The Netherlands

Author: | Published: 9 Nov 2000
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This article provides an overview of the main legal, tax and regulatory aspects of certain types of funds. In the Dutch market, a variety of funds are used, depending, for instance, on the intended investor category, the underlying investments, the desired tax, accountancy or regulatory treatment, and the organizational requirements of the participants or the sponsor. This article focuses on fund structures suitable for both non-Dutch resident investors and domestic investors.

For example, the Dutch stichting pooling vehicle is widely used by institutional investors and is very effective for foreign pension funds and other tax-exempt entities. It is completely tax transparent and potentially outside the scope of any Dutch regulations.

Dutch investment companies, usually in the form of a naamloze vennootschap (NV), are common vehicles for the retail market, and are both publicly traded on the Amsterdam Exchanges and unlisted. They can be structured as qualifying fiscal investment institutions, combining tax-exempt status for Dutch corporate income tax purposes with double tax treaty protection in respect of cross-border investments. In other words, the investment company will enjoy favourable tax treatment for investments under a double tax treaty (such as reduction of withholding tax rates), while there is no corporate tax liability at the level of the fund itself. Usually such investment companies will be subject to supervision by the Dutch Central Bank and require a licence.

An open fonds voor gemene rekening is a mutual fund which can be set up as a mezzanine structure; it has both stichting pool and investment company characteristics.

From January 1 2001, the Dutch Individual Income Tax Act will be changed completely. Dutch resident private individuals will be taxed on a deemed return rather than on their actual investment income. As a result, the so-called growth funds – investment companies fully subject to Dutch corporate tax and intended to protect investors from any personal income tax by not paying any dividends – will become obsolete.

Also from January 1 2001, new provisions apply to certain dividends paid by fiscal investment companies. Where dividends are paid from the so-called reinvestment reserve, dividend withholding tax will no longer be due. The abolition of dividend withholding tax on these dividends is especially beneficial for foreign investors, and makes fiscal investment companies potentially very interesting as alternatives to, for instance, Luxembourg SICAVs.

Stichting pools

The stichting pool is a structure that is normally used by institutional investors. A stichting is a Dutch tax-exempt legal entity and does not have any shareholders. The institutional investors will contribute cash or contributions in kind, such as securities, to the stichting. In exchange for their contribution, the investors are entitled to a pro-rated part of the assets of the stichting. The assets of the stichting constitute the actual investment pool (if you like the fund). The stichting will keep a register in which it administers the entitlements of the participants to the pool. Further, it will hold the underlying assets on behalf of the investors. The stichting itself does not actively manage the portfolio and will enter into contracts with asset managers and custodians for the actual management and custody of the portfolio. Formally, however, the stichting holds the assets in its own name on behalf of the investors, which in essence means that the stichting is the legal owner of the underlying assets. Therefore, to secure their claims on the assets, the investors will require the stichting to be strictly passive and thus bankruptcy remote.


In principle, the pool qualifies as an investment institution within the terms of the Investment Institution Supervision Act (Wet toezicht beleggingsinstellingen or Wtb). However, provided the participants qualify as professional investors within the terms of the Wtb, the pool is exempt from supervision by the regulator, the Dutch Central Bank. Also, no prospectus is required. The sponsor marketing the investment in the pool would generally qualify as a securities intermediary under the Securities Markets Supervision Act 1995 (Wet toezicht effectenverkeer or Wte). When securities intermediaries offer their services in or from the Netherlands, they must obtain a licence from the Dutch Securities Board. However, a number of exemptions could apply, eg under the sponsor's single passport under the EU Investment Services Directive.

Tax status

For tax purposes, the stichting is a transparent entity, provided it has a passive and formal role as holder of the assets only. As a result, the investors are effectively in the same position as if they were directly investing in the underlying assets. To ensure that the pool itself will not be taxable for Dutch corporate income tax purposes, the transferability of units is limited. Units can be made freely redeemable. Provided adequate consent procedures are put in place for the admission of additional participants after the formation of the fund, no Dutch capital tax is due on contributions to the stichting or the pool (capital tax is a one-off 0.9% duty on capital contributions).

NVs with fiscal investment institution status

The NV is one of the two common types of Dutch bodies corporate with a capital divided into shares (the other is the besloten vennootschap or BV) and is comparable to an English PLC, French SA or German AG.

Provided the NV is solely involved in qualifying investment activities, it can obtain the special corporate tax status of a fiscal investment institution. The paragraphs below on the regulatory and tax aspects of the NV fiscal investment institution would in principle also apply to BVs and open fondsen voor gemene rekening (hereafter called open mutual funds).


Under the Wtb, it is prohibited to solicit or obtain, in or from the Netherlands, moneys or other goods, beyond a restricted circle, in exchange for units of an unauthorized investment institution or to offer units of such an investment institution. This means that investment institutions, which offer units to investors in or from the Netherlands outside a closed group of investors, require a licence from the Dutch Central Bank. The Dutch Central Bank grants authorization on request to an investment institution if the applicant shows that it meets all requirements in respect of expertise and trustworthiness, financial resources, management and the information to be furnished to the investors and to the public in a prospectus.

