermogen or WIA) (The amount of the premium paid varies, depending
on the type of work and the type of company) and Disablement Insurance Act:
(Wet op de arbeidsongeschiktheidsverzekering or WAO).
• Unemployment Insurance Act (Werkloosheidswet orWW);
• The New Health Insurance Act (Nieuwe Zorgverzekeringswet) (The employer is
obliged to compensate his employee for the mandatory income related contribution
of 7.2% of the annual salary up to a maximum of EUR 2,249 in 2008);
• The New National Assistance Act (Nieuwe Algemene Bijstandswet or NABW).
The NABW helps people to provide basic living standards for themselves when
they are not entitled to any other benefit.
WIA/WAO
The Disablement Insurance Act (WAO) is replaced by the Work According to Labour
Capacity Act (WIA) on 1 January 2004. Currently, the Disablement Insurance
Act is merely applicable to employees who became or would become ill before
1 January 2004. Therefore, employees who received WAO benefits before
1 January 2004 will still be covered by the WAO.
The Disablement Insurance Act insures employees for a wage replacement benefit
after 104 weeks of full or partial disability. The WIA creates incentives for rehabilitation
and reintegration into the workforce.
This act, divides disability into two plans: one for individuals who are incapable of
working due to full permanent disability (IVA) (a) and one for individuals with a
remaining ability to work and therefore earn some income (WGA) (b). Individuals
who are less than 35% disabled (earn more than 65% of the maximum hourly wage)
(maatman inkomen per uur) are not eligible for a WGA benefit (nor IVA benefit).
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Employers have the choice of self-funding the disability benefit and/or insuring this
risk with private insurers, or pay contributions to a government agency (Authority
for Employee Insurance, UWV).
Full and permanent Disability (IVA)

As of 1 January 2007, full and permanent disabled employees are entitled to 75%
of their last salary (which is maximized to the maximum daily wage).
Employees, who in 2006 already received an IVA benefit, have received a raise of
70% up to 75% with retroactive effect from 1 January 2007.
Partial Disability (WGA)

Partially disabled employees are entitled to 70% of their last salary (which is
maximized to the maximum daily wage). The duration of this benefit will be
dependent on their employment history, which must be at least six months to
a maximum of five years.
After the wage-related benefit, partially disabled employees who returned to work
would be entitled to supplemental wage benefits equal to 70% of the difference
between prior earned wages before unemployment (maximized to the maximum
daily wage) and the current wages. However, individuals who were partially
unemployed would receive income benefits equal to 70% of the minimum wage
multiplied by the percentage of their disability.
PEMBA
The Dutch Premium Differentiation and Market Operation Act (theWet Premiedifferentie
en Marktwerking bij Arbeidsongeschiktheidsverzekering or PEMBA) took effect on
1 January 1998 and applied to all types of disablement insurances.
The purpose of PEMBA was to differentiate the disability premium on a company-
by-company basis which depended on a company’s disablement risk. The premium
was to be fully paid by the employer. Companies having few employees falling
under the disablement legislation would therefore pay a low premium. Conversely,
those with several such employees pay a high premium.The premium differentiation
was valid for five years. Companies could take out insurance to cover this risk.
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As of 1 January 2008, there are no more individual (for large employers) nor
branch-wide (for small employers) differentiated premium obligation regarding
the WAO. All the public insured employers are obliged a uniform premium for
the WAO from that time on.
Moreover, the possibility of premium differentiation for the IVA is also not
implemented, as intended, and employers therefore, are not allowed to take the
IVA risk upon themselves (or insure this risk).
Employers are currently allowed to take the WGA risk upon themselves for a period
of four years, with the possibility of differentiation in premium.
As of January 2007, all the WGA benefits have been funded by a basic and a
differentiated premium. The differentiation of the premium will be applied on a
company-by-company basis. If the employer chooses to take the WGA risk himself
(or insure the risk), there is no obligation to pay the differentiated premium.
Employers will have the possibility to recover the WGA expenses on the employees
to a maximum of 50%.
3. Sickness and Disability

Under present Dutch law (Article 7:629 of the Dutch Civil Code), employers are
obliged to continue paying the salary of ill employees for a maximum of 104 weeks.
During an employee’s period of illness, the employer is obliged to pay at least 70
percent of his or her most recent salary for the first 52 weeks (based on the statutory
minimum wage) and for a period of 104 weeks (based on the maximum daily wage)
or until the date on which the employment contract expires, if earlier. Please note
that in November 2004, Social Partners (bodies representing employers and
employees or unions) and the Dutch Government reached an agreement, which
implied that employers would pay a maximum of 70% of the last salary (up to the
maximum daily wage) in total during 104 weeks of illness. Research shows,
however, that in practice, social partners do not yet comply with this agreement
and the 70% maximum is exceeded in most of the Collective Bargaining
Agreements (CBAs).
Furthermore, both the employer and the employee have far-reaching obligations
with respect to reintegration. Both parties are obliged to adopt an active approach
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in this respect. In this light, the employer must make sufficient efforts to reintegrate
the employee to the extent possible, even in case of one whose employment contract
will end on short notice.
4. Dutch Pension System

The pension system in the Netherlands is based on this three-tier system:
(a) The first tier of the Dutch pension plan is the government pension known as
the Old-Age Pension or “AOW (Dutch: Algemene Ouderdoms Wet).” All residents
of the Netherlands are entitled to an AOW pension when they reach the age of
65. There is no relation between the amount of the AOW benefit and the
amount of contributions paid.
(b) The second tier consists of old-age pension benefits that are supplementary to
the AOW, disability pension, supplementary to Dutch disability law (WIA),
and supplementary to a governmental provision for surviving relatives (ANW),
a surviving-relatives pension. All these second-tier pensions are financed by
contributions paid by the employer and/or the employee. There are many
ways in which the second-tier pension benefits can be arranged. We will
explore this in further detail later on.
(c) The third tier of the Dutch pension system consists of private insurance for the
employee’s salary that is in excess of the second-tier benefits. Employees
sometimes arrange for additional pension plans with their employer by
concluding agreements with life insurance companies.
Please note that as of 1 January 2007 the new Pension Act has come into force.
This new Pension Act replaced the Dutch Pension and Savings Fund Act (Dutch:
Pensioen- en Spaarfondsenwet). The new Pension Act offers more clarity about
responsibilities and liabilities between the employer, the employee, and the pension
funds/insurance companies.
Second-tier Pension Benefits

Although in principle, employers are not obliged to provide pension benefits, there
are some situations in which they do not have an option. In some branches (industries),
a compulsory Industry Wide Pension plan (Dutch: BPF) is effective. Similarly, as of
1 January 2007, employers who do not inform the new employee of the willingness
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to offer a pension plan or not within one month after he starts his job, and who are
already offering a pension plan to their other employees in the same line of business,
will be considered to have offered the same pension plan to the new employee.
Furthermore, various forms of legislation on equal treatment (age, man/woman,
full-time/part-time, temporary labor contracts/indefinite labor contracts, and the
like), existing collective labor agreements, or some specific merger and acquisition
situations might also lead to pension obligations for the employer.
The second-tier pensions, by law, are held by industry-wide pension funds,
company pension funds, or by insurance companies. The following options apply:
1. joining an industry-wide pension plan (this might be compulsory);
2. setting up a company pension plan through self-administered funds approved by
the Ministry of Social Affairs and supervised by the Dutch National Bank
(DNB) and the Authority Financial Markets (AFM); and
3. insuring employees with a life insurance company, licensed by the Dutch
Supervisory Authorities.
Three Insured Pension Plans

As an alternative to an industry-wide pension plan or a company pension plan,
pension plans may be fully insured by a life insurance company that is licensed in
accordance with the Dutch Act under the supervision of the Insurance Industry.
Insuring a pension plan by a life insurance company as mentioned above, can be
done by means of a “B Policy.” A “B Policy” means setting up insurance entitlement
between employer and an insurance company, e.g., a life insurance company that
ensures the employees an individual or collective entitlement. In contrast to the
former Pension and Savings Fund act, the new Pension Law as of January 2007 no
longer allows new pension plans to be based on a C-Policy, making it possible for
the employee to take out a policy with a licensed life insurance company by giving
an allowance for purchasing such an insurance). Insurance companies use deferred
annuity contracts as the funding instruments, combined with risk insurance to
provide pre-retirement and post-retirement death benefits and a waiver of premiums
on disability. The rates are mostly based on an interest discount rate of 3% a year.
Because investment returns tend to be higher, a “profit” or “gain” can be generated
on the policies.
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Several Ways to Finance and Arrange Supplementary

Pension Benefits
There are several ways in which old-age pension benefits can be arranged and financed,
i.e., by a defined benefit system or a defined contribution system.
Defined Benefit system (DB)

A DB system can take the following forms:
a. Final Pay System; and
b. Average Pay System.
Final Pay System

Under the Final Pay System, the pension accrued is a fixed percentage of the
pensionable base (salary minus franchise) applicable in the initial year as of the
commencement date of service or the commencement date of the pension plan.
With regard to future increases of the pensionable base, pension claims are
allocated to the previous years of service from the commencement date of
employment or of the plan. Therefore, the amount of the old-age pension depends
on the employee’s salary on the pension date, the years of employment and the
franchise.
Advantage of the final pay system:
• Under the final pay system, any salary increases lead to an ideal pension accrual,
because the pension is based on the most recent salary.
Disadvantages of the final pay system:
• The pension costs may increase out of control due to salary increases (thus
increasing the pensionable base) at a later age. Conversely, upon a reduction
of the pensionable base, the pension costs will also be progressively lower.
• If employment is terminated, time-proportional pension claims must be paid
up, i.e., the total pension claims on the basis of the employee’s most recent
salary, less the pension claims in relation to the period between the termination
date and the pension date.
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Note: Moderate Final Pay System

To prevent a situation in which pension increases at a later age will lead to major
costs increases, the final pay system often includes provisions to limit the costs.
A frequent provision stipulates that the pensionable bases after a certain age (55
or 60 years) are taken into account only with respect to future years of service.
Alternatively, it may be determined that promotions after the employee reaches
a certain age (55 or 60 years) no longer count for pension increases, but only the
usual periodical salary increases. Employers have to be aware that these kinds of
stipulations might be in conflict with Dutch equal treatment law.
Average Pay System

In this system, the pension accrual is a fixed percentage of the pensionable base in
the first year as of the commencement date of employment or the commencement
date of the plan. Upon each consecutive increase of the pensionable base, a pension
is accrued only for years of service yet to come. In this way, the pension to be
distributed on the pension date is calculated on the average of all pensionable bases
over the entire period of participation in the plan.
Advantages of the average pay system:
• The costs of an average pay system can generally be estimated easily and kept
under control, because pension increases following major salary increases are
granted only for future years of service (average);
• If the pensionable base decreases due to a lower salary, the pension loss will be
smaller, as salary decrease occurs later in the employee’s career; and
• Upon termination of the employment contract, there will be no need to pay up
any time-proportional pension claims.
Disadvantage of the average pay system:
• Pension accrual is not ideal, particularly if a major salary increase occurs at a
later age. This can be compensated to some extent by indexing the pension
claims
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Defined Contribution System (DC)

A DC system can take the following forms:
a. Defined Contribution System; and
b. Collective Defined Contribution System.
Defined Contribution System

Under a defined contribution system, it is not the final pension that is the standard,
but the costs that form the basis of the pension commitment. Thus, rather than
a pension commitment, a premium commitment is involved.
Advantages of the defined contributions system:
• A premium system is one in which the employer can control the costs;
• The International Financial Reporting Standards (IFRS) will not lead to any
records of pension obligations in the company books (balans). The pension
premiums will be shown only in the profit and loss account (resultaten rekening);
• Upon termination of the employment, the employer need not pay up any time
proportional pension claims;
• If the pensionable base decreases, the pension accrued by the employee in the
past will not be affected;
• In a defined contribution system, it is still possible to accrue a full pension of
70% of the employee’s final pay; and
• As pensions are partly the responsibility of the employee, premiums can be used
to accrue pension at the employee’s discretion. For instance, the employee
could insure only an old-age pension rather than an old-age pension in
combination with a surviving relatives’ pension.
Disadvantages of the defined contribution system:
• Older employees who develop their career later in life in a situation with a high
rate of inflation may not accrue a full pension;
• As the employee gets older, the years for premium payment become fewer,
which means that less pension can be accrued;
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• Upon marriage, cohabitation, or expansion of the family at a later age,

provisions for surviving relatives have to be financed from the same premiums;
and
• The final pension, owing to different circumstances (investment risks, interest,
and the like) is not as easy to forecast. Therefore, it is impossible to indicate
the relation between the employee’s final pay and the insured pension on the
pension date.
Collective Defined Contribution system (CDC)

As of 2005, International Financial Reporting Standards (IFRS) for companies
quoted on the stock exchange has led companies to reconsider their existing DB
pension plans. The impact of IFRS on the company books, when having a DB
pension plan, is tremendous. The Project Unit Credit (PUC) method based on
IFRS used, leads to very high pension liabilities in the company books due to the
fact that this method takes into account discount rates, salary increases, periods of
service, inflation, and other actuarial factors.
Although most of the companies affected by IFRS do not wish to be confronted
with the high liabilities in the company books, most of them also wish to keep the
advantages of the DB System. The combination of the two leads to a so-called
Collective Defined Contribution system.
A CDC pension plan, based on the Average Pay System, might show the following
aspects:
• The employer pays on a yearly base (within a few years), a prefixed pension
premium;
• Extra risk insurance is already included in the pension premium;
• The pension fund will use the DB system to divide the pension accrual, making
the yearly pension accrual flexible;
• The basic assumption will be that the premium should provide for the expected
pension. However, if there is a mismatch in expectations and in the final result,
the employees will collectively carry the actuarial/investment risks and
benefits; and
• Indexation might be paid by extra interest profits.
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The Dutch National Bank (DNB), however, has already been very critical on the so-
called CDC pension plans and has interpreted some of these plans as a DB plan.
The interpretation of the DNB has a direct effect on the way the pension plan has
to comply with specific pension provisions. The important interpretation for IFRS
might depend on the interpretation of the pension plan system by the specific
accountant. This means that the CDC pension plan might not be IFRS-proof, which
will imply a considerable risk for the employer.
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XVI. Competition Rules and Free Movement

of Goods
1. Competition Rules
The EC competition rules provided in Articles 81 and 82 of the EC Treaty have
direct effect in the Netherlands. Individuals can therefore invoke these articles
before the Dutch courts and they are obliged to apply them.
Article 81(1) of the EC Treaty prohibits agreements and concerted practices between
undertakings (natural or legal persons) the object or effect of which is to prevent,
restrict, or distort competition in the European Union (EU) and which may affect
trade between EU Member States.
Such restrictive agreements or practices may, however, benefit from an exemption
pursuant to Article 81(3). This exemption applies if the agreement or practice
improves the production or distribution of goods or services, or promotes technical
or economic progress, while allowing consumers a fair share of the resulting benefit,
provided that the agreement neither imposes restrictions that are not indispensable
to the attainment of these goals, nor afford the parties the opportunity to eliminate
competition in respect of a substantial part of the products or service in question.
Whether a certain agreement or practice satisfies these conditions for exemption
has to be determined by means of self-assessment. To facilitate this self-assessment,
the Commission provides guidance through the “Modernization Package,” a set of
notices and one procedural regulation.
In addition, the Commission has adopted the so-called Block Exemption Regulations
that automatically exempt certain categories of agreements. EC Block Exemption
Regulations currently exist in relation to, inter alia, technology transfer agreements,
motor vehicle distribution, specialization agreements, research and development
agreements, as well as other agreements in specific sectors, such as the insurance
sector and the transport sector. All Regulations have direct effect and are directly
applicable in the Netherlands.
An important EC Block Exemption Regulation is that for vertical agreements that
took effect on 1 June 2000. In principle, the Regulation automatically exempts
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from Article 81(1) of the EC Treaty all vertical agreements for the purchase or sale
of goods and services, provided that the supplier’s market share does not exceed
30% and the agreement concerned does not contain any “hard core provision.”
Typical hard core restrictions are fixed and minimum resale price maintenance,
absolute territorial restrictions, and absolute customer restrictions. Agreements
exceeding the 30% market share threshold are not eligible for automatic exemption,
but may still be exempt pursuant to Article 81(3) following an individual self-
assessment. Non-competition restrictions imposed on a purchaser in a vertical
agreement are generally required not to exceed five years.
Article 82 of the EC Treaty provides that any abuse of a dominant position by one
or more undertakings within the EU (or a substantial part of it) is prohibited if
trade between EU Member States may be affected. Illustrations of possible abusive
behavior are excessive pricing (whether low or high), fidelity rebates, and
discriminatory practices.
Upon infringement of the Article 81 or Article 82 prohibition, the European
Commission is empowered to impose fines of up to 10% of the worldwide group
turnover of undertakings involved.
The EC Merger Regulation, which gives the European Commission control over
mergers and acquisitions, as well as certain types of joint ventures, with a
Community dimension is also directly applicable in the Netherlands. If certain
monetary thresholds are met, a transaction is considered to have a Community
dimension, and prior notification and clearance of such transaction is mandatory in
the EU. Transactions that fail to meet the monetary thresholds of the EC Merger
Regulation may still be caught by the local merger control regimes of Member
States.
2. Dutch Competition Act

