he Kingdom of the Netherlands was founded in 1813. It was part of France from 1810 until 1813. Before 1795, the greater part of the current territory was governed by a confederation of sovereign provinces. The Netherlands is a constitutional monarchy with a parliamentary system with ministerial responsibility. Legally speaking, the King forms part of the government but actually it is the responsible ministers who make policy. The Netherlands is one of the founders of the EU.

The Kingdom of the Netherlands was founded in 1813. It was part of France from 1810 until 1813. Before 1795, the greater part of the current territory was governed by a confederation of sovereign provinces. The Netherlands is a constitutional monarchy with a parliamentary system with ministerial responsibility. Legally speaking, the King forms part of the government but actually it is the responsible ministers who make policy. The Netherlands is one of the founders of the EU. The currency is the euro. During the French period, the Netherlands legal system was much influenced by French civil law. This influence carries through to the present-day civil law system. Trusts There is no Dutch trust legislation. Instead, the “foundation” is a civil law legal entity in Dutch law with similar uses to a trust. It is a long established form of legal entity and an important continental, European, alternative to the common law trust. Since 1 February 1996, the Netherlands is a party to the Hague Convention on the Law Applicable to Trusts and on their Recognition, 1 July 1985. For international estate planning and asset protection, a Dutch foundation (“Stichting”) is often used in the form of a so-called Stichting Administratiekantoor (“STAK”). The STAK is used to hold shares in a Dutch limited liability company. Upon acquisition it issues depository receipts. The receipts entitle the holder to all shareholders’ rights, excluding voting rights. Voting power will remain with the STAK. Thus the economic and legal ownership are split. To some extent the STAK is comparable with a voting trust. The STAK, placed between the shareholder and the company, is fiscally transparent (i.e. a dividend payment from the company to the foundation and subsequently from the Dutch foundation to the shareholder is treated for fiscal purposes as a payment from the company to the shareholder directly). Besides the STAK, a Dutch charitable or philanthropic foundation may be used for estate planning purposes. Property, Estate and Probate Civil law countries generally observe forced heirship rules. The freedom of testamentary disposition, as is found in the common law world, is not applicable to these countries. A civil law notary plays an important role in drafting and executing wills. If a testator wishes to derogate from the statutory provisions on succession, it is necessary to execute a will, drafted by a civil law notary. According to Dutch law of succession, children and grandchildren are entitled to a certain statutory portion of the estate, the “legitime”. A testator can never disinherit children or grandchildren from this legitime, and they can invoke this portion without taking recourse to the courts. Probate proceedings are unknown in the Netherlands. After a death, a civil law notary issues a “certificate of succession” that records the names of the heirs, who can only access the deceased’s bank accounts if they have this certificate. Personal representatives are not possible in the Dutch law of succession. From the moment of death onwards, the estate passes to the heirs directly and immediately: the principle of “saisine”. One of the heirs is then usually authorised to wind up the estate on behalf of the other heirs. The Netherlands has concluded a number of gift and inheritance tax treaties with other countries. Other Forms of Legal Entities The Netherlands has two types of limited liability companies with authorised capital divided into shares: the so-called Naamloze Vennootschap (NV) and the so-called Besloten Vennootschap met beperkte aansprakelijkheid (BV). Both the NV and the BV are incorporated by notarial deed executed by one or more incorporators before a civil law notary in the Netherlands. The minimum capital requirements for an NV are €45,000 and for a BV, €18,000. An NV can issue both registered and bearer shares, while a BV can only issue registered shares. NV bearer shares are freely transferable. Registered shares have to be transferred before a civil law notary. Limited partnerships established in the Netherlands (commanditaire vennootschappen or CVs) have been used for many years as vehicles for corporate and individual investors when structuring international transactions. As in most other jurisdictions with comparable partnership legislation, a “closed” CV, where transfer of a partnership