Download an Executive Summary and a Summary of AmCham's Study on the Investment Climate in the Netherlands here.
The American Chamber of Commerce in the Netherlands (AmCham) strives to keep the Netherlands competitive as an international focus point for foreign investments. In these times of strong competition between various countries, it is important to take all possible measures to keep an attractive and unique Dutch investment climate and to (re-)build a strong economy.
The countries which are best able to meet this challenge will be the economic leaders of the coming decades. Increasing public sector efficiency, freeing stakeholders from red tape and instituting the required structural reforms – with the necessary fiscal support – are powerful tools that governments must use to boost economic growth, encourage innovation, create jobs and thus establish a strong and well-balanced economy.
The future of the Netherlands is closely connected with its ability to innovate and compete in a fast-paced (digital) world. Marketing of the Dutch innovation potential to foreign investors and start-ups is increasingly important and is progressing; in this respect, AmCham appreciates the publication by VNO of the “10 P’s” as a marketing strategy for ambitious growth of the Netherlands, in order to make it the world's most prosperous nation. AmCham further welcomes Startupdelta, the new Dutch initiative for start-ups which will collaborate with existing start-up hubs in the Netherlands, such as the High Tech Campus in Eindhoven and Kennispark Twente, as well as leading international hubs and team up with established businesses to help start-ups to grow further. It is equally important that the Dutch fiscal system continues to remain open and attractive to new, innovative initiatives.
In these Priority Points 2015, AmCham renders various recommendations and policy suggestions for the upcoming AmCham year. These Priority Points 2015 have been composed after consultation with the various AmCham Standing Committees, which comprise of more than 50 top-executives of various AmCham member companies.
I. Taxes: a vision with ambition for an attractive fiscal investment climate
The Netherlands is one of the most open economies in the world. Traditionally, Dutch companies are in the top 10 of direct investors abroad. From abroad, the Netherlands receives proportionally more direct investments than almost any other country in the world. These direct investments are important for the open Dutch economy: they provide a stable source of funding, contribute to increased productivity and innovation, and create the jobs the Netherlands needs to grow its economy.
The Dutch business tax regime supports the open economy. Foreign profits are tax exempt when repatriated to the Netherlands, so that Dutch industry competes in foreign markets at local tax rates. Double taxation is avoided by tax treaties concluded with all trade partners and emerging market jurisdictions. No withholding tax is applied on payments of royalties and interest. The Advanced Pricing Agreement/Advanced Tax Ruling team of the Dutch Tax Authorities (APA/ATR team) is well-known for its ability to provide entrepreneurs certainty in tax matters in advance; a measure widely copied by other countries that is a great example of efficiency, hospitality and transparency. These advantages, further amalgamated with Dutch entrepreneurship and the central location of the Netherlands in Europe, makes the Dutch investment climate “world class”.
However, the Dutch investment climate is vulnerable to competition from neighboring countries. The continuing globalization of the world economy and increasing digitalization lead to increased competition. Unfortunately, AmCham has found that the Netherlands no longer is the only obvious choice for a new European logistics distribution center or a digital warehouse. Other countries have copied the most attractive elements of the Dutch corporate tax regime. In this fiscal convergence, small details make a bigger than ever difference on short lists compiled to rank potential investee countries. Neighboring countries compete for the top position on these short lists and are very much promoting their corporate tax regime: "We will have the most attractive corporate tax regime in the G20" or “We will have a world class R&D regime”. In today’s world, where reform of long standing international tax conventions is underway and the pillars of the Dutch business tax regime are being challenged, investors find comfort in such statements, and direct their investments accordingly.
Furthermore, AmCham sees other EU countries copy attractive Dutch measures for the importation of goods into the communal market on a cash flow neutral basis. Leveraging these rules, ports in these countries are rapidly capturing market share. It is only a matter of time before the impact of this development will be felt in the Netherlands.
