NETHERLANDS Law and Practice Contributed by: Vilmar Feenstra, Robert Veenhoven, Joyce Kerkvliet and Sebastiaan Verkerk, Loyens & Loeff N.V.
Authorised Dutch UCITS funds have to appoint a depositary. In principle, in the Netherlands, such depositary is subject to a licence require - ment, unless a specific exemption to the licence requirement is available. Certain other operational requirements are rel - evant, such as customer due diligence require - ments on the basis of the Dutch implementa - tion of the (revised) Fourth and Fifth Anti-Money Laundering and Terrorist Financing Directive, which is applicable to Dutch UCITS funds. 3.5 Fund Finance See 2.5 Fund Finance . 3.6 Tax Regime Retail funds that are structured as a tax opaque FGR or NV BMVK often elect to be treated as a VBI or an FBI. An FBI is subject to Dutch corporate income tax at a 0% rate. Profit distributions by an FBI are, in principle, subject to 15% Dutch dividend withholding tax, with two important exceptions. • The FBI can apply a conditional rebate for the amount of directly suffered (foreign) withhold - ing taxes against the FBI’s own obligation to remit 15% Dutch dividend tax to the Dutch tax authorities, withheld in respect of its own profit distributions. Effectively, the (foreign) withholding tax levied in connection with the investments of the FBI will be converted into Dutch withholding tax, for which the retail investors may be eligible for a credit or (par - tial) refund. This is considered an apparent benefit of the FBI regime compared to other
investment tax regimes (including the Dutch VBI regime), where (foreign) withholding taxes suffered in connection with the invest - ment portfolio are often neither creditable nor refundable, as a consequence of which, such withholding taxes will be a fund cost, reduc - ing the return on investment. • The FBI can elect to apply a so-called rein - vestment reserve ( herbeleggingsreserve ) by claiming such a reserve in its Dutch corpo - rate income tax return. This reserve is equal to the net balance of (unrealised) gains and losses reduced with a proportionate part of the running costs of the FBI. By creating a reinvestment reserve, items of a capital nature will be excluded from the FBI’s taxable profits and, therefore, will not fall under the annual distribution obligation. Furthermore, subject to certain provisos, the FBI can make distri - butions at the expense of the reinvestment reserve free from Dutch dividend withholding tax, so that items of a capital nature realised by the FBI are effectively subject to neither Dutch corporate income tax nor Dutch divi - dend withholding tax. 4. Legal, Regulatory or Tax Changes 4.1 Recent Developments and Proposals for Reform Legislation on Partnerships Proposed legislative reforms in relation to Dutch partnership laws are being considered. One of the most remarkable amendments may be that a partnership obtains legal personality. However, it is currently unclear if and when these proposed amendments will be formalised.
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