Netherlands

KEY COUNTRY FACTS
System of government:	constitutional monarchy
Population:	16.88 million
Currency:	euro (€)
FX regime:	free float
GDP:	$880.4bn (2014 est)
IGTA member:	yes
FATF member:	yes
Treasury association:	Dutch Association of Corporate Treasurers (DACT)
Other professional financial/banking associations:	Dutch Banking Association

Financial regulatory framework

Bank supervision

De Nederlandsche Bank, the national central bank of the Netherlands, is a member bank of the European System of Central Banks (ESCB). De Nederlandsche Bank fulfils its tasks according to the primary objective, the maintenance of price stability. On 4 November 2014, the European Central Bank (ECB) adopted the authority to monitor the financial stability of banks within the eurozone through its Single Supervisory Mechanism (SSM), in line with the EU’s SSM Regulation No 1024/2013 conferring specific tasks on the ECB with regard to the prudential supervision of credit institutions. The ECB has final supervisory authority, with member states’ national supervisory authorities now providing a supporting role. The ECB directly supervises the 120 “most significant” banks within each eurozone member state. The ECB is responsible for supervisory reviews, on-site inspections and investigations; granting/withdrawing banking licences; assessing bank acquisitions; ensuring compliance with EU prudential rules; and, if required, setting higher capital requirements to counter financial risks. Germany’s national supervisory authorities. The Netherlands’ national supervisory authority is De Nederlandsche Bank (DNB), the body responsible for bank supervision in the Netherlands. Additionally, the Netherlands Authority for the Financial Markets (De Autoriteit Financiële Markten – AFM) supervises how financial institutions treat their clients.

Exchange controls

Controls apply to foreign investment from outside the EU in airlines and Dutch flag shipping vessels (where majority ownership is prohibited).

Taxation framework

Corporate income tax

The Netherlands has a two-tier system with progressive tax rates. The first EUR 200,000 of taxable income is subject to a tax rate of 20%. Income in excess of EUR 200,000 is taxed at 25%.

Capital gains tax

Capital gains are generally taxed as ordinary income, except for those on certain investments in shares (e.g. in cases where the participation exemption regime applies).

Withholding tax

A withholding tax of 15% is levied on dividends paid to both residents and non-residents. For non-residents, the application of a tax treaty may reduce the rate, potentially to 0%. A withholding tax exemption may apply to dividend payments if the participation exemption applies. If the parent company is a resident of an EU Member State, and meets certain criteria, a withholding tax exemption may apply. Payments on certain profit-sharing loans are treated as dividends. All other interest payments are exempt from withholding tax. No withholding tax is levied on royalties.

Thin capitalisation

The thin capitalisation rules were abolished and replaced with new rules as from 1 January 2013. Under the old rules, interest expense paid to affiliated companies that related to ‘excess debt’ (i.e. debt exceeding a 3:1 debt-to-equity ratio or the ‘group’ ratio) was not deductible. The new rules disallow the deduction of interest costs relating to excess debt (deemed to be) associated with the acquisition price of participations. The excess debt for purposes of this rule will be calculated based on a mathematical rule, under which operational participations acquired from a third party generally will be excluded.

Transfer pricing

The arm’s length principle is laid down in the Dutch Corporate Income Tax Act. Corporate income taxpayers are obliged to keep records substantiating that intercompany transfer prices have been determined in line with the arm’s length principle.

Indirect taxes

VAT is levied on all persons considered “entrepreneurs” (this includes importers and foreign firms supplying goods and services in the Netherlands) at a general rate of 21%. There is a reduced rate of 6% for basic goods and services. Exports and certain services are zero-rated, and certain goods and services are exempt (particularly those which relate to financial services).

All tax information provided by Deloitte Touche Tohmatsu and Deloitte Highlight 2014 (www.deloitte.com).

Banking service provision

There are 55 domestic banks, 24 foreign bank subsidiaries and 44 branches of foreign banks operating in the Netherlands. The three main domestic banks – ING, Rabobank and ABN AMRO Bank – dominate the domestic market. All offer a full range of universal banking services. However, there remain a number of specialist entities, especially in private banking, operating in the Netherlands. An open regulatory environment has attracted both a large number of multinational companies and the major international cash management banks to the country.

Clearing and payment systems

Clearing systems

TARGET2 is a pan-European Real-Time Gross Settlement (RTGS) system. TARGET2-NL is the Netherlands’ component of TARGET2’s SSP (Single Shared Platform), which is legally structured as a multiplicity of payment systems. There were 66 direct participants and 48 indirect participants in TARGET2-NL at the end of 2013. The Equens Clearing and Settlement System (CSS) is a multilateral net settlement system, processing the majority of non-urgent retail payments in the Netherlands. Equens CSS had 29 direct participants and three indirect participants at the end of 2013. In addition to TARGET2-NL and Equens CSS, the presence of a highly concentrated banking sector in the Netherlands means that a high volume of payments are transfers between customers of the same bank. These are processed via individual banks’ in-house processing facilities, rather than via the above-mentioned clearing mechanisms.