These developments emphasize that now more than ever before, the Dutch government needs to formulate a strong vision with ambition for the Dutch investment climate. An ambitious vision that stops the ongoing erosion of the pillars of the Dutch business tax regime for those entrepreneurs with real activities in the Netherlands, as well as for start-ups. An ambitious vision that embraces the opportunities offered by digitalization, the upcoming changes in the international tax conventions and endorses the Netherlands as the gateway to Europe – for physical goods, digital products and all services.
AmCham believes this ambitious vision can be framed by the following Priority Points:
A. Stability, Consistency and Predictability
Stability, consistency and predictability of the business tax regime are paramount factors for the Dutch investment climate. AmCham is pleased that the Dutch government has not proposed any new controversial tax legislation in the past year. At the same time, AmCham is increasingly concerned about the consequences of the ongoing international tax reforms (OECD Base Erosion and Profit Shifting: BEPS) and related actions by the European Commission. Careful management and leadership with regard to these international developments will be required in order to ensure that the Netherlands has viable alternatives for the future. The Dutch government should not accept any proposal, whether unilateral or multilateral, if it adversely impacts the pillars of the Dutch business tax regime for entrepreneurs with real activities in the Netherlands.
Such entrepreneurs with real activities should continue to:
- be eligible without any limitation for the benefits of the Netherlands tax treaty network;
- be able to earn foreign profits from operational activities, exempt from further taxation by application of the current participation and foreign branch exemptions;
- be able to determine Dutch taxable income in accordance with the Dutch guidelines on transfer pricing and applicable long standing case law;
- be able to deduct all interest and royalty expenses within the current limitations - but certainly not broader;
- be able to pay interest and royalties abroad without any withholding tax;
- be able to benefit from an innovation box that is accessible for all assets derived from research and development (R&D) activities, regardless of the place of research and without registration requirements, and to deduct all R&D expenses at once;
- be able to attract skilled employees from abroad with the benefit of the 30% ruling, which should be made more readily available;
- have unlimited access to the Dutch tax authorities, including its APA/ATR team, to clarify, in advance or afterwards, the application of applicable Dutch tax law and at arm’s length pricing in line with the historic Dutch tradition, without impediment of European hindrances;
- be able to trust the Dutch government and tax authorities for supporting direct investments in their country, without any compromises.
Importantly, it is AmCham’s strong belief that the Dutch government should not allow any of the above benefits to be restricted by EU legislation or multilateral agreements. The Dutch business tax regime is one of the key policy tools available to the Dutch government to create jobs and foster sustainable growth of the Dutch economy. The Netherlands is well placed to be the preferred jurisdiction for today’s global multinationals that work on the technology of tomorrow, to support the future Dutch economy. This is where the Dutch government needs to draw a line in the sand: the Dutch business tax regime is the preferred tool to safeguard Dutch welfare, and when used for legitimate business activities, is an exclusive sovereign matter.
B. Further improvements
AmCham believes that today, the Netherlands intrinsically still ranks as one of the most attractive jurisdictions for international investors, but improvements are necessary to keep on par with tax regimes in the rest of the world. Once the erosion of the pillars of the Dutch business tax regime has been halted, the Dutch government should focus on continued, enhanced competitiveness.
AmCham recommends abolishing the withholding tax on dividends for tax treaty resident shareholders that hold a qualifying interest. This would improve competitiveness. Neighboring countries do not apply dividend tax on dividends paid to non-residents. Other countries have an exemption for dividends paid to qualifying corporate citizens of a treaty state. By aligning the Dutch withholding dividend tax regime accordingly, the Netherlands remains in competition in attracting international investors.
AmCham further recommends to review (budget neutral) opportunities to improve the indirect taxation of goods and services distributed via the Netherlands. Cash flow neutrality is an important factor in the global supply chain, and AmCham believes ample opportunities exist to further improve the opportunities for Netherlands as the preferred gateway to Europe from this perspective, for physical goods, digital products and all services.