The Dutch Competition Act (Mededingingswet) took effect on 1 January 1998. The
Dutch Competition Act implements a prohibition system virtually identical to that
of Articles 81 and 82 of the EC Treaty.
Article 6(1) of the Competition Act contains a general prohibition against restrictive
agreements or practices whether of a horizontal or a vertical nature, provided that
the de minimis thresholds are exceeded. Agreements or practices that violate the
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prohibition are void. Moreover, parties to such an agreement or practice run the
risk of fines of up to EUR 450,000 or 10% of the worldwide group turnover of the
undertakings concerned, whichever is higher.
The Competition Act contains a de minimis exception. The general prohibition
contained in Article 6 of the Act will not apply to cases involving a maximum of
eight companies with a combined turnover of not more than EUR 5.5 million in
the case of goods and EUR 1.1 million in all other cases, such as the provision of
services. Similarly, the prohibition contained in Article 6 of the Act will not apply
if (i) the combined market share of the companies involved is not more than 5%
on any of the relevant markets which is influenced by the agreement, decision
or concerted practice; and (ii) the combined turnover of the companies with
regard to the relevant goods or services was not more than EUR 40 million
in the previous calendar year.
Similar to Article 81 of the EC Treaty, agreements or practices prohibited under
Article 6(1) of the Competition Act may, under certain conditions, be exempt.
Whether a certain agreement or practice satisfies these conditions for exemption
has to be determined by means of self-assessment. As previously stated in
paragraph 1 above, the European Commission has provided guidance for this
self-assessment through a set of notices.
Under the Competition Act, present and future EC Block Exemption Regulations
apply directly in the Netherlands. Any agreement benefiting from exemption under
an EC Block Exemption Regulation is automatically exempt. Present and future
EC Block Exemption Regulations also apply to purely Dutch restrictive agreements,
as a practical result of which the EC Block Exemption Regulations have remained
the most relevant documents to scrutinize any and all commercial agreements.
In addition, there are specific Dutch block exemptions for certain exclusivity
arrangements relating to shopping malls, promotional pricing campaigns of
a limited duration, and for certain joint tender arrangements.
The Competition Act further prohibits abuse of a dominant position by one or more
undertakings. Generally, this principle also applies to undertakings or governmental
bodies entrusted with the operation of services of a general economic interest, as is
similarly outlined in Article 82 of the EC Treaty.
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The Competition Act also provides for a system of prior merger control. In order
to fall within the ambit of the Dutch merger control provisions, the proposed
concentration (i.e., merger, joint venture, or takeover) must meet the following
threshold: the undertakings concerned must together, generate a total worldwide
turnover of at least EUR 113.45 million in the previous calendar year, of which at
least EUR 30 million must have been generated in the Netherlands by each of at
least two of the undertakings concerned in the previous calendar year. Different
thresholds apply to the banking and the insurance sectors.
However, the NMa does not have to be notified of a concentration if it falls within
the jurisdiction of the European Commission (the “one-stop-shopping” principle).
The EC Merger Regulation enables firms that are involved in a concentration over
which the Commission does not have automatic jurisdiction to benefit from one-stop
shopping. If the transaction has to be notified in three or more Member States, it is
possible for the parties involved to request that only the Commission reviews the
transaction, and not the individual national competition authorities.
The parties to the concentration are free to decide when to notify a merger, but the
proposed merger is not allowed to be implemented until four weeks after formal
notification (Phase 1). Within the four-week period, the NMa will inform the
notifying parties as to whether a license is required. If the NMa fails to notify the
parties within this period, the proposed concentration will be deemed approved.
If the NMa decides within the four-week period that no license is required, parties
are free to implement the transaction.
The NMa may decide that a license is required if it has reason to believe that the
concentration will significantly restrict effective competition on the Dutch market
or a part thereof, especially as a result of the creation or strengthening of a dominant
position. Without that license, the concentration may not be realized and the parties
will need to file a separate notification (Phase 2). Within 13 weeks, and upon
closer examination, the NMa will either grant or refuse the license. The license
will not be granted if the concentration is seen to significantly restrict effective
competition on the Dutch market or a part thereof, especially as a result of the
creation or strengthening of a dominant position.
The Dutch Minister of Economic Affairs has the power to ultimately decide whether
to approve a concentration, thereby overruling the NMa’s refusal, if he believes that
overriding social interests are involved.
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The NMa has the power to impose fines of up to EUR 450,000 or 10% of a company’s
worldwide group turnover (whichever is higher), if parties fail to notify a notifiable
concentration. The fine for withholding information or providing inaccurate or
misleading information to the authorities will amount to a maximum of EUR 450,000
or to 1% of the company’s worldwide group turnover. For infringements of the
prohibition against restrictive agreements or abuse of a dominant position, the NMa
has the power to impose fines of up to EUR 450,000 or 10% of the worldwide
group turnover of the undertakings concerned, whichever is higher.
Since 1 October 2007, the NMa can also fine natural persons for giving instructions
or exercising de facto leadership with regard to an infringement of the Dutch
Competition Act. The maximum fine that can be imposed on a natural person is
EUR 450,000.
3. Public Procurement Rules

To a large extent, the Dutch Public Procurement Law consists of legislation and
rules in which the EC Public Procurement Directives are converted. Aside from
this, several regulations exist which contracting authorities are either allowed or
obliged to apply.
Prior to 1993, substantial Dutch legislation regarding public procurement did not
exist. Legislation only existed with regard to public works contracts. In order to
cover the entire EC public procurement legislation, the Framework Procurement
Act (Raamwet EEG-voorschriften aanbestedingen) was enacted in 1993. This act
constitutes a framework law on EC procurement rules.
At present, the Framework Procurement Act functions as a legal basis for Royal
Decrees, by which EC public procurement legislation is implemented. Two Royal
Decrees came into force on 1 December 2005, the result being that the Dutch
government complied with its obligation to implement the two Procurement
Directives before 31 January 2006. The first is the Decree Public Procurement
Special Sectors (Besluit Aanbestedingen Speciale Sectoren), which implements the
Utilities Directive. The second is the Decree Public Procurement (Besluit
Aanbestedingsregels voor Overheidsopdrachten), which implements the other “Classic”
Directive (regarding services, works, and supplies).
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Before 1 December 2005, the EC Directives on public procurement were implemented

under Dutch law by means of a mere reference to these Directives. The adoption
of the new Royal Decrees resulted in a full text implementation with which the
legislator has kept as close as possible to the original text of the Directives. The only
references made to the Directives are there to implement the models for
announcements and to the financial threshold values.
Despite the full text implementation, the text and order of the Royal Decrees have
been slightly modified with regard to the Directives. For instance, contrary to the
Directives, the rules on the scope of enforcement of the Directives have been
bundled in the Royal Decrees and some of the longer articles of the Directives have
been shortened to several paragraphs to enhance the legibility.
Furthermore, the Alcatel8 jurisprudence of the EC Court of Justice has been included,
unlike in the Directives. Another addition was put in the Royal Decrees to comply
with the Dutch obligations under the Agreement concerning the European
Economic Area and the Government Procurement Agreement.
Most optional procedural provisions of the Directives have been taken over and
specifically implemented in the Royal Decrees.
Naturally, if there is room for debate on the scope of the definitions or clauses in
the Royal Decrees, the main rule of the La Scala9 case will apply, being that the
Directive must be interpreted in such a way as to ensure that it is given full effect.
Before the end of 2008, the Dutch government is planning to enact a bill that is to
replace the Framework Procurement Act. This bill, known as the Procurement Act
(Aanbestedingswet), was passed by the Dutch Lower Chamber and is currently being
considered by the Dutch Upper Chamber. Aside from implementing the Directives,
the Procurement Act is intended to serve as a tool for the Dutch government for a
more accurate execution of European and international procurement obligations.
The two Royal Decrees will remain in force when this new framework law is adopted
in order to timely implement any modifications of the Directives, developments in
case law, any international obligations regarding public procurement, and specific
national additions to the Directives.
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8 EC Court of Justice, 28 October 1999, C-81/98 Alcatel Austria.
9 EC Court of Justice, 12 July 2001, C-399/98 La Scala.
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The Works Procurement Regulation 2005

In the Dutch system, the four “building” ministries10 are obliged to apply the
Works Procurement Regulation 2005 (Aanbestedingsreglement Werken- ARW 2005)
for contracts both within the scope of the Directive and national procurement
procedures, for instance, those below the respective threshold value. The application
of this Regulation is not mandatory for noncentral authorities, say, municipalities.
Some municipalities might still use the old Uniform Procurement of Works
Regulations (Uniforme Aanbestedingsreglementen, for instance, the UAR 2001 or the
UAR EG-1991), which are based on the old Directives, and refer disputes to the
Court of Arbitrators.11
The Works Procurement Regulation 2005 is fully compliant with the Directive and
the Royal Decree. If there is any discrepancy between the different regulations, the
Royal Decree prevails.12
The regulation can also be voluntarily used by all other contracting authorities for
European and national procurement procedures. The regulation provides for two
different sets of rules: one for European procurement procedures and one for
national procurement procedures. The national public procurement procedures do
not have a statutory basis within the Dutch legal system. However, due to
developments in both European and national case law, the general principles of
procurement law (such as the principles of nondiscrimination objectivity and
transparency) should also be complied with in cases where the Directives do not
apply. In these cases, the Works Procurement Regulation 2005 could help the
contracting authorities to put up work in accordance with these principles.
Contracting authorities
Contracting authorities are the state, regional or local authorities, bodies governed
by public law, or associations formed by one or several of such authorities (jointly
referred to as “public authorities”). The definition of “state” is given a functional
____________________
10 Ministry of Defense, Ministry of Agriculture, Ministry of Transportation and Ministry of Housing,
Spatial Planning and Environment.
11 However, with the adoption of the new Procurement Act, procurement disputes can no longer be
settled before the Court of Arbitrators.
12 The Directives do not have a direct effect on the residents of the EU member states.
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interpretation, rather than a formal approach. In the Netherlands, there are more
than a thousand entities that can qualify as public authorities that have to adhere to
the Framework Procurement Act.
Moreover, as far as the utilities sector is concerned, contracting authorities are
defined as public authorities or public undertakings that exercise relevant activities.
Besides, if an entity which is not a public undertaking, exercises relevant activities
on the basis of special or exclusive rights granted by a competent authority, it is also
regarded as a contracting authority, regardless of its legal status. As a consequence, the
Framework Procurement Act can also be applicable to private companies. Apart
from certain important exemptions, relevant activities for the purpose of the
Utilities Directive are as follows:
• the provision (in short) of services to the public in connection with the production,
transport, or distribution of drinking water, electricity, gas, or heat (or their
supply);
• the exploitation of a geographical area for the purpose of:
1. exploring for or extracting oil, gas, coal, or other solid fuels; and
2. the provision of airport, maritime or inland port, or other terminal
facilities to carriers by air, sea, or inland waterway;
• the operation of networks providing a service to the public in the field of
transport by railway, automated systems, tramway, trolley bus, or cable; and
• the provision or operation of postal services.
The Framework Procurement Act does not apply to contracts that the contracting
authorities award for purposes other than the pursuit of relevant activities. The
Framework Procurement Act refers to the various threshold values, which are
stated in the Directives.
Main principles
Dutch public procurement law that implements the EC Directives is based on
four principles:
• adequate advertising of the intention of the contracting authorities to place
public procurement contracts, so that companies have the opportunity to
compete for the award of the contracts;
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• a ban on the use of technical specifications which favor or eliminate certain

undertakings;
• objective criteria for the participation to and the award of public contracts; and
• the general principles of proper government.
The first three principles are corollary to the general principles of procurement
law, such as nondiscrimination, objectivity, and transparency. According to Dutch
and EC case laws, contracting authorities should always comply with the general
principles of proper government and the general principles of procurement law,
regardless of whether or not the Framework Procurement Act applies.
Advertising
Advertising rules oblige contracting authorities to send notices to the Office for
Official Publications of the EC in Luxembourg. The content of notices may differ.
It is determined by various publication requirements. Notices can or must take the
form of indicative notices after the beginning of the budgetary year, call for tender,
design contest notices, notices on the existence of a qualification system, or notices
on contracts awarded.
Voluntary use of advertising possibilities for contracts, which fall outside the scope
of the Framework Procurement Act, is allowed. On a regular basis, notices are also
published in the Official Gazette (Staatscourant) and Cobouw, a newspaper for the
construction industry. The Dutch government promotes electronic procurement;
for instance, through the Internet.
As stated above, Dutch and EC case laws require compliance with the general
principles of procurement law and proper government. This entails, inter alia, that
the contracting authority should always exercise a proper level of transparency
while procuring contracts.
Award procedures
Award procedures include the following:
• the open procedure;
• the restricted procedure;
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• the negotiated procedure; and

• the competitive dialogue.
If the open procedure is followed, all interested contractors, suppliers, or service
providers may submit tenders. If the restricted procedure is followed, only those
contractors, suppliers, or service providers that have been invited may submit tenders.
If one is not invited, a request to participate in the procedure can be made. If the
negotiated procedure is followed, contracting authorities may consult contractors,
suppliers, or service providers of their choice and negotiate the terms of contract
with one or more of them. This is not allowed when the open or restricted
procedure is followed.
The Directives have introduced a new procedure, being the competitive dialogue,
which is also implemented by the Royal Decree in the Dutch legal system.
Contracting authorities who wish to execute a complex project are often unable to
ascertain their specific needs to consequently set those down in specifications for
the project.
For those projects, the Directives have introduced a more flexible procedure for
a contracting authority to assess its needs and to organize the procurement procedure
in a regulated dialogue with the preselected tenderers. With the introduction of
the competitive dialogue procedure, the possibility to use the negotiated procedure
is more limited than before.
Time limits
Time limits for the receipt of requests or tenders may be fixed by contracting
authorities, but may not be less than indicated in the EC Directives. In cases where
urgency renders the time limits impracticable, they may be reduced.
Selection criteria
Criteria for qualitative selection consider the company (and not the contract).
In some cases, a separate category of criteria is allowed by the use of additional
specific conditions, for instance, the capability of a company to hire long-term
unemployed workers. By not defining these criteria, uncertainty has been created
as to what extent public procurement can be used by governments as an instrument
to execute a social or economic policy.
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Criteria for qualitative selection are divided into criteria for the evidence of the
company’s financial and economic standing on one hand, and for the evidence of the
company’s technical knowledge or ability on the other. Registration in an official list
of recognized companies may be used as an alternative evidence to prove suitability.
Award criteria
Public contracts are awarded on the basis of one of two possible criteria. Contracts
are either awarded to the tender with the lowest price only or to the one that is
economically most advantageous. When the award is given to the economically
most advantageous tender, various criteria, including the price, are taken into
account, such as running costs and technical merit. The Framework Procurement
Act does not address the application of the EC state aid regime. Regional
preference schemes, used when awarding public procurement contracts, may still
exist in practice, but are likely to be prohibited if as a result, a percentage of the
contracts is restricted to certain companies established in a certain area of the
Netherlands.
4. Import and Export: Free Movement of Goods