There is an exemption from licence requirements of the Dutch Central Bank in the event that the units will exclusively be offered to professionals, ie persons who trade or invest in securities in a commercial or professional capacity (such as pension funds).

Tax status

The Dutch Corporate Income Tax Act contains a specific provision granting a 0% corporate income tax rate to fiscal investment institutions. There are various conditions that have to be met to obtain the status of a fiscal investment institution. The main ones are in the field of maximum stakes held by taxable corporate investors, as opposed to private individuals and tax-exempt entities (for which latter categories the tax facility was originally intended). These requirements are somewhat more relaxed for fiscal investment institutions listed on the Amsterdam Exchanges than for those that are not. Capital contributions to a NV fiscal investment institution are subject to the 0.9% Dutch capital tax.

One of the main characteristics of the fiscal investment institution regime is that a fiscal investment institution is obliged to distribute its yearly income to the shareholders within eight months of year-end. The background of this obligation is to put private individual investors investing through such a fund in a position more or less equal to that of making a direct investment in the underlying assets, in which case the investors would have received the relevant income themselves (the 0% corporate tax rate for the fund has the same background). After January 1 2001, however, actual dividends are tax-free in the hands of Dutch resident individuals, who will then be taxed on a deemed return (4% at a tax rate of 30%) on the net average value of their investment assets. Nevertheless, for the fiscal investment institution, the obligation to distribute remains. Contrary to income received by the fund, capital gains (whether realized or unrealized) do not have to be distributed. They can allocated to the so called reinvestment reserve.

Dividends paid by the NV fiscal investment company are subject to 25% dividend withholding tax. Under most of the double tax treaties concluded by the Netherlands, this rate is reduced to 15% in respect of portfolio investments. However, from January 2001, favourable treatment is granted to dividends that are distributed from the reinvestment reserve. From that date, distributions from the reinvestment reserve will be free from Dutch dividend withholding tax. This new feature may render the NV fiscal investment institution much more attractive for foreign resident investors. This would particularly be the case where the expected return of the fund would mainly consist of gains rather than dividend or interest income. Other than the one-off capital duty, the NV fiscal investment institution would then result in virtually no taxation at fund level.

Further, the main advantage over, for instance a Luxembourg Sicav, would be that, generally, fiscal investment institutions enjoy tax treaty protection, thus receiving favourable foreign tax treatment in respect of returns on cross-border investments, such as the reduction of withholding tax on dividend and interest income, and protection against source country taxation on capital gains. Finally, to the extent the fund is owned by (taxable) Dutch residents, a fiscal investment institution is entitled to a refund by the Dutch tax authorities with respect to any remaining foreign withholding tax.

Open mutual funds

A fonds voor gemene rekening or mutual fund, whether open or not for tax purposes, does not have legal personality. Usually the assets of the fund are held by a custodian (similar to the above described stichting holding the pool assets) and fund management will be the responsibility of a separate manager, both set up as corporate entities.

Open mutual funds are in principle subject to Dutch corporate income tax. However, as mentioned above, it can also qualify as a fiscal investment institution and benefit from the 0% corporate income tax rate. An open mutual fund is a fund whereby the transfer of units is free, ie not subject to the consent of all participants in the fund.

As opposed to the situation with NVs, mutual funds that are open for corporate income tax purposes can be structured so as to remain outside the scope of Dutch capital tax. This means, for instance, that the mutual fund can apply for fiscal investment institution status for corporate income tax purposes, while no capital tax is due on contributions to the fund. A mutual fund is exempt from capital tax in case – subsequent to the establishment of the fund – the admission of new participants and the disposal of units by existing participants (except for redemption to the fund itself and the transfer to existing participants), is subject to the consent of all participants.

Depending on the circumstances, eg a relatively limited amount of investors or the required liquidity of investment in the fund, this mezzanine type of investment fund can be an attractive alternative. It combines the absence of both Dutch corporate income tax and capital tax, while retaining the potential benefits of the Dutch tax treaty network.


The Netherlands offers various possibilities to structure investment vehicles, that are effective from a legal, tax and regulatory viewpoint for the needs of both private individuals and institutional investors. Institutional investors, whether foreign or Dutch resident, can make efficient use of both the transparent stichting pool structure and of the NV fiscal investment institution (taxed at 0% in the Netherlands) with its entitlement to the benefits of the Dutch tax treaties. The fiscal investment institution is common for private individuals as well and, as of January 2001, becomes attractive for foreign institutions and individuals, when capital gains dividends are no longer subject to Dutch withholding tax. In some cases, where the avoidance of Dutch capital tax is important, a mezzanine fund type – the open mutual fund – may be ideal. Funds catering for professional investors only, such as pension funds, do not require any licence; but funds for the public do, and are supervised by the Dutch Central Bank.

Clifford Chance

Droogbak 1A
1013 GE
The Netherlands

Tel: +31 20 711 9000
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