Netherlands tax exempt investment funds

In 2007, the Netherlands introduced an attractive tax regime for investment funds. As a result, two types of tax exempt funds currently exist.

These are the fiscale beleggingsinstelling (FBI), also known as fiscal investment institution and vrijgestelde beleggingsinstelling (VBI), known as tax exempt investment institution.

The Dutch FBI was first introduced in 1969 and is widely used as an investment fund for investments in securities and real property. A FBI is subject to a corporate income tax rate of 0%, provided that certain requirements are met.

Requirements to obtain the FBI status include:

• Residency in Aruba, the Netherland Antilles, EU member state or state with which the Netherlands has arranged a tax treaty.
• Profits (excluding capital gains/losses) must be distributed within 8 months of the end of the financial year.
• Legal form of a Dutch public limited company, Dutch private company or Dutch mutual fund.
• The statutory purpose and actual activities must consist of portfolio investment activities. The FBI may also invest in real estate and carry out project development activities.
• Up to 60% of the book value of investments in real estate may be financed. For other investments, the limit is 20% of the book value.

The Dutch VBI is a new fund that is exempt from corporate income tax and dividend withholding tax. Also, no shareholder requirements, gearing limitations and distribution obligations apply.

Requirements to obtain the VBI status include:

• The institution must have several shareholders.
• The institution may only invest in qualifying financial instruments such as shares, bonds and other financial instruments.
• Legal form of Dutch public company or mutual fund.
• Authorization from Dutch tax authority.
• The purpose and actual activities must consist of investment of financial instruments such as shares, bonds, options, etc.
• Cannot invest in Dutch real estate.