Trade to and from the Netherlands (like trade to and from any other EU Member
State) is subject to the rules on the free movement of goods. Articles 28 to 31 of
the EC Treaty provide that all measures that tend to restrict imports from or
exports to other EU Member States are prohibited. Such restrictions can be
justified only in exceptional cases, e.g., for reasons of public security, the protection
of health and lives of human beings, animals or plants, or the protection of industrial
and commercial property.
The general rule is that any product that has been legally manufactured and
marketed in another EU Member State should be allowed to circulate freely within
the Netherlands, and vice versa. Articles 28 to 31 of the EC Treaty have a direct
effect in the Netherlands and can be invoked before Dutch courts. With regard to
trade between the Netherlands and other EU Member States, all customs duties
have been abolished.
The common EU customs tariff rate applies to trade between the Netherlands and
non-EU countries. In addition, the European Commission’s import and export
regulations for trade with non-EU countries must be observed. Depending on the
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country of origin or the destination of a product or the type of goods (e.g., textiles,
dual-use, or strategic goods), import or export licenses may be required. Additional
controls exist for certain goods, such as livestock or chemicals.
5. The European Economic Area

The European Economic Area (EEA) Agreement took effect on 1 January 1994.
The EEA consists of the 27 EU Member States13 plus Iceland, Norway, and
Liechtenstein. The EEA Agreement provides for a set of competition rules, which
are virtually identical to the EC competition rules. In addition, the free movement
of goods rules mentioned above also apply to goods of EEA origin.
6. Standardization
One of the objectives of the Community is to eliminate technical barriers to
trade and to promote the use of European standards. In furtherance of this aim,
a considerable number of EC Directives have been enacted to harmonize technical
and safety requirements, and have been implemented in the Netherlands and in
other Member States, as well. These Directives relate to the lawful marketability
of a variety of products, such as machinery, toys, and medical devices. Products
that are produced in conformity with European standards are presumed to be in
conformity with the EC Directives on Technical Harmonization. Products that
comply with those Directives are required to carry the CE mark and can be freely
marketed throughout the European Union.
____________________
13 Member States: Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland,
France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the
Netherlands, Poland, Portugal, Romania, Slovak Republic, Slovenia, Spain, Sweden, and the
United Kingdom.
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XVII. Intellectual Property

1. Patents
Patents filed on the basis of extensive research can be registered in the Netherlands
for a period of 20 years. As of June 2008, it is no longer possible to file for short-
term patents (with a validity of six years), as these patents create too many legal
insecurities due to the lack of an extensive research as part of the application
procedure. Applications for a Dutch patent must be submitted to the Industrial
Property Office (Bureau voor de Industriële Eigendom) in Rijswijk, the Netherlands.
As of June 2008, the description of the patent application may be filed in the
English language. The conclusion thereof, however, still needs to be filed in the
Dutch language.
The owner of a patent may grant licenses to third parties for the use of its patent.
If it is considered necessary for the public interest, or if the patent is not adequately
used in the Netherlands within three years after its rights are granted, the owner
can be compelled to grant a license. Compulsory licensing can also be enforced if
there is a certain level of dependency between an existing patent and the application
for which the license has been requested, if it contains an important new technology.
The Dutch Supreme Court gave way to cross border relief in multi-jurisdictional
patent infringement cases in 1989 in its Lincoln v. Interlas judgment. Since then,
Dutch courts have allowed for cross border injunctions in numerous instances.
The possibilities for obtaining cross border injunctions have been restricted lately.
The Court of Appeal in The Hague in its decision of 1998 EGP/Boston Scientific
required the Dutch defendant to be the “the spider-in-the-web,” i.e., the company
determining the policy with respect to all companies involved in the allegedly
infringing act in other EU countries where the cross border injunctions was sought.
Recent European case laws (European Court of Justice in 2006 in its decisions
Gat/Luk and Roche/Primus) have further restricted the possibilities to obtain cross-
border injunctions.
The Netherlands is a party to the (1975) Treaty of Paris for the Protection of
Industrial Property, the (1973) European Patent Convention, the (1970) Patent
Cooperation Treaty, and the (1963) Strasbourg Convention.
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Applications for a European patent can be filed with the European Patent Office in
Munich, Germany, or with its subdivision in Rijswijk, the Netherlands.
2. Copyright
There are no formalities required to obtain copyright protection. A work qualifies
for copyright protection if it has an “original and personal character”.Therefore,
copyrightable works made or published in most countries of the world will likewise
be protected under the Dutch 1912 Copyright Act (Auteurswet 1912). Copyright
protection continues for 70 years after the death of the author or, in some cases,
after the publication of the work. The Netherlands is a party to the 1886 Bern
Convention on the protection of literary and artistic works and the 1952 Universal
Copyright Convention.
The Dutch 1912 Copyright Act has been amended to implement the European
Directive of 22 May 2001 on the harmonization of certain aspects of copyrights and
related rights in the Information Society (the “Copyright Directive”). The amended
Dutch Copyright Act entered into force on 1 September 2004. The Copyright
Directive introduces a reproduction right, a right of communication to the public,
and a distribution right. Further to the implementation of the Copyright Directive,
the Dutch 1912 Copyright Act has introduced new exceptions and limitations, such
as the exception of use for purposes of caricature, parody, or pastiche. Furthermore,
new provisions with respect to the protection of technological measures and rights
management information have been included in the amended Dutch 1912
Copyright Act.
As a result of Directive (EC) 2001/84 of 27 September 2001 on “droit de suite,”
the Dutch Copyright Act has recently been amended to introduce a right of
remuneration for the original author on further sale of an original work (“droit
the suite”).
The Netherlands is one of the few European Union Member States likewise, to
protect non-original works, such as phone books, timetables, and other collections
of data, provided that they are meant to be made available to the public. However,
the scope of protection is limited.
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3. Neighbouring Rights
Performing artists, producers of sound recordings and broadcasting companies
can claim neighbouring rights that are related to copyrights under the Dutch 1993
Neighbouring Rights Act (Wet op de naburige rechten). Registration is not required.
Neighbouring rights may be exercised for a period of 50 years after the first of
January of the year following the year of the initial performance. Further to the
implementation of the Copyright Directive, the Dutch 1993 Neighbouring Rights
Act has also been amended.
4. Protection of Databases
Apart from protection under Dutch copyright law, databases have obtained sui generis
protection further to the implementation into Dutch law of the European Directive
96/9 of 11 March 1996 on the legal protection of databases. The producer of a
database is granted exclusive rights to prevent extraction and/or reutilization of the
whole or of a substantial part, if the database shows that there has been a qualitatively
and/or quantitatively substantial investment in obtaining, verifying, or presenting
the contents. The rights run from the date of completion of the database and will
expire 15 years from the first of January of the year following the date of completion.
In its judgment in 2004 of the British Horseracing Board v.William Hill case, the
European Court of Justice has limited the scope of costs involved that can contribute
to qualifying an investment as substantial. For instance, the costs involved with
the mere creation of data are not relevant. Furthermore, the European Court of
Justice decided that with respect to the scope of database protection, the economic
value of the extracted or reutilized data is of no importance with regard to the
infringement question.
5. Trademarks
Belgium, the Netherlands, and Luxembourg, forming together the Benelux region,
have had a uniform trademark protection law since 1971. The EC Trademarks
Directive 89/104 of 21 December 1988 has been implemented in the Benelux
Trademarks Act. On 1 September 2006 the Benelux Trademarks Act and the
Benelux Designs and Models Act have been merged into the Benelux Treaty for
Intellectual Property.
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In principle, trademark owners can oppose the use or registration of a younger sign
that is identical and is used for identical goods or services. Furthermore, trademark
owners can oppose the use and/or registration of an identical or similar younger
sign that is used for identical or similar goods or services if there exists a likelihood
of confusion.
If an identical or similar trademark has been filed for similar or dissimilar goods or
services, a trademark owner can, in principle, oppose the use of the younger sign if
its existing registration is well known in the Benelux countries and if the use of the
younger sign takes unfair advantage of, or is detrimental to the distinctive character
or reputation of the existing trademark.
In addition, a trademark owner can oppose the use of a younger sign if it is used in
any way other than to distinguish goods and such use, without a valid reason, takes
unfair advantage of, or is detrimental to the distinctive character or reputation of
the existing trademark.
To acquire protection, a trademark has to be registered with the Benelux Office
for Intellectual Property in The Hague, in accordance with the Benelux Treaty for
Intellectual Property. In principle, words, symbols, colors, three-dimensional
shapes (of a product or packaging), and sounds that distinguish goods or services
can be registered as trademarks.The Benelux Office for Intellectual Property may
refuse signs that are not distinctive, misleading, or are in violation of public order.
Unregistered trademarks are, in principle, not protected. A trademark registration
is valid for 10 years and can be renewed for another 10 years. It is also possible to
register collective trademarks. The said trademarks distinguish certain collective
characteristics of goods and services (e.g., seals of approval, logos for the environment),
rather than to distinguish the goods and services themselves.
Since 1 January 2004, the Benelux countries have introduced an opposition procedure,
that allows trademark owners to oppose an application for registration of a
conflicting sign with the Benelux Office for Intellectual Property. The goal of the
opposition is to obtain clarity at an early stage whether a trademark can be
registered or not. Furthermore, the new rules are meant to encourage parties to
reach an amicable settlement whenever possible. As of January 2006, oppositions
may be lodged against new trademarks filed for goods and services in all classes.
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It is also possible to apply for a European Community Trademark registration,

which covers all the Member States of the European Union. Trademark attorneys
can file applications in any EU country. On 1 May 2004 the Czech Republic,
Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia, and the Slovak
Republic joined the EU. Trademark protection of existing European Community
Trademarks has been extended to these countries automatically and without cost.
Owners of older national trademark rights in one of the new Member States can
file an opposition against an allegedly conflicting European Community Trademark
but only if the same was filed between 1 November 2003 and 30 April 2004.
Romania and Bulgaria joined the EU on 1 January 2007. Community trademark
applications filed between 1 July 2006 and 1 December 2006 can be subject to
oppositions based on earlier rights in these new Member States.
The Netherlands is also party to the Madrid Convention and the Madrid Protocol
(“the Madrid System”), which makes it possible for persons or legal entities with a
real and effective industrial or commercial establishment in a country that is a party
to the Madrid System, and for persons or legal entities with domicile or a registered
seat in an EU Member State, to extend a Benelux trademark registration to another
Member State and vice versa. In general, the main advantage of international
registration is that it is cheaper than filing individual national applications for
registration. The disadvantage of international trademark registration is that it
automatically lapses or is cancelled in all Member States if the national application/
registration on which the international registration is based, lapses or is cancelled
within five years after the international registration.
Countries that are party to the Madrid System and/or the Paris Treaty can claim
priority rights within six months after the application date of the first registration.
With Global IP Manager (“GIPM”) Baker & McKenzie can provide web-based
worldwide trademark portfolio management services. GIPM enables our clients
to review instantly online, all IP matters being handled by Baker & McKenzie.
Organized by country, legal action, or structured according to brand categories,
GIPM replaces the need for in-house attorneys to trace information on the status
of pending applications or current contentious matters.
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6. Designs and Models

The provisions of the Benelux Treaty for Intellectual Property protect registered
designs and models for functional products, i.e., features of shape, ornaments,
or patterns. Applications for registration are filed with the Benelux Office for
Intellectual Property or with the International Bureau for the Protection of
Industrial Property, in the case of international applications.
Novelty and having a “distinctive character” are conditions for protection, but
originality of design is not required. Nevertheless, a design is still considered new
if it has been made public for the first time within 12 months before the filing.
Pursuant to EC Directive 98/71 of 13 October 1998 (European Directive on the
Legal Protection of Designs), the Benelux Designs and Models Act was amended
and came into force on 1 December 2003. As a result, the possibilities of taking
action against design infringements on the basis of unfair competition (tort) have
been broadened. The Benelux Designs and Models Act was merged into the Benelux
Treaty for Intellectual Property on 1 September 2006. The term of protection
(five years) can be extended four times, for a maximum total of 25 years.
As a result of EC Council Regulation 6/2002 of 12 December 2001 on Community
Designs, a new and separate system has been created for the protection of designs
in the European Community. This system also incorporates an Unregistered
Community Design right, which provides protection for three years from the day
the product incorporating the design is made available to the public in the EU.
This design right, granted by law without formalities and free of charge, has been
available since 6 March 2002. It only allows the owner to oppose the use of identical
designs, whereas the Registered Community Design right entitles the owner to also
oppose the use of designs that produce a similar impression. The latter right provides
protection for a five-year period, which can be renewed four times (a total of
25 years of protection). Applications for this right are to be filed with the OHIM
(Office for Harmonization in the Internal Market) of the EU. The OHIM began
accepting applications on 1 January 2003.
The Netherlands is a party to the The Hague Agreement for the International
Registration of Designs and Models. This agreement makes it possible to apply for
“international registration” in all Member States. Registration is effected with the
World Intellectual Property Organization in Geneva. Countries that are a party to
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the Paris Treaty can claim priority rights, within six months, to acquire a priority
date, as of which the owner of the design or model can object to all identical and
similar design or model applications and registrations.
7. Trade Names
The Dutch 1921 Trade Name Act (Handelsnaamwet) prohibits the use of names that
are identical or similar to those already being used by another enterprise, if such
use can cause confusion among the public. A company cannot acquire the right to
a trade name merely by registering it with the Trade Register, but must also use it.
8. IP Enforcement Directive 2004/48/EC

