The Netherlands Digital Gateway to Europe 2016 Meijburg & Co, Tax Lawyers, is an association of limited liability companies under Dutch law,

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The Netherlands Digital Gateway to Europe and is a member of KPMG

a member of KPMG International Cooperative

2 With you today Willem Jan Paardekooper Meijburg & Co Partner, International Corporate Tax Andy van Esdonk Meijburg & Co Senior Manager, Indirect Tax / EU VAT and is a member of KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. 2

3 Why The Netherlands? 1. Tax system made for international business 2. Pro-active tax authorities supporting foreign investment 3. Tax incentives 5% effective tax rate for income from patents and software 4. Favorable VAT treatment for digital economy. and is a member of KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. 3

4 1. Tax system made for international business

5 1. Key features Netherlands tax system Key features Netherlands tax system (1/2) Pillar 1 No or low withholding tax ( WHT ) on dividends No withholding tax on interest, royalties and technical service fees Pillar 2 Pillar 3 The Netherlands have one of the most extensive tax treaty networks worldwide to avoid double taxation on cross-border investments and reduce foreign WHT Tax authorities are highly efficient and effective (including horizontal monitoring) and provide advance certainty (rulings) Pillar 4 Pillar 5 Pillar 6 Attractive effective corporate income tax ( CIT ) rate (rulings, innovation box, holding companies) Value added tax ( VAT ) deferral at import, possibility to shift VAT to customer when distributed in The Netherlands and opportunity to use The Netherlands as EU VAT hub for B2C e-services. Leader in EU with VAT compliance Customs duty deferral on import through customs bonded warehouse and various methods for customs value determination Pillar 7 Tax incentive (30%-ruling) available for expats including R&D staff and is a member of KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. 5

6 1. Key features Netherlands tax system EU HQ in The Netherlands Multinational and smaller businesses have located their headquarters in The Netherlands benefiting from the pro-business environment, tax incentives, multilingual labor force, well developed infrastructure and quality of life. Furthermore, The Netherlands government and tax administration are facilitating this environment by offering advance tax certainty (rulings) and consultations on planned investments in The Netherlands. Corporate income tax: Corporate income tax: 25% general rate 0% on qualifying dividends 5% on qualifying innovation income tax efficient value chain structuring Withholding taxes in The Netherlands No or low withholding tax on dividend distributions to shareholder (under tax treaty or co-operative structure) No withholding tax on interest payments and royalties Income tax and wage tax Income taxed at effective rate of 36.55% with a maximum of 52% (including social security contributions, 2016) Tax incentive ( 30%-ruling ) available for expats including R&D staff and is a member of KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. 6

7 1. Basic Holding structures Basic holding structure (i) Basic holding structure (ii) Country X HoldCo Country X HoldCo BV Coop The Netherlands The Netherlands Subs Subs Subs Subs Subs Subs and is a member of KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. 7

8 1. Basic IP planning structures Basic IP planning structure (i) Basic IP planning structure (ii) HoldCo HoldCo Country X Country X IP owner / Innovationbox BV BV royalty IP owner royalty license license The Netherlands The Netherlands Subs Subs Subs Subs Subs Subs and is a member of KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. 8

9 2. Pro-active tax authorities supporting foreign investment

Demand Movies Ltd - Mirror server to guarantee bandwidth capacity

10 2. Why need tax authority support? Which country has the right to tax? - Server farm - Online sales - Smart servers - Online Sales - Through a website in country B - Server in country A Video on Demand Movies Ltd - Mirror server to guarantee bandwidth capacity Country A Country B and is a member of KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. 10

2. Transfer pricing in The Netherlands The arm s length principle is incorporated in Dutch tax law and guidelines are given in policy, fully

Statutory documentation requirements: Applicable on transactions with associated enterprises (definition is similar to article 9 OECD model

substantiated; No local presence No PE / Server No PE No CIT Local presence Local auxiliary services PE Cost-plus Local presence Local sale PE %

11 2. Transfer pricing in The Netherlands The arm s length principle is incorporated in Dutch tax law and guidelines are given in policy, fully adhering to the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (OECD TP Guidelines). Statutory documentation requirements: Applicable on transactions with associated enterprises (definition is similar to article 9 OECD model convention); Availability of information from which it can be determined how transfer prices were set and the arm s length character can be substantiated; No local presence No PE / Server No PE No CIT Local presence Local auxiliary services PE Cost-plus Local presence Local sale PE % of sale Local presence Fully local IP / risk PE Profit split and is a member of KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. 11

2. Rulings & Dutch tax authorities Dutch Tax Authorities are open for discussions with new and existing taxpayers and their advisers seeking to discuss issues and to agree on solutions in advance.

