The Netherlands consistently ranks among the world’s most competitive industrialized economies. It offers an attractive business and investment climate and remains a welcoming location for business investment from the United States and elsewhere.
Strengths of the Dutch economy include the Netherlands’ stable political and macroeconomic climate, a highly developed financial sector, strategic location, well-educated and productive labor force, and high-quality physical and communications infrastructure. Investors in the Netherlands take advantage of its highly competitive logistics, anchored by the largest seaport and fourth-largest airport in Europe. In telecommunications, the Netherlands has one of the highest internet penetrations in the European Union (EU) at 96 percent and hosts one of the largest data transport hubs in the world, the Amsterdam Internet Exchange.
The Netherlands is among the largest recipients and sources of foreign direct investment (FDI) in the world and one of the largest historical recipients of direct investment from the United States. This can be attributed to the Netherlands’ competitive economy, historically business-friendly tax climate, and many investment treaties containing investor protections. The Dutch economy has significant foreign direct investment in a wide range of sectors including logistics, information technology, and manufacturing. Dutch tax policy continues to evolve in response to EU attempts to harmonize tax policy across member states.
In the wake of the worldwide financial crisis a decade ago, the Dutch government implemented significant reforms in key policy areas, including the labor market, the housing sector, the energy market, the pension system, and health care. Dutch reform policies were crafted in close consultation with key stakeholders, including business associations, labor unions, and civil society groups. This consultative approach, often referred to as the Dutch “polder model,” is how Dutch policy is generally developed.
After years of recovery, with associated “catch-up” rates of economic growth, the macroeconomic outlook in the Netherlands is for a stable but low-growth economy. The Dutch government projects a period of lower GDP growth of 1.5 percent in 2019 and 2020. Projected drivers of growth include increased government spending, as well as invigorated domestic consumption by households as unemployment reaches record lows.
- The Netherlands is a top destination for U.S. FDI abroad, holding just under USD 900 billion out of a total of USD 6 trillion total outbound U.S. investment – about 16 percent.
- Dutch investors contribute USD 367 billion FDI to the United States of the USD 4 trillion total inbound FDI– about 10 percent.
Table 1: Key Metrics and Rankings
|TI Corruption Perceptions Index||2018||8 of 180||https://www.transparency.org/news/feature/corruption_perceptions_index_2017#table|
|World Bank’s Doing Business Report||2018||36 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2018||2 of 126||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, stock positions)||2017||$936,728||http://www.bea.gov/international/factsheet/|
|World Bank GNI per capita||2017||$46,180||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards 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 over USD 900 billion (773 billion euros). According to the International Monetary Fund (IMF), the Netherlands is consistently among the three largest source and recipient economies for foreign direct investment (FDI) in the world, although the Netherlands is not the ultimate destination for the majority of this investment. The government of the Netherlands maintains liberal policies toward FDI, has established itself as a platform for third-country investment with some 145 investment agreements in force, and adheres to the Organization for Economic Cooperation and Development (OECD) Codes of Liberalization and Declaration on International Investment, including a National Treatment commitment and adherence to 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 16 percent of all U.S. FDI abroad as of 2017. 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 going to other EU members.
In 2014, foreign-owned companies made inward direct investment worth USD 15.8 billion (14.2 billion euros) – just over 30 percent of total corporate investment in durable goods in the Netherlands. Foreign investors provide 19 percent of Dutch employment in the private sector (860,200 jobs). U.S. firms contribute the most among foreign firms to employment, responsible for 214,000 jobs. In its 2017 investment report, the UN Conference on Trade and Development (UNCTAD) identified the Netherlands as the world’s fifth largest destination of global FDI inflows and the third largest source of FDI outflows.