The IP Enforcement Directive was adopted on 26 April 2004 by the EU member
states in order to harmonise the enforcement of intellectual property rights within
the EU, based on the European Commission’s view of best practice across the EU.
As of 1 May 2007 the provisions of the IP Enforcement Directive have been
implemented into various Dutch IP laws.
The Directive’s provisions include procedures covering evidence and the protection
of evidence and provisional measures such as ex parte injunctions and seizure.
Remedies available to intellectual property right holders include the destruction,
recall or permanent removal from the market of illegal goods, as well as financial
compensation, injunctions and damages. There is also a right of information allowing
judges to order certain persons to reveal the names and addresses of those involved
in distributing illegal goods or services, along with details of the quantities and
prices involved.
9. Anti-counterfeit Measures
As a member of the European Union, the Netherlands has implemented measures
to harmonize customs controls with respect to IP rights. Council Regulation (EC)
1383/2003 lays down the measures concerning the importation into the European
Community and the export or re-export of counterfeit goods from the same.
These measures provide an effective tool in protecting most IP rights against the
counterfeit trade.
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Under the Council Regulation, customs can either independently take action by
detaining goods that are suspected of infringing certain IP rights, or customs can
take such action provided that the holder of these IP rights has filed an appropriate
notice with customs. The process for filing a customs notice is relatively simple and
straightforward. Customs charges no administrative costs for processing the filing
of such notice. Once customs has detained goods, the right holder is given the
opportunity to either settle the matter amicably by having the goods surrendered
after which the counterfeit goods can be destroyed, or to commence civil or
criminal proceedings. Practice shows that the goods are usually surrendered for
destruction to avoid legal proceedings. Aside from the voluntary surrender of the
goods, it is also possible to obtain the presumed agreement to the destruction of
the goods, in case the carrier, consignor, or consignee does not oppose a request
for surrender.
With “BorderWatch” and “BorderResponse,” Baker & McKenzie has introduced global
web-enabled tools to (cost) effectively fight counterfeit on the customs level on a
global basis. BorderResponse is a pre-litigation enforcement service on a fixed fee
basis, which includes customs recordation of intellectual property rights, preparing
cease and desist letters, and dealing with initial responses from the adverse parties
to reach a settlement.
BorderWatch is an online service offering tips on intellectual property protection
through customs procedures in 55 countries. BorderWatch features 55 country
reports on customs procedures and enforcement options, including information on
filing customs notices, acting on a detention or seizure, practical tips and advice,
customs registration forms, contact details for customs, and local legal assistance.
10. Advertising
Misleading advertising is primarily addressed under the tort law.The Dutch Civil
Code declares it a tort to misrepresent the nature, composition, quantity, quality,
characteristics, user possibilities, origin, or price of a product.
Comparative advertising is permitted under Dutch law provided it gives an objective
comparison of one or more material, relevant, verifiable, and representative features
or qualities of the products or services being compared. Other trademarks may
be used in such comparisons provided that the advertisement does not harm the
reputation of the other trademark.
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In the case of misleading or unlawful advertising, an injunction, a rectification, or

compensation for damages can be sought before the Dutch courts based on the
relevant provisions of the Dutch Civil Code.
Furthermore, advertising standards for specific industries are regulated by separate
laws and the industry itself. The Dutch Advertising Code (Nederlandse Reclame
Code) is an example of such self-regulation and provides that advertising must be
in accordance with the law, the facts, and good taste and that it may not be contrary
to the public interest, public order, or common decency. Advertising that misleads
the public, e.g., the price or origin of a certain product is prohibited. Specific
regulations apply to advertising directed at children and to the advertising of
products such as alcoholic beverages, pharmaceuticals, and financial products.
The advertisement of tobacco products has been banned in the Netherlands. The
Dutch Tobacco Act also restricts the use of tobacco trademarks and distinguishing
signs for non-tobacco products.
In addition to the option of taking legal action, a complaint can be filed with the
Advertising Code Committee and its Board of Appeal. Although decisions of either
group are not legally binding, negative decisions are normally respected by the
affiliated media, which will refrain from publishing the advertisement in question.
The Advertising Code Committee and its Board of Appeal can render an “individual
recommendation” which is communicated only to the plaintiff and the offender
in question, or it can render a “public recommendation” which is published in
various media.
The advertising of pharmaceuticals is regulated by the Pharmaceuticals Act
(Geneesmiddelenwet). The advertising of pharmaceuticals is further regulated by
the self-regulatory codes, such as the Code of Conduct for the Advertising of
Pharmaceuticals of the Stichting Code Geneesmiddelenreclame and the Code for the
Advertising of Medicinal Products to the General Public of the Stichting Keuringsraad
Openlijke Aanprijzing Geneesmiddelen (KOAG).
The advertising of pharmaceuticals (including the grant of incentives to health
professionals) is strictly regulated. Public advertising of non-prescription
pharmaceuticals is allowed under certain conditions, but public advertising of
prescription pharmaceuticals is prohibited. Advertising to health professionals is
allowed provided that certain requirements are complied with. Strict rules apply
to comparative advertising for pharmaceuticals.
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Complaints on misconduct of the Code of Conduct for the Advertising of

Pharmaceuticals can be filed with the Code Committee of the Stichting Code
Geneesmiddelenreclame. Complaints on misconduct of the Code for the Advertising
of Medicinal Products to the General Public can be filed with the Code Committee
of the Stichting KOAG. Appeals against the Code Committees decisions can be filed
with the respective Boards of Appeal. It is also possible to initiate court proceedings
against competitors based on unfair competition.
The advertising through (promotional) games of chance is strictly regulated by
the Act on Games of Chance (Wet op de kansspelen) and the Code of Conduct on
Promotional Games of Chance (Gedragscode promotionele kansspelen). A violation of
these regulations is an economic offense.
Under the code of conduct, a maximum of one promotional game of chance per
product, service, or organization per year is allowed. No costs other than the costs
of communication may be charged for participation in a prize draw. Furthermore,
such costs of communication may not exceed EUR 0.60 per entry and must be
clearly communicated before entry. The price of the product or service may not be
increased merely because of the prize draw. The total amount of any winnings must
not exceed EUR 100,000. In addition, there must be no more than 13 prize draws
in one promotional game of chance.
The organizer of a promotional game of chance must use general terms and
conditions which include certain information, such as the name and address of the
organizer, the period during which the prize draw is open, the number, nature and
value of the prizes, the communication costs, the date of the prize draw, the way
that the tax on games of chance will be paid, and the like.
For “small promotional games of chance,” where the total value of the prizes is less
than EUR 4,500, the regulations are less strict.
In case a promotional action consists of a performance that can be adjudicated,
the promotional action will not qualify as a game of chance but as a prize contest.
In that case, the total value of the prizes may not exceed EUR 2,300.
11. Advertising and freedom of expression

Article 7 of the Dutch constitution regarding the freedom of expression does not
apply to commercial advertising. However, the corresponding Article 10 of the
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European Convention on Human Rights (ECHR), which supersedes the national

constitutions within the EU, does not exclude commercial advertising. This implies
that, according to European law, commercial advertising can fall under the scope of
the right to freedom of expression.
In practice, the scope of protection of Article 10 ECHR for commercial advertising
seems limited. It does not provide advertisers an unrestricted right to advertise for
their own benefit and at their competitor’s expense. In Dutch and European case
laws, it has been established that in case of a conflict between commercial advertising
and, for instance, the intellectual property rights of a competitor, the court will
weigh the interests involved. Generally, the commercial interest of advertising will
not prevail over the interest of protection of intellectual property rights.
12. Unfair Competition

Under certain conditions, recourse may be claimed against passing off or unfair
competition under Dutch tort law. To base a claim against unlawful reproduction
or copying of goods on unfair competition, it will generally have to be demonstrated
that the unlawful acts lead to (a danger of) confusion among the public which could
have been avoided without hampering the reliability and usefulness of the goods
concerned. Furthermore, it will have to be demonstrated that the unlawful acts in
question caused damages for the plaintiff.
Other unlawful acts, such as unfairly competing with one’s former employer, theft
of trade secrets, or misleading (comparative) advertising claims, can also be redressed
on the basis of unfair competition under Dutch tort law.
In December 2003, the possibilities to base legal action against design infringements
on unfair competition became less restrictive, by an amendment of the Benelux
Design legislation.
13. Trade Secrets

Trade secrets are generally protected by contract rather than by law. They may,
however, also be protected by tort law under certain circumstances (see “Unfair
Competition” above).
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14. Assignment, Licensing, and Pledge

Further to the specific provisions under Dutch intellectual property law, the
assignment, licensing, and pledge of certain intellectual property rights are subject
to the general provisions of Dutch property and contract law and European and
Dutch competition law. No government approval is required. However, in order
for certain assignments, licenses, and pledges such as patents, trademarks, design
and models, topographies, or plant breeders’ rights to be effective against third
parties, they must be registered with the applicable registration offices.
15. Treaties and General European Legislation

In addition to the treaties mentioned above, the Netherlands is also party to inter
alia, the TRIPs agreement (effective since 1 January 1996) and the Paris Convention
establishing the World Intellectual Property Organisation.
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XVIII. Telecommunications
1. Market Situation
The Dutch telecommunications sector has been fully liberalized since 1 July 1997.
Various operators are active in all sectors of the electronic communications industry.
2. Basic Legislation and Regulatory Authorities

On 19 May 2004, the new Dutch Telecommunications Act (Telecommunicatiewet, or
TW) took effect, replacing the TW of 19 November 1998 and implementing the
2002 EU Directives on electronic communications. Like its predecessor, the TW is
a framework act, many details of which are further specified in secondary legislation
(e.g., governmental and ministerial decrees). Currently, proposed amendments to
the TW are being discussed in parliament. The modification aims amongst other on
the establishment of an antenna register and extension of the prohibition on undesired
electronical communications. Besides in the current proposal the so-called Policy
Document on Frequency. In short, this Policy Document strives for a less regulating
attitude of the Dutch government with regard to the use of frequency. The
distribution of frequencies will preferably take place by means of an auction.
The principal aim of the new TW is to encourage effective competition. It is designed
to work more in line with general competition law. The new TW is also more
technologically neutral compared to the 1998 TW. The independent regulatory
authority (OPTA) remains responsible for the general supervision of parties operating
on the telecommunications market, for management of numbering and for the
registration of providers, and also has significant jurisdiction with respect to the
resolution of interconnection disputes.The Dutch Competition Authority (NMa),
affiliated with the Ministry of Economic Affairs, is empowered to monitor the
electronic communications sector for anti-competitive activities and concentrations.
OPTA and NMa have strengthened their cooperation since 2004.
3. Registration
In order to install or operate public electronic communications networks and to
provide public electronic communications services and conditional access systems
(e.g., video-on-demand), a party is required to register with OPTA. OPTA is also
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responsible for certifying service providers for electronic signatures. There are
standard registration forms available for this purpose (in Dutch and English).
Registration is intended primarily to give OPTA an overview of market players in
order to ensure effective supervision and is not conditional on meeting any material
qualifications, other than demonstrating to OPTA that the service/network is
indeed offered to the general public. The fees OPTA charges consist of a one-time
registration fee and an annual “supervision” fee, which as of 2006 has been tied to
annual turnover.
An individual license under the TW is required, in principle, only for the use of
frequencies, for mobile and satellite communications. Depending on the scarcity
of the frequencies concerned, licenses for the use of frequencies for commercial
electronic communications are granted in accordance with one of the following
procedures: (i) in the order in which applications are received (“first-come-
firstserved” basis); (ii) by competitive assessment of applicants and applications
(“beauty contests”), which may include the requirement of a financial quotation;
or (iii) by auction. Details on the allocation and use of frequencies are set out in
a National Frequency Plan. Parties can be excluded from a frequency allocation
procedure, if this is necessary to guarantee genuine competition in the relevant
market.
4. Numbers
The designated use of numbers is indicated in a number plan. Number plans have
been drawn up for, inter alia: (1) telephone and ISDN services; (2) telex services;
(3) packet and circuit-switched data services; (4) international signaling point
codes; (5) transit network signaling point codes; and (6) identity numbers for
international mobility (IMSI numbers).
OPTA is charged with the task of granting, reserving numbers, and supervising the
use of such numbers. Numbers may be obtained or reserved by means of standard
forms, which are available for: (i) information numbers for free services (0800)
and paid services (0900 and 0906); (ii) number blocks; (iii) individual numbers;
(iv) carrier (pre)select numbers (a prefix of “16xx”); (v) international signaling
point codes; and (vi) transit network signaling point codes.
Under the revised TW, the number plans indicate what allocation method applies
to a certain type of number (i.e., auction, lottery, or “first come, first served”).
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Numbers with an exceptional economic value (i.e., short numbers) will be allocated
by auction. Numbers allocated by auction will be assigned for an indefinite period,
unless the number plan specifies the duration of the assignment.
Numbers may not be traded as a business activity, but the holder of numbers may
allow third parties the use of its numbers provided this is done in a nondiscriminatory
and transparent manner and on the basis of objective criteria.
In 2004, OPTA established guidelines on number portability requiring mobile
providers to comply with any request for number portability received from end
users within 10 working days, regardless of the contractual provisions between the
provider and the end user (including notice terms and minimum contract periods).
In summary proceedings before an administrative court, OPTA’s guidelines were
regarded as unlawful.
5. Rights of Way
All providers of public electronic communications and broadcasting networks are
accorded rights of way. In this respect, the TW provides that, notwithstanding a right
to compensation of certain damages, any party is obliged to tolerate the installation,
maintenance, and clearance of cables in and on public grounds by these providers.
In the case of regional and international networks, this obligation extends to all
other land, with the exception of enclosed gardens and other enclosed grounds that
are integrally connected to private residential premises. For owners and supervisors
of public grounds, the right to compensation of damages is limited to a compensation
of actual costs incurred by the landowner in relation to the establishment or removal
of the facilities and any additional maintenance costs. Antennas and antenna sites
are not regarded as cables. A mobile network provider therefore, cannot rely on
a landlord’s obligation to tolerate the installation of antennas or antenna sites.
Under the TW, the obligation to tolerate the installation, maintenance, and clearance
of cables is extended to empty cable ducts. However, this obligation is limited to
10 years. After the expiration of these years, the provider of the network can be
obliged to remove the empty ducts. Empty cable ducts that already situated in
public grounds before 6 December 2006 will be allowed until 1 January 2018.
The basic regulation in the TW that the owner of public land does not acquire
ownership of cables installed in or on the land by accession does not apply to empty
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cable ducts. As a result, an operator that wishes to install empty cable ducts must
make arrangements with the landowner in order to prevent the ducts from
becoming the property of the landowner.
The municipal authorities are charged with coordinating the work relating to the
laying, maintenance, and clearance of cables within their jurisdictions. At the
moment, an Act concerning improvement of exchange of information regarding
underground networks is being prepared.
6. Significant Market Power

KPN Telecom has been designated a party with significant market power (SMP) in
various communications markets, i.e., (i) public fixed telephony; (ii) leased lines,
with the exceptions of lines with a capacity greater than 2 Mb/s; and (iii) public
mobile telephony (Vodafone was designated as party with SMP in the public mobile
telephony market, but successfully disputed this designation). This subjects KPN
Telecom to the full range of ONP obligations, as described in the following
paragraphs. Under the TW, KPN’s designation as a party with SMP on the market
for public fixed telephony continues for 12 months after the TW was enforced.
In 2006, OPTA completed its market analyses for the various electronic
communications markets in the Netherlands.
In its Vision on the market OPTA has set forth two extremes: (i) convergence,
meaning that a horizontal market structure with multiple providers will exist.
In this scenario parties with significant market power are less probable, thus less
regulatory intervention; and (ii) consolidation, already currently happening and if it
continues, which will mean that only few providers will remain. Therefore, OPTA
will have to stay alert to protect the customer. OPTA is closely following KPN’s
transition to providing all its services via the Internet Protocol ( All IP -strategy)
in order to make sure that the envisaged competition on the market for broadband
will continue. Also, OPTA has conducted new market analyses on broadband,
broadcasting, and mobile telephony.
7. Interoperability
Save for certain specified exemptions, all providers of electronic communications
networks and services within the Netherlands that control end-user access to
network termination points are generally obliged to enter into negotiations to
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achieve interoperability between their respective end users. OPTA may set a term
within which an interconnection agreement must be concluded. The distinction
between direct and indirect interconnection was left out of the new TW. More
onerous interconnection obligations apply to providers who have been designated
by OPTA as having SMP in the market sector concerned. The “dominant” providers
(i.e., KPN Telecom) are obliged to (i) offer interconnection to their networks on
nondiscriminatory conditions; (ii) provide other operators with all necessary
information, including all changes in that information scheduled to be introduced
in the next six months; (iii) publicise a reference interconnection offer which
described the interconnection facilities and services and which is subject to OPTA’s
review and approval; and (iv) offer interconnection at costoriented and sufficiently
unbundled rates.
8. Universal Services
Pursuant to the TW, certain services and provisions must be available to everyone at
affordable prices and at a specified quality, on the grounds of general and social interest
(universal service). These services and provisions currently include fixed voice
telephony service, access to public phone booths (one for every five thousand
inhabitants), access to a comprehensive and complete telephone directory of
fixed and mobile telephony subscribers, and access to a telephone directory
information service.
The Minister may oblige a party to provide universal services in a designated area
for five years, if the Minister believes that the provision of services at affordable
prices or at a certain quality level is not guaranteed under normal market conditions.
The Minister will assign the universal services obligation by conducting a competitive
test between qualified applicants to the party that can provide the services at lowest
net costs. All providers of the services concerned that possess SMP within the
designated area must participate in the competitive test procedure. The Minister
will inform the party having the largest end-user database in a specific service area
that he intends to assign to this party the obligation to provide the universal service.
Through a notification published in the Dutch State Gazette (Staatscourant), other
parties will be invited to provide a competitive offer. The Minister will assign the
universal service obligation to the party that can provide the services at the lowest
net cost. The TW contains a description of net cost.
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In 2006, the universal services regulation was amended concerning the duty to
inform the customers on the tariffs used, payment options, dialed phone numbers,
and the like. At the end of 2006, OPTA has issued new guidelines for providers on
how to abide by these new regulations. These can be found on OPTA’s web site.
9. Privacy and Legal Interception

