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Taxation of Dutch Fiscal Investment Institutions

Updated on Tuesday 10th March 2020

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Taxation-for-fiscal-investment-institutions-in-the-NetheralndsAt the beginning of 2016, the Dutch Government enabled new regulations which ease the establishment of investment funds in the Netherlands. The Fiscal Investment Institution (FII) regime provides for more flexibility related to the taxation of Dutch investment funds. In order to qualify for the new scheme, an investment fund must meet certain criteria.
 
Our Dutch company formation consultants can offer more information on the new FII regime. We can also assist foreign investors in various taxation matters, including in respect to the new Dutch fiscal investment institutions regime.
 
If you want to open a company in the Netherlands with the purpose of creating an investment fund, our local consultants are at your disposal with complete support.
 

Fiscal investment institutions in the Netherlands

 
Under the new FII regime in the Netherlands, investment funds can be set up as limited liability companies or as joint stock companies which can be listed on the capital markets in order to benefit from the new tax advantages. Among the conditions available for Dutch investment funds under the FII regime are equal distribution of profits among shareholders and several limitations on the classes of shares the fund may issue. The fiscal investment institutions may issue different classes of shares only if:
 
  • - the FII is set up as an umbrella fund which will be made up of separate sub funds;
  • - the profit rights of the share classes differ only in terms of administration fees, share registration in other currencies or marketing costs.
 
As for the shareholder requirements, the following criteria apply:
 
  • - the shareholders must own maximum 45% of the outstanding shares;
  • - individual shareholders must own maximum 25% in the investment fund.
 
When it comes to non-regulated investment funds in the Netherlands, individuals or companies must own at least 75% of the shares in order to qualify for the FII regime. Also, individuals may not own more than 5% equity interests in the fund.
 

Setting up a funds under the FII regime in the Netherlands

 
The fiscal investment institution regime is one of the most important regulations for the creation of investment funds in the Netherlands. This entity can be used for the establishment of funds with various types of portfolio investments, however, in most cases it is used for the registration of real estate investment funds.
 
It is possible for the Dutch investment fund created under the FII regime to be listed on the Amsterdam Stock Exchange, however, this is not a mandatory requirement.
 
In order to be considered a fiscal investment institution, a company must meet specific requirements, among which:
 
  1. it must be registered as a limited liability company, private or public (BV or NV);
  2. it can be registered as mutual fund provided that certain conditions are met;
  3. the company setting up the fund must be a resident of an EU member state, of the Dutch Antilles or another state that has a double tax treaty with the Netherlands;
  4. the objective of the fund must be of portfolio investments or real estate investments.
 
From a taxation point of view, the Dutch fiscal investment institution, must distribute profits to the shareholders no later than 8 months after the end of the financial year. It is important to note capital gains are not considered profits under a fiscal investment institution.
 
Another important aspect to considered when it comes to the taxation of such types of funds is that the debts of the fund may not exceed 60% of the value of the real estate assets or 20% in the case of other assets, as presented by the financial documents.
 
Our Dutch company formation consultants can offer more information on the taxation of fiscal investment institutions.
 

The Dutch regulated and the non-regulated FII

 
In order to be regulated, an FII must be admitted to the financial instruments market, as prescribed by the Dutch Financial Markets Supervision Law by respecting one of the following conditions:
 
  • - the fiscal investment institution or its manager must have a license issued by the Dutch Financial Market Supervisory Authority;
  • - the institution or its manager benefits from a licensing exemption under the regulations of the same authority.
 
In the case of a regulated FII, the maximum shareholding or interest in a fund of a single investor must not exceed 25%. No corporate shareholder can own more than 45% in the fund, unless it is a company qualifying as a portfolio investment company. In most cases, such funds are registered as UCITS.
 
In the case of unregulated fiscal investment institutions, a natural person cannot own more than 5% of the interest in the fund, while in the case of corporate shareholders, at least 75% of the interest must be held by tax exempt companies or regulated FIIs.
 
If you need information on the documents related to the creation of a fiscal investment institution, our company formation representatives in the Netherlands can assist you.
 

Shareholders and directors in Dutch FIIs

 
When setting up a Dutch fund as a fiscal investment institution, there are several aspects to consider in terms of shareholding and management structure. First of all, it is important to note that a Dutch fiscal investment institution cannot have one shareholder, as its shareholding base must be diversified.
 
In terms of management, the members of the board are subject to various limitations.
 

Real estate investment funds as FIIs in the Netherlands

 
One of the greatest benefits when it comes to the taxation of fiscal investment institutions in the Netherlands is when they are created as real estate investment funds registered as funds for joint account (FGR).
 
With respect to the taxation of real estate in the Netherlands, the following must be considered:
 
  • - for taxation purposes, a Dutch real estate company must have a balance sheet consisting of 50% or more of real estate assets;
  • - also, at least 30% of its assets must be represented by immovable property in the Netherlands;
  • - the transfer of real estate property is subject to a tax rate of 6%;
  • - a 2% rate applies to the transfer or residential real estate in the Netherlands.
 
From a taxation point of view, there are several differences between the fiscal investment institution and the exempt investment institution. The main advantage of the former consists in the appliance of Dutch double tax treaties when it comes to foreign investors.
 

What does the new Dutch FII regime entail?

 
According to the new FII taxation regime, qualifying investment funds in the Netherlands would benefit from 0% corporate tax rate. They would be applied a 15% withholding tax on dividends which would be reduced through the Netherlands’ double taxation agreements or through the remittance deduction.
 
For complete information on taxation under the new FII regime, please feel free to contact us. You can also rely on our company registration agents in the Netherlands for assistance in setting up various types of investment funds.

 

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