Payment instruments

Payment cards, particularly debit cards, are now the most popular payment method in the Netherlands. Credit transfers and direct debits dominate the Netherlands’ payment system in terms of value. Cheques are no longer issued or processed in the country. Banks in the Netherlands have implemented SEPA (Single Euro Payments Area) standards for €-denominated payments. The country’s banks now only issue SEPA-compliant payment cards and offer pan-European SEPA credit transfers (SCTs) and SEPA direct debits (SDDs). Migration to SEPA credit transfers and direct debits was finalised on 1 August 2014. However, the legacy TNS (Telegiro Nieuwe Stijl - New Style Telegiro) credit transfer continues to operate in the Netherlands, outside the scope of SEPA. The predominantly paper-based IBAN-Acceptgiro pre-prepared credit transfer is to be phased out by 2019. • Credit transfers – Credit transfers are the predominant non-cash payment instrument in the Netherlands in terms of value. Both paper-based and electronic credit transfers can be made although the majority of transfers are electronic. Companies use credit transfers for the vast majority of their commercial payments (salaries, tax and supplier payments) and for treasury payments.

Direct debits – Direct debits have experienced a rapid increase in use over recent years. They are used primarily by companies to make regular retail collections. There is a payback guarantee for all direct debits (five days for single and company direct debits and up to 56 days for general authorisation).
Cheques – Cheques are no longer used in the Netherlands.
Payment cards – There has been a strong increase in the use of credit and debit cards in recent years. All are EMV-compliant. The debit card is the most popular method of payment in the Netherlands. There were 25.3 million debit cards and 6.4 million credit cards in circulation at the end of March 2015.

Cross border

There are two main settlement alternatives for urgent cross border payments within the European Union: TARGET2 and the Euro Banking Association’s EURO1 clearing system. For non-urgent payments, there are also two main alternatives; through a bank’s own network or alliances via SWIFT and through the EBA’s pan-European STEP1/STEP2.

Cash and bank account management

Account availability

There are no restrictions on residents holding domestic currency (€) and foreign currency accounts both within and outside the Netherlands. Residents’ domestic currency (€) accounts are fully convertible. Non-residents are permitted to hold domestic currency (€) and foreign currency accounts in the Netherlands. Non-resident domestic currency accounts are fully convertible. Interest-bearing current accounts are available.

Money laundering

The Netherlands has enacted anti-money laundering legislation, including legislation implementing the three EU anti-money laundering directives (the Identification Act (Financial Services) of 2004 as amended, the Money Transfer and Exchange Offices Act of 2001 and Sanction Provision for the Duty to Report on Terrorism 2002, as amended; the Act on the Supervision of Trust Offices of 2004 and the Act on Terrorist Offences of 2004 and the Act for the Prevention of Money Laundering and the Financing of Terrorism 2008, as amended 2013). The Ministry of Finance, the Dutch National Bank and the FIU have also issued associated Guidance. A Financial Action Task Force (FATF) member, it observes most of the FATF-49 standards. The Netherlands is also a member of the Caribbean Financial Action Task Force (CFATF) as a Co-operating and Supporting Nation. The Netherlands has established a financial intelligence unit (FIU), the Office for the Disclosure of Unusual Transactions (MOT), which currently gathers preliminary investigative information before forwarding reports to the National Public Prosecutor Office (BLOM). The MOT is a member of the Egmont Group.

Supplied by BCL Burton Copeland (www.bcl.com). Data as at January 2015.

Cash concentration/zero balancing/target balancing

Domestic – Domestic cash concentration techniques are commonly available and widely used in the Netherlands. These techniques are offered by both international and domestic banks, with zero balancing the most popular. Resident and non-resident accounts and accounts held by different legal entities can exist in the same cash concentration pool entities can exist in the same cash concentration pool.
Cross border – Cross border cash concentration techniques are also commonly available. The services offered vary between banks. Coverage is best for eurozone countries. A number of banks offer cross border, cross-currency pools. Some banks will allow pools to include balances in accounts held outside the Netherlands.

The Netherlands is a popular location for central treasury centres. A broad range of cash management services are commonly available. The regulatory regime is not restrictive and withholding taxes are not applied on interest payments.

Notional pooling

Domestic – Domestic notional pooling is permitted and offered by most of the leading domestic and international banks. Resident and non-resident accounts and accounts held by different legal entities can exist in the same notional cash pool. Cross-guarantees are usually required if the companies involved have different parent groups.
Cross border – Cross border notional pooling is offered by a number of banks. Coverage is best for eurozone countries. Some banks will allow pools to include balances in accounts held outside the Netherlands.

Electronic and internet banking

Electronic banking is normal practice in the Netherlands. There is no electronic banking standard in the Netherlands. SWIFT for Corporates is available for multinationals. Proprietary bank platforms provide their users with access to transaction and balance reporting and with the ability to initiate domestic and cross border payments. Internet banking is widely available and offered to companies by almost all banks in the Netherlands. The SEPA-compliant iDEAL application allows for secure online purchases via credit transfer using consumers’ banking facilities. The Standard Digital Invoice (Standaard Digitale Nota) is provided by the country’s leading banks, enabling bills to be opened and paid online. The e-Mandate service allows companies to offer secure digital direct debit payments via their websites.

Liquidity management

Short-term investments

Bank deposits – Bank deposits remain a popular short-term investment alternative for Dutch companies. Time deposits for a range of maturities (from overnight up to a few years) are readily available.
Interest payable on bank account surpluses – It is possible for companies to open interest-bearing current accounts, although the interest rates on such accounts tend to be low. It is relatively easy for companies to sweep surplus balances to take advantage of higher yielding alternative short-term investment opportunities.
Commercial paper/CDs – Commercial paper and certificates of deposit (CDs) are both available in the Netherlands. Commercial paper issues have a minimum denomination of €500,000.
Government paper – The Dutch State Treasury Agency issues Dutch Treasury Certificates (DTCs) with maturities of three, six, nine and 12 months.
Money market funds – A number of banks offer money market funds as part of their suite of short-term investment products.
Other – Repurchase agreements (repos) have grown in popularity over recent years.