In addition to the general rules for the protection of privacy under Dutch privacy
regulation, the TW lays down specific privacy rules with respect to providers of
public electronic communications networks and services. In general, providers must
take appropriate organisational and technical measures to protect the privacy of
their subscribers, the subscribers’ personal data, and the users of their network or
services, taking into account the level of technology and the costs involved.The TW
contains an opt-in regime for SPAM, which includes e-mail and SMS SPAM. The
opt-in regime does not apply to unsolicited e-mail sent for products or services
similar to those already purchased by a customer, provided that the customer is
given the opportunity to object to such use of electronic contact details when they
are collected and on the occasion of each message, if the customer has not initially
refused such use. In 2007, OPTA has for the first time imposed a penalty of
EUR 1,000,000 because of unwanted distribution of software.
The TW contains specific obligations regarding the processing of location data (data
processed in an electronic communications network, indicating the geographic
position of the terminal equipment of a user). Location data may be processed only
when rendered anonymous to the extent necessary to provide the services, or with
consent of the end user.
All providers of public electronic communications networks and/or services are
also obliged to enable the legal interception of their network or services at their
own cost. In order to enable the authorities to make use of interception, the TW
has been altered recently to the extent that providers of public telecommunications
networks and public telecommunications services are now obliged to store specific
user data for a period of twelve months.
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XIX. Information and Communication

Technology (ICT)
1. General
The Netherlands takes a pragmatic approach to ICT legal issues. The regulatory
body provides a basis for IT companies seeking IP protection for their products and
services (see also Chapter XVII). In general, much is left to the agreement between
the parties. This chapter contains an overview of specific IP protection available
for ICT products and addresses a number of contractual and topical issues in the
field of ICT.
2. Computer Software
Computer software can be protected under the Dutch Copyright Act (Auteurswet),
provided it satisfies the originality requirement (see also Chapter XVII). The
protection granted under the Copyright Act covers, among other things, preparatory
materials, source codes, object codes, icons, screens, displays and interfaces.
Following the (late) implementation of the 1991 EC Directive on Copyright
Protection for Computer Programs, the Copyright Act contains a special section
dealing with computer software. No formalities are required in order to obtain
copyright protection for computer software. In 2004, the Dutch Copyright Act
was amended to reflect Directive 2001/29/EG. These changes have not affected
the protection granted under the Copyright Act to computer software. Unless the
software is developed within the framework of an employer-employee relationship
(in which case the employer will normally hold the copyright), generally, there is no
equivalent to the “work for hire” doctrine as may be applicable in other jurisdictions.
Unless the parties agree otherwise, software suppliers will thus retain the copyright
to their software, even if it was specifically developed for a customer.
The Copyright Act offers the owner of a copyright to software both civil and criminal
recourse against third-party infringement.
In a recent court decision in summary proceedings, the court decided on whether
all data and data carriers of an alleged software infringer needed to be disclosed to
the requesting party, enabling the claiming party to verify whether the infringing
party has forfeited any penalties by breaking a previous court order. To safeguard
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the alleged infringer’s trade secrets and know-how, the court limited the type data
to be disclosed to the source code and only to an independent party. The possibility
of protecting software by means of a patent is still under discussion, even at the
European level.There is not much Dutch case law on patent protection for computer
software. Foreign companies should at least verify whether their computer software
qualifies for patent protection in the Netherlands (see Chapter XVII).
3. Databases
The Dutch Database Act (Databankenwet) took effect on 21 July 1999.The Database
Act is based on the EU Directive on the Legal Protection of Databases.The Dutch
legislature adhered to the two-tier regime prescribed by the EU Directive.Within
the meaning of the Act, a database is a collection of works, data, or other independent
materials arranged in a systematic or methodical way, individually accessible by
electronic or other means. The acquisition, verification, or presentation of the
content must be the result of a qualitatively or quantitatively substantial investment.
Original databases, whether a copy of which is printed, or stored using another
medium, or electronically, will qualify for either copyright or sui generis protection.
Recent European and Dutch case laws provide an indication as to how the principles
of qualitatively and quantitatively substantial investment can be interpreted.
4. Topographies of Semiconductors
Chips and their topography may be protected against unlawful exploitation by third
parties, pursuant to the Dutch Original Topographies of Semiconductor Products
Legal Protection Act (Wet houdende regelen inzake de bescherming van oorspronkelijke
topographieën van halfgeleiderprodukten). Registration with the Office of Industrial
Property is required and will remain valid for 10 years. It concerns a national
right only.
5. Technology Transfer
The 2002 EU Technology Transfer Regulation has a direct effect in the Netherlands.
It is concerned mainly with competition law aspects of technology transfer (see also
chapter XVI). Furthermore, in 2004, the Commission has issued an additional/
specific Regulation ([EC] No 772/2004) containing certain categories of technology
transfer agreements which, provided certain requirements are met, are allowed for
a competition law perspective.
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6. ICT Agreements and Standard Terms

As in many jurisdictions, suppliers and distributors of ICT products use a plethora
of agreements to, for instance, restrict warranties and liability. Both suppliers of
computer products/services and end users draft standard terms, which are freely
available and which are sometimes used, although their use is by no means mandatory.
A number of standard terms are mentioned below.
FENIT Conditions
FENIT, the industry organisation for suppliers of computer products and services
has published standard conditions for, e.g., the sale of hardware, the development
and licensing of software, and the provision of maintenance and computer services.
Generally, the conditions are more advantageous to the supplier. The FENIT
conditions were updated in 2003.The main changes were that: (i) suppliers were
better protected against the bankruptcy of their customers; and (ii) disputes arising
between the parties must be settled through arbitration in accordance with the
Arbitration Regulations of the Foundation for the Settlement of Automation
Disputes in The Hague.
Purchase Conditions
The Dutch Ministry of the Interior has published general terms and conditions,
covering a range of topics, from the purchase or lease of hardware to complex
turnkey projects. These standard conditions are known as “BiZa” contracts. They
are produced regularly in negotiations by prospective end users and are in their favor.
EDI Model Agreement

The Netherlands has a model EDI Agreement, which is based on the European
standard. The liability of suppliers of ICT goods and services is governed by the
rules in the Dutch Civil Code on liability (see chapter XX), but a number of cases
with respect to the IT industry have been published. A rule of thumb that may be
deduced from those cases is that an IT supplier is under an obligation to inform its
customers of both anticipated delays in delivery and of problems with respect to
the delivery and installation.
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In addition to recourse to the courts and arbitration in accordance with the rules of
the Netherlands Arbitration Institute (NAI), a special dispute resolution forum for
the settlement of IT disputes operates in the Netherlands: the Association for the
Settlement of Automation Disputes (Stichting Geschillenoplossing Automatisering).
7. Shrink-Wrap License Agreements

Many larger (mostly US) software manufacturers use shrink-wrap or even clickwrap
licensing terms in the Netherlands. The new legislation implementing the E-
Commerce Directive (EC/2000/31) contains several requirements regarding the
use and/or applicability of electronic general terms and conditions. There is not
much that case law in the Netherlands that governs the use and/or applicability of
shrink-wrap or click-wrap licensing terms. The applicability of such terms will
mainly depend on the manner in which they have been brought to the attention of
the end user. The principle rule is that an end user must be given a reasonable
opportunity to become acquainted with these general terms prior to or at the
moment that the agreement regarding the subject matter is entered into.
8. Source Code Escrow

Software source code escrow is fairly common in the Netherlands, but there is no
specific legislation. Both active and passive escrow agents make use of tripartite
agreements with the supplier and the end user.
9. The Internet and E-business

The basic principle regarding the Internet is “offline is online” (existing regulations
for offline activities will be applied similarly to online activities, if possible).
Domain Names
It is generally felt that, in principle, the rightful owner of a trademark or a trade name
should be able to act successfully against the use of that trademark or a trade name
in a domain name, irrespective of the level on which it is used. In the Netherlands,
there is an association for the registration of domain names (“SIDN”). The SIDN
has incorporated Alternative Dispute Resolution for .nl domain names only.
In 2006, the .eu domain name was successfully introduced.
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Liability of Service Providers

Generally speaking, Internet service providers are exempt from criminal prosecution
with respect to the disclosure or dissemination through their services of information
that is punishable on the basis of its content, if (i) they reveal their identity at the
time of the disclosure or dissemination; (ii) the identity of the perpetrator is known
or, once a judicial inquiry is commenced, it is revealed by the service provider upon
first order by the judiciary; and (iii) the service provider has taken all reasonable
measures to prevent further dissemination of the contentious information. Under
the new legislation implementing the EU E-Commerce Directive, various principles
for civil law liability of Internet service providers have been introduced. Furthermore,
note that in a Supreme Court decision, a service provider was ordered to disclose
the name and address of an anonymous web site holder to a third party.
Electronic Commerce Directive

The Dutch government has implemented the EU E-Commerce Directive into
Dutch law. The EU Distance Contracts Directive has been implemented into Dutch
law as well, and contains provisions protecting consumers in distance, including
online, transactions. All of the Directives mentioned determine some of the legal
parameters for the development and operation of E-Commerce in the European
Union market.
Electronic Signatures
The EU Electronic Signatures Directive (Wetsvoorstel elektronische handtekeningen) was
implemented under Dutch law, effective 21 May 2003. The new law establishes
a legal regime for electronic signatures.
Consumer protection
In 2007, a new authority (Consumentenautoriteit) for the protection of the collective
interests of consumers was founded. This new authority has been attributed with
certain public powers to enforce consumer law. How this enforcement will crystallize
in practice has yet to be seen. The authority has announced that it will especially
focus on internet trade.
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10. Encryption
Although in the past, the Dutch government had expressed its intention to introduce
a bill dealing with the use and availability of encrypted software, (a draft of such a
bill already circulated in 1994 and which was heavily criticized and never made it as
a bill) still, no such bill has been introduced. It does not seem likely that legislative
initiatives will ensue in this context in the near future.
11. Data Protection

The 2001 Data Protection Act (Wet bescherming persoonsgegevens) imposes a number
of obligations on parties that collect and control personal data. What constitutes
personal data is largely a question of fact. It is important to verify whether a
notification with the Dutch Data Protection Authority should be filed. Likewise,
that transfer outside the EU triggers specific requirements.
12. Computer Crime

The Dutch 1993 Act on Computer Crime (Wet computercriminaliteit) contains criminal
provisions related to computers. Deletion of data and the addition of worms or
viruses that lead to damage may be criminal offences (although the definition of
a virus is somewhat unclear). The Act on Computer Crime is incorporated in the
Dutch Criminal Code and the Dutch Code of Criminal Procedure. At the end of
1996, the Dutch Supreme Court issued a judgment that held that computer data
are not “goods” within the meaning of the Criminal Code. In 2006, the long-debated
new Act on Computer Crime II (Wet computercriminaliteit II) has entered into force.
This Act expands the scope of certain computer crimes and also introduces new
investigative powers for the enforcement agencies.
13. Online Gambling

In principle, to offer games of chance over the Internet in the Netherlands requires
the government’s permit. In 2006, the Ministry of Justice has successfully undertaken
a crusade against illegal gambling sites. Most illegal gambling sites in the Netherlands
have shut down.
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14. Retention
Recently, there has been a Dutch proposal to implement a retention period of
18 months for Dutch service providers for Internet traffic data. This proposal
is currently still under discussion. Likewise, the EU is currently considering
a minimum retention period for Internet traffic data.
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XX. Liability
1. General
The Dutch Civil Code (Burgerlijk Wetboek [BW] in this Chapter referred to as the
“Code”) generally distinguishes between two types of liability: contractual liability
and noncontractual liability. The Code contains several strict liability provisions,
which form a separate category within liability based on wrongful acts (for instance,
defective goods and premises, dangerous substances, damage caused by animals, and
the like). All liabilities that may arise between parties in any contractual relationship
are essentially governed by the same general provisions of the Code. Outside of
a contractual relationship, liability may be based only on a wrongful act (or strict
liability). These two types of liability may coincide, e.g., in a situation in which
a party to a contract causes damage to another party and the event qualifies as
a wrongful act if there has been no contractual relationship between the two.
2. Pre-contractual liability
Dutch law is notorious for its pre-contractual liability. This liability may be incurred
if one of the parties to ongoing negotiations withdraws from such negotiations at a
stage when the other party could, for example, reasonably expect that an agreement
will be entered into. Depending on the exact stage of the negotiations, the party
withdrawing from the negotiations may be liable for costs incurred by the other
party, or even for all lost profits, as if he had an agreement. It is even possible
that a court orders the party withdrawing from the negotiations to continue the
negotiations in good faith.
3. Contractual liability
Breach of contract
A general section of the Code applies to all contractual liabilities, regardless of the
type of contract. The main provision is Article 6:74 of the Code, which stipulates
as a basic rule that a party is liable for all damages resulting from its attributable
nonperformance (breach of contract). Such a party may avoid liability if it can
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prove that it acted under force majeure, which generally entails proving that the
nonperformance cannot be attributed to it on the basis of its actions, the law, the
contract, or generally prevailing public opinion.
Good faith
Furthermore, the concept of ‘good faith’ permeates contract law. Both parties to
an obligation must behave in their relationship according to what is reasonable and
fair. Different to many other jurisdictions, contracts do not only have the effects
expressly agreed upon, but, according to the nature of the contract, also those
which result from the law, trade customs, or the requirements of reasonableness
and fairness.
Damage and performance

In a contractual relationship, the creditor is not only allowed to claim damages, but
in all cases in which the debtor is still able to comply with its obligations, the creditor
may also claim specific performance (nakoming). Alternatively, the creditor may be
allowed to dissolve the agreement. Upon dissolution, each party must return to
the other what it has received under the dissolved agreement. In addition, in both
situations, the creditor is entitled to compensation for damages incurred as a result
of the breach.
Several types of contracts are governed by specific statutory provisions, which may
contain specific obligations. For instance, the law on contracts for the sale of goods
contains several specific obligations on the part of the seller. Under those obligations,
the seller of certain goods is obliged not only to compensate the buyer for any
damages, but also to repair or replace a defective product, or supply any missing
part, if the buyer so desires.
Limitation of liability
The parties to an agreement may deviate from most liability provisions in the Code.
Parties are free to exclude or limit their potential liability for damage caused by a
breach of contract or a tort by agreeing on an exemption clause. This contractual
right to invoke an exemption clause may be limited only by the court in exceptional
cases. In some cases, deviation from the Code is not allowed, e.g., in the case of
agreements with consumers. In addition to those rare cases in which a contractual
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deviation is expressly prohibited in the Code, several other restrictions apply to all
contracts in general and liability provisions in particular. First, provisions that limit
or exclude liability for damage caused intentionally or caused by gross negligence
of one of the parties are void, although it is permitted to exonerate for damages
intentionally caused or caused by gross negligence of employees other than senior
management. Second, and far more important, a restriction is imposed by the
principles of reasonableness and fairness.
Generally, in the case of a contract for the sale of goods, only the seller of the goods
may be held liable by the end user if the goods are not in conformity to the agreement.
In principle, the end user can claim damages from the manufacturer or from other
parties in the distribution chain only if the parties are liable on the basis of some
type of noncontractual liability (wrongful act). In practice, this means that it is
usually difficult for the end user of defective goods to claim damages from any
party other than the seller, since it is far more difficult to provide the evidence
required to obtain damages from a manufacturer or distributor than the seller.
In product liability cases however, this is different (see below).
4. Noncontractual Liability (Wrongful Act)