Although policy makers fear that a Brexit will be detrimental for the Dutch economy, so far the Netherlands is benefitting from companies exiting the United Kingdom in anticipation of Brexit. According to the Netherlands Foreign Investment Agency (NFIA), the number of companies interested in moving to the Netherlands because of Brexit increased from 80 in 2017 to 150 in 2018 to 250 in 2019. The companies are coming mainly from the health, creative industry, financial services, and logistics sectors. The Dutch Authority for the Financial Markets (AFM) has predicted Amsterdam will emerge as a main post-Brexit financial trading center in Europe for automated trading platforms and other ‘fintech’ firms, allowing these companies to keep their European trading within the confines of the EU after Brexit.
Dutch tax authorities provide a high degree of customer service to foreign investors, seeking to provide transparent, precise tax guidance that makes long-term tax obligations more predictable. 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. Dutch tax policy continues to evolve as the EU seeks to harmonize tax measures across members states. A 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 currently subject to a corporate tax rate of 25 percent on taxable profits, which puts the Netherlands in the middle third among EU countries’ corporate tax rates and below the tax rates of its larger neighbors. Profits up to USD 240,000 (200,000 euros) are taxed at a rate of 19 percent. In October 2018, the Dutch government announced it would lower its corporate tax rate to 20.5 percent in 2021, with profits up to USD 240,000 taxed at a 15 percent rate from 2021 onwards.
Dutch corporate taxation generally allows for exemption of dividends and capital gains derived from a foreign subsidiary. Surveys of the corporate tax structure of EU member states note that both the corporate tax rate and the effective corporate tax rate in the Netherlands are around the EU average. Nevertheless, the Dutch corporate tax structure ranks among the most competitive in Europe considering other beneficial measures such as ATAs and/or APAs. 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) (https://investinholland.com/ ). Historically, over a third of all “Greenfield” FDI projects that NFI attracts to the Netherlands originate from U.S. companies. Additionally, the Netherlands business gateway at https://business.gov.nl/ – maintained by the Dutch government – provides information on regulations, taxes, and investment incentives that apply to foreign investors in the Netherlands and clear guidance on establishing a business in the Netherlands.
The NFIA maintains six regional offices in the United States (Washington, DC; Atlanta; Boston; Chicago; New York City; and San Francisco). The American Chamber of Commerce in the Netherlands (https://www.amcham.nl/ ) also promotes U.S. and Dutch business interests in the Netherlands.
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 the U.S.-EU Air Transport Agreement. 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 that the United States allows for foreign nationals in U.S. carriers.
In concert with the European Union, the Dutch government is considering how to best protect its economic security but also continue as one of the world’s most open economies. The Netherlands has no formal foreign investment screening mechanism, but the government has begun discussions about developing targeted investment-screening for certain vital sectors that could represent national security vulnerabilities. The government is in the process of finalizing legislation that will establish investment screening mechanisms in the first of those vital sectors: telecommunications. The Netherlands has certain limitations on foreign ownership in sectors that are deemed of vital national interest (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.
Other Investment Policy Reviews
The Netherlands has not recently undergone an investment policy review by the OECD, World Trade Organization (WTO), or UNCTAD.
All companies must register with the Chamber of Commerce and apply for a fiscal number with the tax administration, which allows expedited registration for small- and medium-sized enterprises (SMEs) with fewer than 50 employees: https://www.kvk.nl/english/ordering-products-from-the-commercial-register/ .
The World Bank’s 2019 Ease of Doing Business Index ranks the Netherlands as number 22 in starting a business. The Netherlands ranks better than the OECD average on registration time, the number of procedures, and required minimum capital.
