Taxation of Investment Funds in the Netherlands
Taxation of Investment Funds in the NetherlandsUpdated on Wednesday 31st July 2019
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The taxation of the investment funds that are available in the Netherlands is done based on the type of fund selected for registration. Since investments funds are set up for developing investment activities in the financial sector, they are taxed following a different tax scheme than the one applicable to commercial entities.
Depending on the type of fund and the legal entity under which it operates, the investment vehicle can benefit from various tax exemptions; our accountants in the Netherlands can present the basic taxes available for investment funds and the tax exemptions investors can benefit from when investing in a Dutch fund. For example, specific types of funds can benefit from an exemption on the payment of the corporate income tax or the withholding tax applicable to the transfer of dividends.
What are the basic tax regulations for Dutch investment funds?
The tax system that is imposed to a Dutch investment fund is based on the nature of the entity of the vehicle. Thus, the Dutch tax legislation differentiates between taxable joint accounts funds and tax transparent funds (in the case of those registered as public funds). In the case of a taxable fund for joint account (FGR), the fund will be imposed with the corporate income tax, applicable at the standard rate.
This type of fund will also be imposed with the withholding tax on dividends, which is generally applied at the standard rate of 15%, but exemptions can apply based on the investment principles followed by the fund; our Dutch accountants can provide more details concerning this matter. It is necessary to know that in the case of a tax transparent entity, the fund will be exempted from the payment of the corporate income tax. The Dutch funds can also benefit from the following:
- • hedge funds and vehicles registered as open-ended retail funds can be exempted from the payment of the corporate income tax and the withholding tax (in specific conditions);
- • in order to qualify for the tax exemptions, the above mentioned funds must be licensed by the National Authority for the Financial Markets (AFM);
- • funds operating as fiscal investment funds in the Netherlands can benefit from the provisions of the double tax treaties available in this country;
- • as a general rule, fiscal investment funds are imposed with the standard withholding tax (applicable at a rate of 15%), but the rate can vary based on the stipulations of a given double tax treaty;
- • this tax treatment can apply to a fiscal investment fund as long as it is incorporated under specific Dutch legal entities (public/private limited companies).
What is the value of Dutch investment funds?
Businessmen who want to register an investment fund in the Netherlands can receive full assistance on the registration requirements from our Dutch accounting firm; our accountants can provide advice on the taxation system and on the accounting principles and procedures that must be followed by all Dutch investment vehicles.
When investing here, besides knowing information on the tax and accounting systems applicable to these structures, investors must also take into consideration the value of the investment market, the main types of investment instruments used and the preferred investment entities. Foreign businessmen must know that in 2018 the Dutch investment market reached a record level; the main market characteristics are presented below:
- • in the third quarter of 2018, the total assets held by Dutch investment funds accounted for EUR 906,6 billion;
- • the value of the net deposits accounted for EUR 5,2 billion;
- • the increase of the third quarter was of 2,4%, accounting for EUR 21 million;
- • since 2016, the value of the investment market in the Netherlands increased by 20%;
- • the top foreign investments in the Dutch funds are represented by US investments, accounting for 30% of all the investments;
- • this value represented a total of EUR 194 billion (in the third quarter of 2018);
- • the UK is also an important market, accounting for 5% of the investments on the Dutch market.
What is the tax system for the AIFMD in the Netherlands?
The Alternative Investment Fund Manager Directive (AIFMD) is a comprehensive legislation available at the level of the European Union, which regulates the activity of fund managers. In this case, the corporate tax is applicable at a rate of 20%, but only as long as the yearly profits stand at a value of maximum EUR 200,000; our Dutch accountants can provide more details on the corporate tax system available in this case.
It is necessary to know that the income obtained from employment is taxed at a progressive rate, based on the value of the income, but certain tax reductions can be applied in this case under the 30% ruling. Investors are invited to contact our team of accountants in the Netherlands for further information on other tax principles applicable to Dutch investment funds.