Wrongful act
The basis of all types of liability outside of contractual relationships is Article 6:162
of the Code, which stipulates that any party that commits a “wrongful act” towards
another party, whose act can be attributed to the party committing the wrongful
act is liable for all damages incurred by the injured party. There are three forms of
wrongful acts: (i) infringement of a subjective right; (ii) act or omission violating a
statutory duty; and (ii) conduct contrary to the general standard of conduct
acceptable in society.
Nevertheless, liability is denied if the rule invoked by the injured party does not
cover the interests of the injured party, damaged by the liable party.
Strict liability
Several types of strict liability apply with respect to goods. Under Dutch law,
“strict liability” means that liability is deemed to exist without the injured party
having to prove more than the damage and the causal connection between the
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wrongful act and the damages. Essentially, the injured party is not required to
prove that the wrongful act or the damage may be attributed to the liable party
on the basis of fault.
Product liability
Product liability is an important type of strict liability and was incorporated into
the Code in 1988 as a result of the EC Directive of 25 July 1985. This legislation
created strict liability on which basis a consumer can hold a manufacturer liable if
the latter’s defective (unsafe) product causes damages. However, only some forms
of damages may be claimed from the manufacturer on the basis of product liability
legislation. Depending on the facts of the case, the injured party may also claim
damages from a party other than the manufacturer (e.g., the seller, the importer
into the European Economic Area, or the party that has sold the product under its
own brand name) or may obtain damages that are not recoverable under product
liability legislation on other grounds (e.g., the general law on wrongful acts or
a breach of warranty). According to the Code, a product is defective if it does
not provide the safety that one is entitled to expect, taking all circumstances into
consideration; in particular, (a) the presentation of the product; (b) the reasonably
anticipated use of the product; and (c) the time the product is brought into circulation.
The manufacturer is liable for all damages resulting from physical injury or death
caused by its defective product. The manufacturer may also be liable for damage
to other goods that are normally used by consumers if such damage exceeds EUR
500. It is not possible to exclude product liability towards the injured party
contractually. Although there is still some uncertainty in this respect, Dutch law
generally allows for a limitation of product liability between companies in a
distribution chain.
In a case heard by the Dutch Supreme Court in 1999 (in Hoge Raad, 22 October 1999,
Nederlandse Jurisprudentie 2000, no. 159, Rockwool), the Supreme Court held that as
a general rule of law, if a party brought a product into the market that had caused
damages, that party would be liable for the damage, if it was used for a purpose
that could reasonably have been anticipated. This type of liability exists towards
professional buyers, end users, and consumers, and covers all types of damage
(including physical injury, property damage, and consequential damage). With this
decision, the distinction between claims based on wrongful acts and claims based
on product liability appears to have faded.
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For completeness’ sake, in the Consumer Goods Act the EU Directive 2001/95/EC
on General Product Safety was implemented on 1 December 2005. Based on this
act, rules may be imposed regarding product safety in the interest of public health,
safety, fairness in trade, or proper information about the goods. This act is aimed
especially at protecting further distribution of unsafe goods. The Consumer Goods
Act Decree on “general product safety” (of 29 June 1994) deals with the obligation
to launch a product recall.
5. Compensation of Damages
The sections of the Code that govern the compensation of damages apply to both
contractual and noncontractual liabilities.
Kinds of damage
Two kinds of damage can be compensated: (i) financial loss (vermogensschade); and
(ii) other disadvantages (ander nadeel). Financial loss is the damage to pecuniary
interests, including damage to goods and economic loss, pure or consequential.
The liable party is obliged to compensate the injured party for all these damages
incurred by the injured party as a result of, and that may be attributed to, the event
that has led to liability (“causal link”). More specifically, such damages may include
compensation for costs incurred as a result of a breach of contract or a wrongful
act, lost profits, costs incurred for assessing and (out-of-court) collection of the
amount of damages, and costs incurred in order to limit or reduce the damages.
Although in principle the injured party has a right to claim compensation for the
exact damages, the courts are free to assess the damage in a more abstract way,
if that corresponds better to its nature.
Other disadvantages will be compensated only if these have a legal basis.
Compensation of non-pecuniary loss (Article 6:106 of the Code) for instance,
is possible only in case of intentional damage, personal injury, and in case the
injured party’s reputation has been damaged.
Kind of compensation
Normally, damages will be compensated in money, but the injured party may demand
compensation in any other form. Moreover, if the liable party has made profits as a
result of its breach of contract or wrongful act, the court may calculate the
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damages so as to include all or part of the profit. On the other hand, the court is
entitled to reduce the obligation to compensate the damages if it believes that full
compensation will lead to clearly unacceptable results.
Penalty clauses
Penalty clauses are allowed under Dutch law regardless of whether the penalties are
a genuine estimate of damage incurred or serve as an incentive to perform.
Therefore, a penalty does not need to be a reasonable estimate of damage actually
incurred. Unless otherwise agreed upon, the penalty is the only compensation that
can be claimed, regardless of the size of the penalty. A party that is obliged to pay a
penalty may always request the court to reduce the amount on the ground that
payment of the full penalty will be unacceptable.
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XXI. Dispute Resolution

1. Jurisdiction
In the Netherlands, the civil and criminal judiciary comprises cantonal divisions,
district courts, courts of appeal and the Supreme Court.The district courts have
general jurisdiction over civil law disputes. Administrative disputes are resolved by
separate administrative branches of the district courts. With a few exceptions,
judges are professional judges and are appointed for life. In civil and commercial
cases, the cantonal divisions of the courts are concerned with first instance claims
that do not exceed EUR 5,000, regardless of the cause. The cantonal divisions of
the district courts also have jurisdiction over employment law issues, agency and
(real estate) lease disputes.
District courts essentially hear all other civil and commercial first instance claims.
Courts of appeal decide on judgments given by a district court though most cantonal
division judgments may be appealed before a court of appeal.The administration of
justice in the Netherlands is essentially limited to two instances. A judgment given
by the court of appeal may, in principle, be submitted for review or cassation before
the Supreme Court of the Netherlands on issues of law only. The Supreme Court
will, therefore, not decide any factual issues. A submission for cassation to the
Supreme Court may be brought on the grounds of noncompliance with formal
requirements (for instance, if a court fails to give adequate reasons for a judgment)
or breach of the law, but not the law of another country. The Dutch Supreme Court
and lower courts have no authority to examine laws for compliance with the
Constitution (Grondwet). This prohibition on examining laws against the Constitution
relates to the manner in which acts of law are established as well as to their substance.
On the other hand, acts of law may be tested for compatibility with a provision of
a treaty to which the Netherlands is a party, including any European Community
legislation.
Some cantonal divisions and district courts, as well as certain courts of appeal, have
special chambers that deal with particular issues. One such chamber is the Enterprise
Chamber of the Amsterdam Court of Appeal. This chamber decides on disputes on
first instance, for example, concerning (i) annual accounts, (ii) mismanagement,
(iii) buyouts of minority shareholders, (iv) the Dutch Works Councils Act and on
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appeal, for example, concerning (a) mandated departure or ejection of shareholders,

(b) the revocation of responsibility for a group company, and (c) objections to
a reduction of capital, legal merger or split.
2. Course of the Proceedings

Most civil and commercial proceedings are initiated by a writ of summons and take
place before the district court.The writ requires that the defendant appears in court
on a certain date. It is served on the defendant by a bailiff. In district court
proceedings, the defendant must appear through an attorney of record. Unless
the defendant makes no appearance, the court customarily grants the defendant a
six-week extension to submit a written answer. This first appearance is merely for
administration and record purposes and does not take place physically. After the
statement of defense is submitted, additional briefs may subsequently be exchanged,
or the court may order the parties to appear in person in order to supply information
to the court or to attempt to reach a settlement.The greater part of the proceedings
is conducted in writing. The briefs are filed at a docket session, which is a district
court session held specifically for that purpose. After the briefs have been exchanged,
a hearing for oral arguments before the court may be held if either of the parties
so requires.
Appeal proceedings are also initiated by the service of a writ (within three months
after the judgment in first instance). Only two briefs are exchanged. In the
appellant’s brief, the party filing the appeal explains why it disagrees with the
judgment passed in first instance. The opponent may file an answer, which is often
followed by a hearing for oral arguments. The appellant may contest the judgment
by the district court in whole or in part.
The course of the proceedings may be complicated by accessory actions and orders
to provide evidence, for instance, by examining witnesses.
3. Summary Proceedings
In urgent cases, the President of the district court may sit in summary proceedings to
provide provisional relief. Summary proceedings have gained substantial importance
in recent years. There are far fewer restrictions on the type of dispute that may be
heard than in almost all other jurisdictions. Today, they are even used to obtain
a payment order for essentially undisputed claims. Summary proceedings have the
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advantage of being fast. At the plaintiff’s request, the President will schedule a date
for the summary hearing to take place within a few weeks. In very urgent cases,
hearings can be scheduled even on the same day. The plaintiff initiates the summary
proceedings by serving a writ on the defendant. On the date of the summary
proceedings, the parties and their counsel (although a defendant may appear in
person) appear before the President of the court to explain their positions by oral
arguments. The President has a great degree of latitude to decide on the procedure
at a hearing. Although witnesses cannot be heard in the context of summary
proceedings, the President may hear “informants” if they are present at the hearing.
Although no sworn statements are taken, the President usually takes the information
provided into account when deciding the issue. The President generally hands
down his decision in summary proceedings within 14 days, but may do so earlier if
the case is urgent. A summary judgment is immediately enforceable and is usually
sanctioned often by a substantial penalty to be forfeited to the plaintiff if the judgment
is not complied with. The judgment may be appealed before the court of appeal
(within four weeks after the judgment in first instance is rendered). It is also
possible to lodge a summary appeal, so that the proceedings before this court are
conducted as swiftly as possible. A decision by the court of appeal may be submitted
for cassation to the Supreme Court. After the summary proceedings, the interested
party may start principal proceedings in which the case is judged on its full merits
(since summary proceedings are basically a provisional remedy.) In these proceedings,
there is room for formal evidence gathering and witness examination. The court is
in no way bound by a judgment given in summary proceedings. Parties rarely
initiate principal proceedings after summary proceedings. They usually accept the
judgment given in summary proceedings (whether or not on appeal), an indication
of the generally good quality of the summary judgment decisions (and judges).
4. Prejudgment Attachment
To secure the claim, the plaintiff may levy one or more prejudgment attachments,
before or during legal proceedings. The leave of the President of the district court
is required for a prejudgment attachment. The plaintiff must file an “ex parte”
petition with the President in which the claim is prima facie demonstrated.
Such leave is generally easy to obtain, often on the same day.
The prejudgment attachment is levied by a bailiff. An attachment on movable
property may be combined with judicial custody. This means that the bailiff turns
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over the attached property to a person appointed by the President to keep the
property in his custody pending the proceedings. The party subject to attachment
may object to the attachment in summary proceedings. The President will lift the
attachment if the party subject to attachment demonstrates that the asserted claim
is nonexistent or frivolous, or that the attachment is unnecessary. The President
will also lift the attachment if the party subject to attachment provides adequate
security (generally, a bank guarantee by a first-class Dutch bank), as well as in the
event of noncompliance with formal requirements (which can result in a nullity).
If proceedings before the district court are not yet pending at the time of filing the
petition for the President’s leave, the President will set a term within which such
proceedings must be initiated. The usual term is 14 days. This term may be
extended at the request of the attaching party. If judgment is eventually rendered
against the plaintiff, the attachment is wrongful. In that case, the plaintiff is liable
for damages caused by the attachment.
5. Arbitration
Parties may also choose to settle their disputes by arbitration, rather than in court.
A Dutch court will usually accept this choice. If either party invokes the arbitration
agreement, the Dutch court will find that it has no jurisdiction over the case. If the
arbitrators are not authorized under the arbitration agreement to grant provisional
relief for urgent cases, the President of the district court is competent to grant
such relief in summary proceedings, and even if they are not, the President may
nevertheless assume jurisdiction if he believes the remedy provided in arbitration
is inadequate. The best known Dutch arbitration institute is the Netherlands
Arbitration Institute (NAI) in Rotterdam, which has its own arbitration rules that
parties can adopt in their arbitration agreement. The NAI may appoint the arbitrators,
or the parties may do so themselves. The NAI has a list of qualified and experienced
arbitrators who are often attorneys. Dutch arbitral decisions can easily be enforced
in the Netherlands. Like many European countries and the United States of America,
the Netherlands is a signatory to the New York Convention on the recognition and
enforcement of foreign arbitral awards. Thus, arbitral awards given in the territory
of these States can be enforced in the Netherlands and vice versa.
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6. Mediation
Mediation as an instrument for dispute resolution is becoming more popular in the
Netherlands. At the start, mediation was mainly used in family law cases. Today,
though, we see mediation being used with increasing frequency in other types
of disputes.
7. International Enforcement
Judgments passed by the courts of EU Member States can easily be enforced in the
Netherlands. With the exception of Denmark, the EU Member States are subject
to the Council Regulation on Jurisdiction and the Recognition and Enforcement of
Judgments in Civil and Commercial Matters. This Council Regulation replaced the
Brussels Convention, which now applies only to Denmark. Prior to enforcement
of a judgment handed down by a court in an EU Member State, the leave to do so
must be obtained from the President of the district court. The procedure to obtain
leave generally takes no more than two or three weeks. Similarly, Dutch judgments
are easy to enforce in EU Member States. The same holds true as regards judgments
handed down in States that are a party to the Lugano Convention. Judgments issued
by a court of a State with which the Netherlands has an enforcement convention
are also enforceable in the Netherlands, on the condition that the prior leave of the
President of the district court is obtained. Judgments passed by courts in States
with which the Netherlands has no enforcement convention cannot be enforced in
the Netherlands. Such cases must be retried in the Netherlands and settled anew.
However, if the judgment is passed by a court of a State with a well-developed
court system, Dutch courts tend to review the judgment only marginally.
8. European enforcement order for

uncontested claims
The European Parliament and Council Regulation of 21 April 2004, creating
a European enforcement order for uncontested claims, was implemented in the
Netherlands on 21 October 2005. It lays down minimum standards to ensure that
judgments, court settlements, and authentic instruments on uncontested claims
can be enforced easily in the Member States. This entails the abolition of any
intermediate proceedings or grounds for refusal of enforcement regarding
judgments handed down in another Member State.
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The Regulation applies in civil and commercial matters. It does not cover revenue,
customs, or administrative matters. It is applicable in all Member States with the
exception of Denmark.
A judgment on an uncontested claim is certified as a European enforcement order
by the Member State of origin in accordance with certain conditions. Certification
is carried out by means of the standard form. The certification may apply to only
parts of the judgment, in which case the order will be known as “partial European
enforcement order.”
The Regulation lays down minimum standards with regard to the service of
documents (the document instituting proceedings and, where applicable, the
summons to a court hearing) to ensure that the rights of the defendant are respected.
Only the document service methods listed in the Regulation are allowed if the
judgment is to be certified as a European enforcement order.
The creditor must supply the authorities of the other State responsible for
enforcement with:
• a copy of the judgment;
• a copy of the European enforcement order certificate; and
• where necessary, a transcription of the European enforcement order certificate
or a translation thereof into the official language of the Member State of
enforcement or into another language accepted by the Member State of
enforcement.
9. International payment orders

