NETHERLANDS Law and Practice Contributed by: Vilmar Feenstra, Robert Veenhoven, Joyce Kerkvliet and Sebastiaan Verkerk, Loyens & Loeff N.V.
Netherlands may, however, be eligible for an exemption. Transparent Funds and FGRs Under the new (2025) entity classification rules, investment funds in the form of an FGR may still qualify as tax opaque if they offer (freely) trans - ferable participations to investors. If the partici - pants cannot be transferred to other parties but only to the fund by way of redemption, the FGR qualifies as transparent. For example, debt funds may be structured as a transparent FGR. As a consequence of its tax transparency, any income and gains realised by investing through the transparent FGR are attributed to the participants as if the partici - pants were investing directly in the investment portfolio of the FGR. Tax opaque FGRs are subject to Dutch corpo - rate income tax on worldwide income, and profit distributions made by a tax opaque FGR are, in principle, subject to Dutch dividend withhold - ing tax. However, if certain conditions are met, the tax opaque FGR can opt for the status of “exempt investment institution” ( vrijgestelde bel- eggingsinstelling , or VBI) or “fiscal investment institution” ( fiscale beleggingsinstelling , or FBI). An FGR that elects to be treated as a VBI is fully tax-exempt – ie, the VBI is not subject to Dutch corporate income tax and its profit distributions are not subject to Dutch dividend withholding tax. A VBI may only invest in financial instru - ments, including transferable securities. The FBI is subject to Dutch corporate income tax at a rate of 0%. The FBI may only hold mere portfolio investments. However, unlike the VBI, the FBI may also invest in real estate. Conse - quently, in practice, the FBI may be referred
to as the Dutch REIT regime. Note, however, that, as mentioned in 2.1.1 Fund Structures , it is expected this regime will be abolished for direct real estate investments in 2025. The FBI is required to meet statutory requirements as to its shareholders and leverage restrictions. Fur - thermore, the FBI must distribute its net income within eight months of the fiscal year-end. Profit distributions made by the FBI are, in principle, subject to 15% Dutch dividend withholding tax.
3. Retail Funds 3.1 Fund Formation 3.1.1 Fund Structures
Retail funds (eg, UCITS funds) are often struc - tured in the form of a tax opaque FGR or a public limited liability company ( naamloze vennootsc - hap met beperkte aansprakelijkheid , or NV) that adopts the legal status of an investment institu - tion with variable capital ( beleggingsmaatschap- pij met variabel kapitaal , or BMVK). For more discussion on FGRs and the tax opaque FGR, see 2.1.1 Fund Structures . The NV has legal personality and capital divided into shares. Shareholders of an NV are required to hold at least one physical meeting each year. The NV is incorporated by the execution of a notarial deed of incorporation (including the arti - cles of association of the NV) to that effect. The incorporation of an NV requires a bank account to be set up in the company’s name prior to incorporation, a bank statement providing evi - dence of the payment of the minimum paid-in share capital (if in cash) or a description of the contribution drawn up and signed by the incor - porators, and an auditor’s certificate attesting to such payment (if in kind).
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