AmCham finally recommends other action items, like eliminating the limited nine year net operating loss carryforward period, and reductions of the Dutch corporation tax rate in order to keep up with the downward momentum set by neighboring countries. In this regard, AmCham notes the conceivable opportunity of the Common (Consolidated) Corporate Tax Base (C(C)CTB) to broaden the basis and lower the applicable tax rate. If introduced on the basis of optionality and with taxable basis being allocated on the basis of OECD Transfer Pricing principles, regional headquarters may restructure their operations to benefit from the vast simplification of common base reporting, and an attractive C(C)CTB rate in the Netherlands.
II. Support the Transatlantic Trade and Investment Partnership
AmCham supports the constructive position the Dutch government has taken in the negotiations about the Transatlantic Trade and Investment Partnership (TTIP) which aims to reduce transatlantic barriers to trade and investment. Significant steps are being taken by Dutch policy makers to better prepare the Netherlands for a freer trade and investment environment within an EU and transatlantic context; TTIP is expected to be good for economic growth and the creation of jobs. For the Netherlands, TTIP could bring a structural growth of the Dutch economy by 1.4 to 4 billion euro.
III. Closing the workforce skills gap – a coordinated and strategic approach for future needs
A. Align and invest in life long education, talents and skills
The importance of education and exposure to different work opportunities cannot be overestimated in order to achieve a continued development. An effective policy for a government to adopt is to ensure a pro-active approach to a life-long learning, also by supporting part-time or adult education. AmCham members have found that the participation in part-time education by the Dutch work force is markedly behind other countries. Combining a career with part-time education will require a major change in attitude for all involved: employees, employers and educators, but it will enhance skill sets.
One of the dominant factors in the Dutch economy is an ageing workforce whose education and skill set no longer meets the requirements of companies. Re-skilling and/or upgrading of (digital) skills for (older) employees is necessary to keep themselves employable in the future. In this respect, it is important to realize that digitalization has become increasingly important in the current and future economy and that such digitalization and innovation impacts traditional jobs and required skills of the entire workforce. Furthermore, AmCham members still see a growing shortage of technically skilled employees, although improvement have been made, by giving attention to technical education and careers, in the media and through - for example - Techniekpact. AmCham especially appreciates the coordinated regional approach and considers it a solid step in the right direction.
AmCham recommends a collaboration between the government, educational institutions and companies, which is crucial to achieve a better fit of skill-sets of employees to the current and future needs of the business: language skills, digital skills, labor agility/mobility, timing, and in particular, technical needs.
AmCham further recommends to stimulate employee initiatives and employer facilitation for continued learning by supporting and creating an educational infrastructure for part-time studies and post qualification education for several groups: current employees, unemployed and groups who do not fit the needs of the labor market, including the 45+ age category. It could be considered to create (re)education budget.
B. Implement a strategic EU approach to scarce human resources
Long term education and re-skilling cannot meet immediate and short term needs. Therefore, it is important to increase coordination to ensure that workers with required skills – both within and outside the EU – are aware of opportunities and are facilitated in coming to the Netherlands to work.
AmCham appreciates the initiatives taken by the Dutch government to simplify the work permit process and to support bi-lateral labor related agreements. AmCham recommends that the Dutch government prioritizes these initiatives, so that they materialize into “business as usual”.
IV. Stimulate Workforce Flexibility and Participation
A. Increase flexibility and agility in the labor market by easing employment protection.
The Dutch labor laws and their effect on the labor market remain a topic of attention. The new regulations, unfortunately, have neither simplified nor shortened the process of dismissal of employees. Options around temporary contracts which give flexibility for cyclical workload have been tightened. AmCham regrets this development, but supports the effort of the UWV to take on the challenge of operationalizing the dismissal process through automation and standardization. AmCham appreciates the opportunity to provide input to this initiative and would encourage any other efforts to streamline and increase predictability. Uncertain and lengthy processes discourage maintaining and establishing operations in the Netherlands.
B. Reorientation of career and future as a step forward
Many companies are and will be confronted with an aging workforce – often with an average age of over 50 years. The challenge for organizations is how to maintain these valuable, experienced employees without creating or facing a stigma around demotion. Reorientation in the last stage of the career curve needs to be considered earlier and as part of total career planning. Organizations and individuals could consider voluntary re-motion – a step aside or back to create a new horizon, or a different employment arrangement. It is important to recognize that many employees still want, and are able, to contribute.