On 30 December 2006, the European Parliament and the Council adopted a
Regulation creating a European order for payment procedure.This procedure will
allow creditors to recover their uncontested civil and commercial claims before the
courts of the Member States, except Denmark according to a uniform procedure
that operates on the basis of standard forms. Due to the existence of a procedure
that will be common to all Member States, the need for creditors to familiarize
themselves with foreign civil procedures will be reduced to a minimum. The
procedure does not require presence before the court. It can even be started and
handled in a purely electronic way. The claimant only has to submit its application.
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It does not require any further formalities or intervention on the part of the claimant.
This will ensure a swift and efficient handling of the claim, which should substantially
reduce the length of traditional court proceedings. In addition, since no assistance
by a lawyer is required, the procedure will keep the costs to a minimum.
Language problems are minimized due to the availability of standard forms for
the communication between the parties and the court that are available in all
EU languages.
The judicial decision obtained as a result of this procedure can be enforced easily in
the other Member States. The creditor will not have to undertake intermediate steps
to enforce the decision abroad. The Regulation will be applicable for 24 months
from 30 December 2006.
10. Collective action

Articles 3:305a and 305b of the Dutch Civil Code allow associations and foundations
with full legal capacity, as well as public law entities, to initiate action with the aim
of protecting “interests similar in kind which are held by other persons.” The
articles of association should stipulate that the foundation or association promote
these interests.
Before filing a claim, the foundation or association is obliged to make sufficient
efforts to settle the dispute out of court. The foundation or association files the claim
in its own name. The represented parties will not be a party to the proceedings.
The judgment is only binding between the foundation or association and the party
or parties responsible for the damages. The individual will not be bound and it
keeps the possibility of filing an individual claim.
The most important limitation of the collective action is that damages may not be
claimed. Possible remedies are declaratory judgments or injunctions. Those
remedies can be helpful to enable individuals claim damages.
11. Class actions

A new Act on the Collective Settlement of Mass Damages took effect on 27 July 2005.
The act facilitates the court-endorsed collective out-of-court settlement agreements
of mass damages between a representative organization and the party or parties
responsible for the damages.
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The procedure to achieve a binding settlement agreement as described in the act is

undertaken in three phases.
During the first phase, the representative organization and the responsible party
negotiate as regards a possible settlement agreement. From the articles of association
of the representative organization, it must appear that it acts in the interest of the
parties affected. The claims of the affected parties must, to a certain extent, be
similar. In the settlement agreement, the amount of monetary compensation to
each affected party, or a formula to calculate the monetary compensation on the
basis of objective criteria must be specified. The party responsible must provide
sufficient security for its payment obligations under the settlement agreement.
In the second phase, the representative organization and the responsible party file
a joint request to the court of appeal in Amsterdam to declare the settlement
agreement binding for all parties affected or a group of affected parties. Pending the
request to the court of appeal, all legal proceedings against the party involved are
suspended. In principle, all affected parties known to the responsible party must be
invited to a settlement hearing of the court of appeal in order to have the opportunity
to file objections, if there are any, against the settlement agreement. After this
hearing, the court of appeal must assess whether the settlement agreement meets
the criteria as set out in the act, and more specifically, whether the compensation
is reasonable. The court of appeal may either declare the settlement agreement
binding, deny the request, or order the parties to amend the settlement agreement.
The third phase concerns the execution of the settlement agreement. If the court
of appeal declares the settlement agreement binding, the settlement must then be
published in one or more Dutch newspapers and be sent to all known affected
parties. The affected parties who do not want to be bound by the settlement
agreement have the option to “opt out” within three months after the court
decision. The affected parties not opting out may collect their compensation within
a time frame as specified in the settlement agreement. If the responsible party does
not fulfill its payment obligations in a timely manner, the affected person may then
dissolve the settlement agreement as far as it concerns that part of the settlement
agreement relating to the compensation of this individual party. Until now, three
court endorsements of collective settlements have been applied for, namely in the
DES, Dexia and Shell cases. These cases refer to pharmaceuticals and securities.
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12. Inspection or taking copies of certain identifiable

documents instead of full discovery
Dutch law does not provide for full discovery of documents. The legislator and the
courts are wary of “fishing expeditions.” Article 843a Dutch Code of Civil Procedure
(“DCCP”), however, does allow a party who is considered to have a justified interest
to demand inspection or a copy or extract of identifiable documents that relate to a
legal relationship to which it is a party. A contract or alleged wrongful act constitutes
such a legal relationship. By “identifiable,” it is meant that the party that asks for
inspection must identify the documents or at least a specified category of documents.
The party may demand this information from any party that has these documents at
its disposal or in its possession. If necessary, the court will decide the manner in
which inspection, extract, or copy must be furnished.
A court order pursuant to Article 843a DCCP may be enforced by a penalty
for noncompliance or attachment of the documents in question. In certain
circumstances, such an attachment may be made even prior to filing the application
of the court order.
There are restrictions to the application of Article 843a DCCP. First, a party that,
because of its duties, profession, or occupation, is bound by secrecy, cannot be forced
to comply with the demand if the documents are solely at its disposal or in its
possession on that account. Bearers of those duties are inter alia attorneys-at-law.
Second, the confidentiality of the information may be a compelling reason not to
comply with the demand. Third, the proper administration of justice is guaranteed
even without providing the requested documents. Finally, the interest of not
divulging information outweighs the interest in obtaining it. The court will decide
on the validity of these defenses.
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XXII. Real Estate

1. Ownership
A buyer of immovable property becomes the owner of that property after delivery.
The transfer of title of immovable property requires a notarial deed, which must be
entered in the land register, after which the delivery is complete and the buyer is
the owner of the property. The owner can use the property at his or her own
discretion, since ownership is the most complete right to a piece of property. The
only exception is if there are restrictions attached to ownership based on statutory
provisions or unwritten law.
2. Land Register
Real estate is registered in land registers, which are publicly accessible. The
information recorded includes ownership, mortgages, easements and other in rem
rights, as well as any court orders relating to real estate and administrative
enforcement decisions. Leases that do not grant in rem rights are not recorded in
the land registers. Purchase and sale agreements can be made without specific
formalities if these concern business or office space. Since September 2003, a new
law has governed purchase and sale contracts for homes when the buyer is a private
individual. Purchase and sale contracts must be in writing. The buyer (who is
a private individual) has the option of dissolving the purchase and sale contract
within three working days without specifying a reason by informing the seller
thereof. The amendment of the law in September 2003 has also made it possible
for the buyer (of any immovable property) to register the purchase contract in the
land register, which gives the buyer protection within the period that the purchase
and sale contract and the deed of transfer are signed. The transfer of ownership of
real estate requires the formal execution of a notarial deed by a civil law notary in
the Netherlands. The same applies to the establishment and transfer of in rem rights
in general, including mortgages.
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3. Other Rights and Obligations

In addition to formally executing the notarial deed, which the buyer of immovable
property must file with the land register, the buyer should investigate all legal
aspects of the property by consulting the land register. It is also sensible for the
buyer to investigate whether the existing zoning plan can change adversely and to
ask the seller whether he is aware of any of changes.
In the Netherlands, the seller is, by virtue of the law, obliged to transfer the
immovable property without any restrictions or burdens unless the buyer expressly
accepts these restrictions and burdens. This imposes on the seller the additional
obligation to disclose all information on the immovable property. The seller must
inform the buyer of all rights vested in the immovable property, i.e., the rights
that are known to him. The rights can be divided into rights attached to a certain
capacity and servitude. Rights attached to a certain capacity are those arising from
an agreement and relate to immovable property, for instance, an agreement with a
neighbor to refrain from uprooting a tree. An example of servitude is the obligation
to tolerate water from the neighbor’s roof falling on one’s own yard. If the seller
has not informed the buyer of such rights, the buyer can order the seller to have
those rights cancelled or to pay him a lump sum.
4. Construction and Renovation

Under the Dutch Housing Act (Woningwet), municipalities are obliged to adopt a
building ordinance (bouwverordening) containing building and renovation regulations.
A building ordinance does not include technical building regulations. Those
regulations are included in the Building Decree (Bouwbesluit). Article 8 of the
Housing Act stipulates what issues must be regulated, and what issues may be
regulated in the ordinance. Municipalities are not permitted to regulate any other
matters. A building ordinance includes regulations prohibiting building on polluted
soil, regulations regarding building demolition and requirements regarding the
external appearance of buildings. If an owner of a plot of land wishes to build a
house or a homeowner wishes to renovate his home, he must consult the Housing
Act to determine whether a building permit is required. This Act divides buildings
into three types: those for which a regular building permit is required, those for
which a light building permit is required and those that do not require a permit.
The buyer should first investigate whether a (light) permit is required as regards
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the construction of the building. In most cases a regular building permit will be
required. The Netherlands is a small and densely populated country. Consequently,
the use of space for residential and business purposes is tightly regulated. The
zoning plan sets out specifically how land is to be used and developed. In principle,
an application for a building permit is assessed against the zoning plan. The
coordination rule that applies to the building permit and the environmental permit
plays a part in the establishment or expansion of a facility. This means that the
issuing of the two permits is harmonized.
Zoning law, in particular as it relates to the zoning plan and the building permit, is
enforced by the authorities, which have a wide range of instruments at their
disposal to ensure observance.
5. Environmental Permits and Soil Pollution

Both in asset (real estate) and share transactions, it is of utmost importance to
give sufficient attention to the possible presence of soil pollution, as well as to
requirements regarding environmental permits. One of the key elements of the
Dutch Environmental Management Act (Wet milieubeheer) is the “integrated
environmental permit.” This permit is an important regulatory instrument linked
to the setup, change and operations of an establishment.
The Dutch Soil Protection Act (Wet bodembescherming) came into force on
1 January 1987. The Soil Protection Act is based on the concept of “new” and
“historic” pollution.With regard to new pollution, all companies bear a general
liability for maintenance.
Practice has shown that these and other environmental issues can be dealt with
satisfactorily by means of timely due diligence combined with clear contract
language and, if appropriate, negotiations with the relevant authorities.
6. Modernization of regulation
The Ministry of Housing, Spatial Planning and the Environment (VROM) is
currently in the process of modernizing regulations on Spatial Planning and those
concerning various permits as regards the construction of structures. At the
moment this book was edited, it was expected that the new Spatial Planning Act
will come into force in July 2008.
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Spatial planning
The present Spatial Planning Act came into force in 1965. Since then a large number
of amendments have been passed. The last major alteration involved changing
Section 19 to include an independent project procedure for local authorities. This
has led to the establishment of a law that provides for many eventualities but has also
become extremely complicated and confusing in practice. The Council of State has
even compared it to a “patchwork quilt”; the Second Chamber of the Netherlands
parliament concurs with this opinion and because of this, the government has
decided to fundamentally revise the act.
The relationships between the different layers of government have, for example,
become more businesslike. This has led to an increasing entrenchment of opposing
interests. It is becoming more and more common for disputes between government
bodies to be settled in court. The same is true of the relationship between the
government and the public. In addition, the increase in the scale of spatial planning,
renewed economic growth and technological developments have all affected the
way in which decisions related to spatial planning are made. This often means that
they have to be better, more integrated and enforced more quickly. This has made
the processes involved more complex. Furthermore, it is not always clear as to
who is responsible for doing what.
The aim of the revision is to simplify the system, to have the responsibility shared
properly among the various layers of government and to have government and
provincial policy implemented throughout the system.
In the new Act, a clear difference has been made between spatial planning policy
and its (legal) implementation. The zoning plan occupies a central position. A new
element is the structural concept in which authorities describe their spatial planning
policy. These new structural concepts replace the current key planning decision
(at national level), regional plans (at the provincial level) and structure plans (at the
regional and municipal level). One advantage of this is the shorter procedure,
which allows parties to quickly take advantage of new possibilities and opportunities.
Among other things, the Spatial Planning Act also means:
• a shortened zoning plan procedure, reduced from over a year to 26 weeks;
• zoning plans must be digitalized;
• provincial authorities may no longer approve zoning plans;
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• provinces and the State can give indications in the zoning plan procedure;
• a fast construction procedure (project decision);
• a 2% excess for compensation for loss resulting from government planning
decisions;
• the permit-issuing body has the option of coordinating licensing procedures
and of combining them into a single appeal/objection procedure (coordination
scheme); and
• zoning plans must be updated or extended every 10 years.
Permits
The General Provisions for the Environment Act (Wabo) is an important element
of the Cabinet’s desire to reduce the pressure of regulation on citizens and
businesses. It involves the amalgamation of around 25 licensing systems, of which
11 are decentralized. These range from national regulations for building, housing
and the environment to municipal demolition and tree-felling permits. However,
due to legislative difficulties, this Act is not expected to come into force any sooner
than 2010.
7. Leases
Leases are subject to various statutory provisions and administrative regulations.
With respect to office space, a nonrestrictive system applies, which allows parties
to freely negotiate the rent and other terms of their agreement on the basis of
prevailing market conditions. The rental price is often indexed on the basis of
a price index figure. Upon termination of a lease, the courts can grant protection
from eviction to a tenant for a maximum of three years. With respect to retail
business space, a complicated semi-restrictive system applies, which reduces the
freedom to execute contracts with respect to the term and termination of the lease
(by providing protection from eviction and compulsory renewal). The system also
allows the courts to control the rental price. Leases for retail business space usually
have a five-year term with an option allowing the tenant to renew the contract for
another five years.
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8. Public Housing
The government must ensure that there is sufficient housing for the various social
population groups and must promote a suitable living environment. The Housing
Act stipulates the obligations and powers of the different housing authorities and
regulates the government’s housing policy. One of the effects of the decentralization
of public housing is that the government provides new regulations under the Housing
Act only if housing for a particular population group is under threat. The Housing
Act is implemented primarily by municipalities and housing corporations, and to a
lesser extent by provinces and the Ministry of Housing, Spatial Planning and the
Environment (Ministerie van Volkshuisvesting, Ruimtelijke Ordening en Milieu). The
supervision of public housing is assigned to the inspector general of housing, the
provincial inspectors and their civil servants. Due to demographics and planning, the
Netherlands suffers a general shortage of housing resources. It is therefore important
that sparse housing be allocated in a just and fair manner. The government sees to
this by issuing housing permits under certain circumstances. The regulations with
respect to housing allocation are laid down in the Housing Allocation Decree
(Huisvestingsbesluit), which is based on the Housing Allocation Act (Huisvestingswet),
and on the Housing Allocation Act itself, according to which a person is free to
decide where he wishes to reside. This right may only be restricted insofar as it is
essential for the balanced and fair allocation of housing. Government interference
as regards housing is justified only when housing for people with a relatively weak
position on the housing market Municipalities may restrict the right to freedom of
establishment on the basis of a municipal housing allocation ordinance that regulates
the time and conditions for granting housing allocation permits.
Summary of the Netherlands’ Bilateral Tax Treaties

The Netherlands has one of the most extensive tax treaty networks in the EU.
The treaties generally provide for substantial reductions of withholding tax on
dividends, interest and royalties. Appendices II-V contain lists of the treaties currently
in force and under negotiation, and the treaty reductions for withholding taxes.
Most tax treaties negotiated by the Netherlands relating to income and capital are
based on the draft models published by the Organisation for Economic Co-
operation and Development (OECD) in 1963, 1977 and 1992-2000.
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Tax treaties are currently in force in the following countries:

• Albania • Germany • Moldova
• Argentina • Ghana • Mongolia
• Armenia • Greece • Morocco
• Aruba • Hungary • Netherlands Antilles
• Australia • India • New Zealand
• Austria • Indonesia • Nigeria
• Bangladesh • Iceland • Norway
• Barbados • Ireland • Pakistan
• Belarus • Israel • Philippines
• Belgium • Italy • Poland
• Brazil • Japan • Portugal
• Bulgaria • Jersey • Romania
• Canada • Jordan • Russia
• China (excluding • Kazakhstan • Singapore
Hong Kong and
• Korea • Slovak Republic
Macau)
• Kuwait • Slovenia
• Croatia
• Latvia • South Africa
• Czech Republic
• Lithuania • Spain
• Denmark
• Luxembourg • Sri Lanka
• Egypt
• Macedonia • Suriname
• Estonia
• Malaysia • Sweden
• Finland
• Malta • Switzerland
• France
• Mexico • Taiwan
• Georgia
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• Thailand • Ukraine • Vietnam