interest must observe a certain form, is considered a transparent vehicle for corporate income tax purposes in the Netherlands. The Dutch “closed” CV can act as a vehicle for foreign passive investors (e.g. Latin American private investors) with a portfolio of quoted shares in the US, since it can elect for corporate tax treatment under US tax law while at the same time it preserves its transparent status under Dutch tax law. Taxation Individuals who live in the Netherlands qualify as resident taxpayers. Individuals who live abroad, and receive income from the Netherlands that is taxable in the Netherlands, qualify as non-resident taxpayers. In both cases, these individuals will be subject to Dutch income tax. Individuals pay personal income tax at progressive rates up to a maximum rate of 52 per cent. Residents of the Netherlands and non-resident taxpayers opting for resident taxpayer status must report their worldwide income in their income tax returns. Corporate income tax rate for both Dutch resident corporations as well as Dutch permanent establishments is currently (2006) 26 per cent on taxable profits up to €22,689 and 30.5 per cent above that. Corporate tax is levied on resident and non-resident companies. Resident companies are subject to tax on their worldwide income. However, double taxation of foreign source income will normally be avoided by participation exemption, tax treaties, or the Decree for Avoidance of Double Taxation. Non-resident companies, mainly the branch offices of foreign companies doing business in the Netherlands, are taxable only on income derived from sources in the Netherlands. Loss carry-over facilities in the Netherlands are liberal. Both resident and non-resident taxpayers have a loss carry-back possibility of three years and an indefinite carry-forward. Participation exemption provides for an exemption of all benefits at the level of a Dutch corporate entity (dividends and capital gains) arising from a qualifying shareholding. A shareholding qualifies for participation exemption if the following conditions are met: • the Dutch corporate taxpayer owns at least five per cent of the paid-in nominal share capital of the (foreign) subsidiary • the shares in the foreign subsidiary do not qualify as inventory • the foreign subsidiary is subject to a profit tax in its country of residence, and • the shareholding in a foreign subsidiary does not qualify as a passive investment (portfolio investment), unless it concerns a qualifying EU subsidiary. Inheritance and gift taxes are levied on all property inherited from or donated by an individual who was resident or deemed resident of the Netherlands at the time of death or donation of the gift. Dutch individuals who emigrate are deemed resident for ten years after emigration. Inheritance tax rates range between five and 68 per cent of the value of a taxable estate. The rates depend upon the relationship between the deceased and the beneficiaries and the size of the estate. Inheritance tax is levied on the taxable part of the property acquired from the estate of an individual whose last place of residence was situated in the Netherlands. Spouse, children and close relatives pay less tax than do distant relatives or non-relatives. A special rate of eight per cent applies to property inherited by religious, ideological, charitable, cultural, scientific, or public entities serving a social or general interest in the Netherlands, if the donor is a Dutch resident. Currently discussions are being held to further decrease this special rate to 0 per cent. In general foreign donors incur no tax. Substantial amounts are exempted from inheritance tax. Gift tax is a tax levied on the value of anything received by way of a gift from an individual resident of the Netherlands. The rates are the same as those for inheritance tax. As is the case with inheritance tax, certain amounts are exempted. If business assets or certain shares are acquired by virtue of inheritance or by way of gift, 30 per cent of the value thereof can, on request, remain untaxed, subject to certain conditions. Also, discussions are going on to further reduce this rate of 30 per cent to 0 per cent. Anti-Money Laundering In the context of the fight against money laundering, the European Parliament adopted a Directive by the end of 2001 (no. 2001/97/EC) which extends the identification obligation and the reporting obligation in respect of unusual transactions. As a result of this extension, the Disclosure of Unusual Transactions Act of 1993 (MOT) and the Identification (Provision of Services) Act (WID) also apply to services by notaries, lawyers, attorneys, tax advisers and accountants as of 1 June 2003. The obligations as imposed by law require these advisers to identify a client before they may provide their advisory services.