Attitude toward Foreign Direct Investment
The Netherlands is the sixteenth largest economy in the world and the fifth largest in the European Monetary Union (the Eurozone), with a gross domestic product (GDP) of nearly $800 billion (€700 billion). According to the International Monetary Fund (IMF), the Netherlands is the largest source and recipient for foreign direct investment (FDI) in the world, though the Netherlands is not the ultimate beneficial destination for the majority of this investment. The government of the Netherlands maintains liberal policies toward FDI and adheres to the Organization for Economic Cooperation and Development (OECD) Investment Codes and relevant Guidelines.
The Netherlands is the recipient of eight percent of all FDI inflow into the EU. Of all EU member states, it is the top recipient of U.S. FDI, at over 15 percent of all U.S. FDI abroad as of 2014. The Netherlands has become a key export platform and pan-regional distribution hub for U.S. firms. Roughly 60 percent of total U.S. foreign-affiliate sales in the Netherlands are exports, with the bulk of them to other EU members.
In 2014, foreign companies made inward direct investments worth 664 billion U.S. dollars or 82.2% of the Netherlands' GDP. As a result, the Netherlands is the world’s tenth-largest recipient of foreign investment. Foreign investors provide 15% of Dutch employment in the private sector (935,310 jobs).
Dutch tax authorities provide a high degree of customer service to foreign investors. Transparent, precise tax guidance lets investors know what to expect regarding long-term tax obligations. Advance Tax Rulings (ATR) and Advance Pricing Agreements (APA) are guarantees given by local tax inspectors regarding long-term tax commitments for a particular acquisition or greenfield investment. More detailed description of Dutch tax policy for foreign investors can be found at http://investinholland.com/incentives-and-taxes/ and http://investinholland.com/incentives-and-taxes/fiscal-climate/.
Dutch corporations and branches of foreign corporations are subject to a corporate tax rate of 25 percent on taxable profits, which puts the Netherlands in the medium third of the corporate tax bracket in the EU. Profits up to €200,000 (approximately $230,000) are taxed at a rate of 20 percent. Dutch corporate taxation generally allows for the exemption of dividends and capital gains derived from a foreign subsidiary. Surveys into the corporate tax structure of EU member states observe that both the corporate tax rate and the effective corporate tax rate in the Netherlands are average. Nevertheless, the Dutch corporate tax structure ranks among the most competitive in Europe given other beneficial tax measures. No local Dutch income taxes are levied on corporations. The Netherlands also has no branch profit tax and does not levy a withholding tax on interest and royalties.
Maintaining an investment-friendly reputation is a high priority for the Dutch government, which provides public information and institutional assistance to prospective investors through the Netherlands Foreign Investment Agency (NFIA) (http://investinholland.com/). Additionally, an EU format information gateway, http://www.answersforbusiness.nl, provides information on regulations, taxes, and investment incentives that apply to foreign investors in the Netherlands.
The NFIA maintains six regional offices in the United States (in Washington, DC; Atlanta; Boston; Chicago; New York City; and San Francisco). The American Chamber of Commerce in the Netherlands (http://www.amcham.nl) also promotes U.S.-Dutch business interests.
Other Investment Policy Reviews
The Netherlands has not recently undergone an investment policy review by the OECD, World Trade Organization (WTO), or United Nations Committee on Trade and Development (UNCTAD).
Laws/Regulations on Foreign Direct Investment
Commercial laws and regulations accord with international legal practices and standards, and apply equally to foreign and Dutch companies. The rules on acquisition, mergers, takeovers, and reinvestment are nondiscriminatory. The Social Economic Council (SER), an official advisory body consisting of employers’ representatives, labor representatives and independent experts appointed by the government, administers Dutch mergers and acquisitions rules. SER rules are intended to protect the interests of stakeholders and employees. They include requirements for the timely announcement of mergers and acquisitions (M&A) and for discussions with trade unions.