• Tunisia • United Kingdom • (former) Yugoslavia
• Turkey • United States • Zambia
• Turkmenistan • Uzbekistan • Zimbabwe
• Uganda • Venezuela
Tax treaties are still in force in the following countries after split or separation from
the (former) Soviet Union:
• Azerbaijan *
• Kyrgyzstan *
• Tajikistan *
• Turkmenistan
(former) Yugoslavia:
• Bosnia-Herzegovina
• Montenegro (Fed. Republic)
• Slovenia
• Serbia (Fed. Republic)
* Treaty unilaterally applied by the Netherlands.
** Signed on 8 December 2006. Treaty is not yet in force.
* See (b) for application treaties with the former Soviet Union and formerYugoslavia.
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Negotiations are underway or will be held regarding the conclusion of

tax treaties with:
• Algeria • Germany • Peru
• Australia • Hong Kong • Saudi Arabia
• Azerbaijan * • Indonesia • Slovakia
• Brazil • Iran • Switzerland
• Canada • Isle of Man • Tanzania
• China • Japan • Turkmenistan *
• Cuba • Kenya • Turkey
• Cyprus • Kyrgyzstan • United Kingdom
• Costa Rica • Libya
• France • Mexico
Tax treaties with regard to the profits from air and/or sea shipping are currently in
force in the following countries:
• Argentine air/sea • Croatia air
• Armenia air • Cuba air
• Albania air • Czech Republic air
• Azerbaijan air • Egypt air
• Bahrain air • Estonia air/sea
• Barbados air • Georgia air
• Belarus air • Hong Kong air/sea
• Brunei air • Hungary air
• Canada air • Iran air
• Cape Verde air • Korea sea
• China (People’s Rep.) air/sea • Latvia air/sea
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• Lithuania air/sea • Slovak Republic air

• Macau air • Slovenia air
• Macedonia air • South Africa air
• Malawi air • Sudan air
• Maldives air • Suriname air
• Mexico sea • Syria air
• Oman air • Togo air
• Poland sea • Ukraine air
• Panama air/sea • United Arab Emirates air
• Qatar air • Uruguay air
• Russia sea • Uzbekistan air
• Saudi Arabia air • Venezuela air/sea
• Senegal air • Vietnam air
• Seychelles air
Negotiations are underway regarding the conclusion and/or amendment of tax

treaties with regard to the profits from air and/or sea shipping with:
• Angola • Guatemala
• Colombia • Haiti
• Faroe Islands • Iran
• Gabon • Ivory Coast
• Ghana • Jamaica
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Appendix I - Procedure for Incorporating

a Dutch NV, a BV, or a Cooperative
Procedure for the incorporation a Dutch NV (Naamloze Vennootschap met beperkte
aansprakelijkheid or public limited liability company), a BV (Besloten Vennootschap met
beperkte aansprakelijkheid or private limited liability company), and a Cooperative
(cooperatie).
Procedure
(a) Perform trade name research at the Trade Register of the Chamber of Commerce
to investigate whether the proposed or a similar name can be used. Three
different names can be examined in one trade name research.
(b) Execute a power of attorney by incorporation.
(c) Submit questionnaires to the Ministry of Justice.
(d) Open a separate bank account in the name of the company in incorporation.
(e) Issue a bank statement to the notary confirming the payment of the
incorporation capital.
(f) Execute the notarial deed of incorporation including the Articles of Association.
(g) Register the company’s managing directors and sole shareholder with the Trade
Register of the Chamber of Commerce within eight days after the execution of
the notarial deed.
Steps c, d, e, and f are not applicable to the incorporation of a Cooperative.
Documentation
The following information or documentation is required for the application
procedure at the Ministry of Justice as described above:
1. Proposed name, statutory seat, and address of the new company;
2. Description of the new company’s activities;
3. Authorized and issued share capital, number, and par value of shares;
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4. A completed and signed Ministry of Justice “form B” in case the incorporator

or managing director is a private individual (full name, place and date of birth,
nationality, address, marital status, and employment details);
5. A completed and signed Ministry of Justice “form C” for the incorporator or
managing director that is a legal entity (name, statutory seat, object, data of
directors and shareholders, financial figures, and history);
6. The ultimate beneficial owner, either a private individual or a listed company,
should partly complete and sign a Ministry of Justice “form B” or “form C”
respectively.
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Appendix II - Overview of Tax Rates Inbound

Income Under Dutch Tax Treaties
Appendix Dividends Interest Royalties
Country Reduced rate Reduced rate
N.i.f. Means tax under tax treaty under tax treaty Reduced rate Reduced rate
treaty signed but for qualifying for individuals and under tax treaty under tax treaty
not in force yet participations companies
Albania 0%/5% 15% 0%/5%/10% 10%
Argentina 10% 15% 12% 3%/5%/10%/15%
Armenia 0%/5% 15% 0%/5% 5%
Aruba 5%/7.5% 15% 0% 0%
Australia 15% 15% 10% 10%
Austria 5% 15% 0% 0%/10%
Azerbaijan 15% 15% 0% 0%
Bangladesh 10% 15% 7.5%/10% 10%
Barbados 0% 15% %5% 0%/5%
Belarus 0%/5% 15% 5% 3%/5%/10%
Belgium 0% 15% 0%/10% 0%
Bosnia and 5% 15% 0% 0%
Herzegovina
Brazil 15% 15% 10%/15% 15%/25%
Bulgaria 5% 15% 0% 0%
Canada 5% 15% 0%/10% 0%/10%
China 10% 10% 10% 10%
Croatia 0% 15% 0% 0%
Czech Rep. 0% 10% 0% 5%
Denmark 0% 15% 0% 0%
Egypt 0% 15% 12% 12%
Estonia 5% 15% 0%/10% 5%/10%
Finland 0% 15% 0% 0%
France 5% 15% 0%/10% 0%
Georgia 0%/5% 15% 0% 0%
Germany 10% 15% 0% 0%
Greece 5% 15% 8%/10% 5%/7%
Hungary 5% 15% 0% 0%
Iceland 0% 15% 0% 0%
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India 10%/15% 10%/15% 10%/15% 10%20%
Indonesia 10% 10% 10% 10%
Ireland 0% 15% 0% 0%
Israel 5% 15% 10%/15% 5%/10%
Italy 5%/10% 15% 10% 5%
Japan 5% 15% 10% 10%
Jordan 0%/5% 15% 5% 10%
Kazakhstan 0%/5% 15% 0%/10% 0%
Korea 10% 15% 10%/15% 10%/15%
Kuwait 0% 10% 0% 5%
Kyrgyzstan 15% 15% 0% 0%
Latvia 5% 15% 10% 5%/10%
Lithuania 5% 15% 10% 5%/10%
Luxembourg 2,5% 15% 0%/2.5%/15% 0%
Macedonia 0% 15% 0% 0%
Malawi 10% 0% 0% 0%
Malaysia 0% 15% 10% 8%
Malta 5% 15% 10% 0%/10%
Mexico 0%/5% 15% 0%/5%/10%/15% 10%
Moldova 0%/5% 15% 5% 2%
Mongolia 0% 15% 0%/10% 0%/5%
Montenegro 5% 15% 0% 10%
Morocco 10% 25% 10%/25% 10%
Netherlands 8,3% 15% 0% 0%
Antilles
New Zealand 15% 15% 10% 10%
Nigeria 12,5% 15% 12,5% 12,5%
Norway 0% 15% 0% 0%
Pakistan 10% 20% 10%/15%/20% 5%/15%
Philippines 10% 15% 0%/10%/15% 15%
Poland 5% 15% 0%/5% 5%
Portugal 0% 10% 10% 10%
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Romania 0%/5% 15% 0% 0%
Russia 5% 15% 0% 0%
Serbia 5% 15% 0% 10%
Singapore 0% 15% 10% 0%
Slovak Republic 0% 10% 0% 5%
Slovenia 5% 15% 0%/5% 5%
South Africa 5% 15% 10% 0%
Spain 5% 15% 10% 6%
Sri Lanka 10% 15% 5%/10% 10%
Surinam 7.5%/15% 20% 5%/10% 5%/10%
Sweden 0% 15% 0% 0%
Switzerland 0% 15% 5% 0%
Taiwan 10% 10% 0%/10% 10%
Tajikistan 15% 15% 0% 0%
Thailand 5% 25% 10%/25% 5%/15%
Tunisia 0% 20% 7,5% 7,5%
Turkey 5% 20% 10%/15% 10%
Turkmenistan 15% 15% 0% 0%
Uganda 0% 15%/5% 0%/10% 10%
Ukraine 0%/5% 15% 0%/2%/10% 0%/10%
United Kingdom 5% 15% 0% 0%
United States 0%/5% 15% 0% 0%
Uzbekistan 0%/5% 15% 0%/10% 0%/10%
Venezuela 0% 10% 5% 5%/7%/10%
Vietnam 5%/7% 15% 7% 5%/10%/15%
Zambia 5% 15% 10% 10%
Zimbabwe 10% 20% 10% 10%
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Qualifying companies column

The lower rate in the column generally applies if the recipient is a company that
owns at least 25% of the capital or the voting power in the Netherlands company,
as the case may be. There may be special conditions or exceptions.
Interest column
Many treaties provide for an exemption for certain types of interest, e.g., interest
paid to the state, local authorities, the central bank, export credit institutions, or
in relation to sales on credit. Such exemptions are not considered in this column.
The lower rates generally refer to interest paid by banks or on government bonds.
Royalty column
Different rates in the columns generally refer to different types of withholding
tax rates depending upon the type of royalty, e.g., copyright payments, payments
for the use of films and computer software, and payments for the use of patents,
trademarks, and know-how.
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Appendix VI - Contact Information

Amsterdam Practice Groups and Teams
Practice Groups
Banking and Securities Intellectual Property
Phillipe Steffens Reina Weening
Tel.: +31 20 551 7410 Tel.: +31 20 551 7444
phillipe.steffens @bakernet.com reina.weening@bakernet.com
Civil-Law Notary IT/Communications
Jan Willem Schenk Robert Boekhorst
Tel.: +31 20 551 7572 Tel.: +31 20 551 7533
janwillem.schenk @bakernet.com robert.boekhorst@bakernet.com
Corporate Commercial/M&A Litigation and Dispute Resolution
Edwin Liem Robert van Agteren
Tel.: +31 20 551 7514 Tel.: +31 20 551 7459
edwin.liem@bakernet.com robert.vanagteren@bakernet.com
Corporate Contracts National and International Tax
Marco Wallart Wouter Paardekooper
Tel.: +31 20 551 7112 Tel.: +31 20 551 7848
marco.wallart@bakernet.com wouter.paardekooper@bakernet.com
Employment Real Property & Projects
Karin Bodewes Bob Bekker
Tel.: +31 20 551 7452 Tel.: +31 20 551 7449
karin.bodewes@bakernet.com bob.bekker@bakernet.com
Mirjam de Blécourt VAT/Indirect Tax
Tel.: +31 20 551 7466 Folkert Idsinga
mirjam.deblecourt@bakernet.com Tel.: +31 20 551 7599
folkert.idsinga@bakernet.com
EU and Competition
Misha lutje Beerenbroek Telecommunications
Tel.: +31 20 551 7518 Practice leader: Robert Boekhorst
misha.lutjebeerenbroek@bakernet.com Tel.: +31 20 5517 533
robert.boekhorst@bakernet.com
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Industry Groups
Fashion & Luxury Goods Pharmaceuticals and Healthcare
Team leader: Remke Scheepstra Team leader: Reina Weening
Tel.: +31 20 5517 831 Tel.: +31 20 5517 444
remke.scheepstra@bakernet.com reina.weening@bakernet.com
Food Real Estate
Team leader: Misha lutje Beerenbroek Team leader: Bob Bekker
Tel.: +31 20 5517 518 Tel.: +31 20 5517 498
misha.lutjebeerenbroek@bakernet.com bob.bekker@bakernet.com
Specialist Teams
Employee Benefits Tax Group Reorganizations
Team leader: Jan-Willem de Tombe Team leader:Wouter Paardekooper
Tel.: +31 20 5517 837 Tel.: +31 20 5517 848
jan-willem.detombe@bakernet.com wouter.paardekooper@bakernet.com
Outsourcing Risk Management
Team leader: Mirjam de Blécourt Team leader: Frank Kroes
Tel.: +31 20 5517 466 Tel.: +31 20 5517 435
mirjam.deblecourt@bakernet.com frank.kroes@bakernet.com
Pensions Share Based Compensation
Team leader: Irene Vermeeren-Keijzers Team leader: Maarten van der Lande
Tel.: +31 20 5517 477 Tel.: +31 20 5517 426
irene.vermeeren@bakernet.com maarten.vanderlande@bakernet.com
Private Equity Team Japan
Team leader: Peter van den Oord Team leader:Theo van Maaren
Tel.: +31 20 5517 149 Tel.: +31 20 5517 418
peter.vandenoord@bakernet.com theo.vanmaaren@bakernet.com
Project Finance
Team leader: Olav Andriesse
Tel.: +31 20 5517 449
olav.andriesse@bakernet.com
193
www.bakernet.com/amsterdam
Baker & McKenzie Amsterdam N.V.

P.O. Box 2720
1000 CS Amsterdam
The Netherlands
info.amsterdam@bakernet.com
Baker & McKenzie Amsterdam N.V. is a member of Baker & McKenzie International, a Swiss Verein with
member law firms around the world. In accordance with the common terminology used in professional
service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such
a law firm. Similarly, reference to an “office” means an office of any such law firm.
©2008 Baker & McKenzie

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Amsterdam

This may qualify as “Attorney Advertising” requiring notice in some jurisdictions.

Sylvia Arends Jean-Clement Meignen Marc Rijkaart van Cappellen

Cover photo: © L.J.A.D. Creyghton / Holland Album _ Sint Maartensbrug / www.creyghton.com

VI. The Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29

X. Corporate Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53

XIV. Labor Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .105

XXII. Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .176

Baker & McKenzie Amsterdam N.V.

2. Cities and Infrastructure

Traffic and Transport

Main internet hub Amsterdam Internet Exchange

and in the world; (2) Encouraging an innovative, competitive, and enterprising

Macroeconomic figures VALUE YEAR

5. Culture and the Arts

Radio, Television, and the Media

Dutch Creative Climate and Dutch Design

II. International Distribution Centres /

1. Customs value and applicable customs rate

Unlike Customs authorities in other countries, the Dutch Customs authorities

Single (European) authorization

4. Other International Customs Facilities

or avoided. As mentioned, the storage of goods under a customs warehousing

Inward Processing Relief

Outward Processing Relief

Processing under Customs Control

Customs Bonded Transport

5. Authorized Economic Operator

6. VAT and excises

III. Regional Headquarters /

4. Group Financing and Group Licensing

1. BV must have sufficient substance in the Netherlands. A BV is deemed to have

IV. Sales Support, Distribution and Production

V. Legal forms of doing business

• an original extract from the foreign trade register or document of registration,

3. Societas Europaea (SE)

2. through incorporation of an SE as a holding company for two companies based

6. Formal Foreign Companies

When a distribution agreement is silent on termination, such agreement may

VI. The Subsidiary

4. Transfer of shares and membership interest

The transfer of registered shares in an NV and a BV requires a notarial deed of

6. Issuance of new shares

9. Large Companies Regime

• The company and/or an affiliated company (i.e., an enterprise of which the

10. Single-member companies

VII. Reporting, Auditing, and Publication

8. Exemption for group companies

• group companies, the interest in which is only held for disposal.

10. Auditing requirements

11. Act on Formal Foreign Companies

VIII. Corporate Governance Code

1. Principles and Best Practice Provisions

3. Compliance and Enforcement

• Upon their appointment, Supervisory Board members follow an introduction

6. Shareholders and General Meeting of

8. Monitoring of the Code

IX. Personal Income Tax

2. 2001 Personal Income Tax Act

3. Income from Employment

4. Income Tax Ruling

The Employee’s Professional Position

The Employee’s Prior Employment or Stay in the Netherlands