AmCham recommends to engage in social dialogue and offer (fiscal) stimulation to encourage different career path expectations, allow flexibility to tailor employee benefits and opportunities to maintain the employability and motivation of the workforce. This could positively impact keeping older workers employed, increase the opportunity for work/life balance, maintain knowledge and valuable experience and at the same time, open opportunities for younger employees. A vital and productive workforce generates a vital and productive economy.
V. Improve Competitiveness
During the past decades significant U.S. investments have been made in production facilities in the Netherlands. It is of crucial importance that these production facilities remain competitive and attractive, that U.S. companies feel confident to continue their long history of investment in the Dutch production capabilities, and that new U.S. investments are attracted.
Increasing regulatory pressure, however, raises operational costs and requires significant investments, which ultimately impacts competitiveness. This is caused by both, national and regional initiatives, but AmCham members have noted an increase in legislation developed in a European context. For example, a study by the Rotterdam School of Management, commissioned by AmCham in 2014, has confirmed regulatory pressure to be a key issue for competiveness of industrial companies in the Rotterdam port area.
Industrial companies fully recognize that regulations are needed to meet important objectives, especially with regard to health, safety and the environment. However, in reaching these important objectives, there is also a need for a level playing field to compete internationally, and therefore, the regulations should be efficient.
A. Help the EU to keep the EU and the Netherlands competitive
Within the EU, the Netherlands has a relatively high level of industrial activity, with significant exports. Additional EU legal requirements impact businesses in the Netherlands more than elsewhere within the EU. Environmental and climate legislation is a particular area of concern. Policies should also be drafted in such way that production plants can meet the policy targets in the most (cost) efficient way.
AmCham recommends the Dutch government to actively influence evolving EU legislation to achieve a level playing field in an international context.
B. Avoid national gold plating
In the process of developing and implementing new EU legislation, the Dutch government must ensure that the Dutch industry is not put in a position where the Netherlands has competitive disadvantages within the EU.
AmCham recommends to avoid additional, incremental and inefficient requirements for industry when implementing EU directives, related regulations, policies or national legislation.
C. Provide industry targets, rather than detailed prescriptions.
As a result of regrettable safety incidents in recent years, safety remains high on the agenda of national and regional authorities. Unfortunately, this results in a shift from setting targets to dictating means. This leads to inefficient investments which do not actually increase safety.
AmCham recommends to recognize that industry plants are best positioned to identify optimal measures at lowest cost to meet safety targets. Give industry targets, not detailed prescriptions.
D. Closely monitor data privacy developments
Data protection and privacy are increasingly important in the ordinary course of business. Companies, as well as legislators are struggling with Big Data, metadata and data protection. AmCham members have expressed their concerns in respect of a comprehensive reform of the EU's 1995 data protection rules, by a new EU General Data Protection Regulation, which aims to strengthen individual rights and tackle the challenges of globalization and new technologies, by – among other things - imposing large fines on data breaches.
AmCham recommends that the Dutch government closely monitors and assesses the data privacy developments in the U.S. and in Europe, and the way these developments (potentially) impact business of U.S. and foreign investments in the Netherlands and vice versa. The developments regarding the new EU General Data Protection Regulation require special attention. Where appropriate, it is very important to actively participate in sharing concerns with authorities such as the European Commission, regarding unbalanced legislation and to advocate to avoid implementation of legislation which would adversely affect business and investments in the EU and the U.S.
E. Class Actions/ Collective Redress
AmCham has expressed its concerns about the proposed changes to be made in the existing “collective action” model in the Dutch legislation[1], which will make it easier to file class actions with the Dutch courts and may cause the Netherlands to become a “hub” for class actions in the future. This proposal has been criticized by various important stakeholders already. AmCham continues to closely monitor the developments in this respect, as this development may affect the Dutch investment climate.
[1] Wetsvoorstel 'Afwikkeling massaschade in een collectieve actie'