The Netherlands business gateway at https://business.gov.nl/ – maintained by the Dutch government – provides a general checklist for starting a business in the Netherlands: https://business.gov.nl/starting-your-business/checklists-for-starting-a-business/general-checklist-for-starting-a-business-in-the-netherlands/ . The Dutch American Friendship Treaty (DAFT) from 1956 gives U.S. 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 DAFT do not need to satisfy a strict, points-based test and do not have to meet pre-conditions related to providing an innovative product. U.S. entrepreneurs setting up a sole proprietorship only have to register with the Chamber of Commerce and demonstrate a minimum investment of 4,500 euros. DAFT entrepreneurs receive a two-year residence permit, with the possibility of renewal for five subsequent years.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
|Host Country Statistical Source*||USG or International Statistical Source||USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
|Host Country Gross Domestic Product (GDP) ($M USD)||2018||$883,500||2017||$826,200||World Bank|
|Foreign Direct Investment||Host Country Statistical Source*||USG or International Statistical Source||USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
|U.S. FDI in partner country ($M USD, stock positions)||2018||$827,523 (DNB)||2017||$936.700||BEA|
|Host country’s FDI in the United States ($M USD, stock positions)||2018||$999,036 (DNB)||2017||$367.100||BEA|
|Total inbound stock of FDI as % host GDP||2017||700% (Eurostat)||2017||128%
* Source for Host Country Data: CBP, DNB (see notes below)
Note 1: Host country source for GDP 2018 is The Netherlands Bureau for Economic Policy Analysis (CPB). CPB provides more recent data than World Bank. For a breakdown of Dutch GDP, see: https://www.cpb.nl/centraal-economisch-plan-cep-2019
Over 2018, Dutch GDP was 771,000 million euros and 2018 economic growth was 2.5 percent.
- For dollar value of 2018 Dutch GDP, the 2018 CPB amount is converted with the official Treasury annual rate of 1.118 $/€ for 2018: $883,527 (GDP2017*growth rate 2018*annual exchange rate) = (771 billion euro* 1.025*1.118)
Note 2: Host country source for FDI stocks and flows is the Dutch Central Bank (DNB). For Dutch outward FDI destined for the U.S., the accumulated value in 2018 is 893,592 million euros and for inbound FDI originating from U.S. the accumulated value in 2018 is 703,591 million euros. The dollar value of Dutch FDI numbers is obtained with the official Treasury annual rate for 2018 of €/$=1.118. This shows $999,036 million for FDI outbound and $827,523 million for FDI inbound.
- See for outward FDI: https://statistiek.dnb.nl/en/downloads/index.aspx#/details/aggregated-outward-direct-investment-by-country-region-and-industry-class-year/dataset/8d7037d3-cb37-4087-8f78-780992666315/resource/9f770349-047b-4027-9943-1051914ce315
- See for inward FDI: https://statistiek.dnb.nl/en/downloads/index.aspx#/details/aggregated-direct-investment-in-the-netherlands-by-country-region-and-industry-class-year-figures-are-available-from-2004-onwards/dataset/ea9fd02d-c53b-4c66-b9f9-de406e8371e3/resource/7e03971f-e249-43cc-a95c-7ac5529a79bf
Note 3: Eurostat compiles FDI as percentage of GDP for EU member states. For 2017, Eurostat shows that inbound FDI (stocks) is 566 percent and outward FDI (stocks) is 700 percent of Dutch GDP. See: eurostat tables FDI stocks inward for inbound FDI ratio and eurostat tables FDI stocks outward for outward FDI ratio.
Table 3: Sources and Destination of FDI
|Direct Investment From/in Counterpart Economy Data|
|From Top Five Sources/To Top Five Destinations (US Dollars, Millions)|
|Inward Direct Investment (2017)||Outward Direct Investment (2017)|
|Total Inward||$5,005,349||100%||Total Outward||$6,174,234||100%|
|United States||$955,401||19%||United States||$917,646||15%|
|“0” reflects amounts rounded to +/- USD 500,000.|
Table 4: Sources of Portfolio Investment
|Portfolio Investment Assets (December 2017)|
|Top Five Partners (Millions, US Dollars)|
|Total||Equity Securities||Total Debt Securities|
|All Countries||$2,017,438||100%||All Countries||$1,004,598||100%||All Countries||$1,012,840||100%|
|United States||$524,980||26%||United States||$358,264||36%||Germany||$209,473||21%|
|United Kingdom||$128,194||6%||Ireland||$67,182||7%||United Kingdom||$55,062||5%|
14. Contact for More Information
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