The Netherlands ranks 28 out of 189 on the World Bank’s “Doing Business Index” (www.doingbusiness.org/data/exploreeconomies/netherlands/starting-a-business/). All companies must register with the Chamber of Commerce business registry (see http://www.kvk.nl/english/business-register/) as well as register for a fiscal number with the tax administration and allows expedited registration for SMEs with under 50 employees. The EU format website www.answersforbusiness.nl – maintained by the Dutch government –provides clear-cut guidance on establishing a business in the Netherlands: http://www.answersforbusiness.nl/guide/starting-business.
The Dutch American Friendship Treaty gives American citizens preferential treatment to operate a business in the Netherlands, providing ease of establishment that most other non-EU nationals do not enjoy. U.S. entrepreneurs applying under the Dutch American Friendship Treaty do not need to satisfy a strict, points-based test and do not have to demonstrate innovative and distinguishing entrepreneurial pre-conditions. Instead, U.S. entrepreneurs setting up a sole proprietorship need only register with the Chamber of Commerce and demonstrate a minimum investment of €4,500. A two-year residence permit can then be issued, with the possibility of renewal for five subsequent years.
FDI tends to be concentrated in growth sectors including information and communication technology (ICT), biotechnology, medical technology, electronic components, and machinery and equipment. Investment projects are predominantly in value-added logistics, machinery and equipment, and food.
As part of the austerity measures that the government has implemented since 2012, government has focused on forging public/private financing agreements in areas where investment is deemed to be of strategic value. With this so-called “Top Sectors” policy, government, academia, and industry works together to determine where co-financed investment in R&D will go. The “top sectors” policy identifies nine areas (creative industries, logistics, horticulture, agriculture & food, life sciences, energy, water, chemical industry, and high tech) for the focus of the government’s industrial policy. For more information see paragraph 5 and https://www.government.nl/topics/enterprise-and-innovation/contents/encouraging-innovation.
Limits on Foreign Control and Right to Private Ownership and Establishment
With few exceptions, the Netherlands does not discriminate between national and foreign individuals in the establishment and operation of private companies. The government has divested its complete ownership of many public utilities, but in a number of strategic sectors, private investment, including foreign investment, may be subject to limitations or conditions. These include transportation, energy, defense and security, finance, postal services, public broadcasting, and the media.
Air transport is governed by EU regulation and subject to a bilateral agreement between the United States and the EU. U.S. nationals can invest in Dutch/European carriers as long as the airline remains majority-owned by EU governments or nationals from EU member states. Additionally, the EU and its member states reserve the right to limit U.S. investment in the voting equity of an EU airline on a reciprocal basis to that allowed by the United States for foreign nationals in U.S. carriers.
There are no ongoing privatization programs in the Netherlands. Government-controlled entities will maintain dominant positions in gas and electricity distribution, rail transport, and the water sector. The government nationalized ABN AMRO Bank and ASR insurance
company in 2008 due to the global financial crisis. In February 2013, it nationalized the bank and insurance company SNS Reaal due to steep losses in the bank’s real estate portfolio. In November 2015, ABN Amro regained its status as a publicly traded company.
Screening of FDI
The Netherlands has no formal foreign investment screening mechanisms and no foreign ownership quotas, with the exception of certain limitations in the strategic "top sectors" (transportation, energy, defense and security, finance, postal services, public broadcasting, and the media). There is no requirement for Dutch nationals to have an equity stake in a Dutch registered company.
Structural and regulatory reforms are an integral part of a major reorientation of Dutch economic policy. Market competition is being strengthened through laws aimed at stimulating market forces, liberalization, deregulation, and legislative quality, along with a tightening of competition policy.
As an EU and Eurozone member, the Netherlands is firmly integrated in the European regulatory system with national and European institutions exercising authority over specific markets, industries, consumer rights, and competition behavior of individual firms.
The Authority for Consumers and Markets (ACM) provides regulatory oversight in three key areas: consumer protection, post and telecommunications, and market competition.