The Dutch rulings can be obtained for a wide variety of business activities, ranging from, financial services companies (include finance companies and royalty companies) to holding companies, to

12 2. Rulings & Dutch tax authorities Dutch Tax Authorities are open for discussions with new and existing taxpayers and their advisers seeking to discuss issues and to agree on solutions in advance. Special Dutch Tax Office for new foreign investors. The Dutch ruling practice, i.e. obtaining certainty in advance from the Dutch tax administration, is divided in Advance Pricing Agreements ("APA for transfer pricing) and Advance Tax Ruling ("ATR for other cases). The Dutch rulings can be obtained for a wide variety of business activities, ranging from, financial services companies (include finance companies and royalty companies) to holding companies, to manufacturing, sales and marketing, logistics and distribution, research & development and full scale headquarter functions. and is a member of KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. 12

13 3. Tax incentives in The Netherlands

3. Tax incentives Corporate income tax Wage tax 5% effective corporate tax rate (instead of 25% statutory rate) for income from qualifying know-how (innovation box) Immediate tax deductions (no

14 3. Tax incentives Corporate income tax Wage tax 5% effective corporate tax rate (instead of 25% statutory rate) for income from qualifying know-how (innovation box) Immediate tax deductions (no capitalization required) for R&D costs The innovation box applies to self developed know-how. This may include further development of purchased technologies R&D certificate as entree ticket Copyrighted software eligible for innovation box Significant wage tax credit for R&D personnel on qualifying R&D projects and other R&D expenditures. The tax credit equals 32% for the first EUR 350K and 16% on the excess (40% for startups on the first EUR 350K). Additional wagetax reduction for expatriate R&D personnel ( 30% ruling ) and is a member of KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. 14

15 3. Companies that benefit from Innovation box Effective Tax Rate (ETR) for 2014 was 8.5%. This relatively low ETR reflects benefits available for companies with significant research and development activities in the Netherlands The application of the innovation box resulted in a benefit of 9 million over 2015 (2014: 17 million). Effective tax rate in 2015 is 13.4% and is a member of KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. 15

3. Dutch Innovation Box profits from technology based innovation taxed at 5% 80% profit exclusion from 25% Corporate Income Tax rate generates 5% effective rate.

16 3. Dutch Innovation Box profits from technology based innovation taxed at 5% 80% profit exclusion from 25% Corporate Income Tax rate generates 5% effective rate. Technology based products may be in scope. Technology based services including ICT-related services may be in scope. Entry ticket required to confirm technology ingredient. Marketing intangibles (e.g., logo s, brands) are out of scope. Entry ticket and is a member of KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. 16

17 3. Dutch Innovation Box entry tickets Ticket issuers Entry tickets S&O verklaring (WBSO law) to be applied for before the R&D project. Dutch, international or foreign patent. Dutch, international or foreign plant breeder s rights. and is a member of KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. 17

3. Dutch Innovation Box practical topics Any technology? - Self-produced intangible asset, i.e. not acquired by taxpayer through purchase.

$- Royalties from licensing. - Profit upon sale of intangible assets. - Etc. What fraction of profit?$ - Often taxpayer and tax authorities agree a methodology in an Advance Tax Ruling (ATR).

- Often taxpayer and tax authorities agree a methodology in an Advance Tax Ruling (ATR).

- Enabling everyone everywhere online access - New client interface mobile apps - Data access cloud

18 3. Dutch Innovation Box practical topics Any technology? - Self-produced intangible asset, i.e. not acquired by taxpayer through purchase. Trends in Telecom Industry Any type of profit? - Portion of product/service prices. - Royalties from licensing. - Profit upon sale of intangible assets. - Etc. What fraction of profit? - No statutory rule. - Often taxpayer and tax authorities agree a methodology in an Advance Tax Ruling (ATR). - ATR valid for, say, 4 years. - Development cost recapture. The future? - Enabling everyone everywhere online access - New client interface mobile apps - Data access cloud solutions - Software platforms - Technology tools like set-top boxes - Data gathering and is a member of KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. 18

Company has negotiated an Advance Tax Ruling (ATR) with the Dutch Tax Administration: 50% of EBIT taxed at 5% effective rate,

19 3. Meijburg Innovation Box cases Mobile Applications Developer App developer places apps in app stores. App stores arrange payments from app users to app developer. Entry ticket for Innovation Box: R&D Certificate. Company has negotiated an Advance Tax Ruling (ATR) with the Dutch Tax Administration: 50% of EBIT taxed at 5% effective rate, subject to transitional arrangements. ATR duration: 4 years. and is a member of KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. 19

20 4. Favorable VAT treatment for digital economy

4. Indirect Tax / EU VAT 1. 28 EU Member States in which VAT should be paid 2. Identify your customer 3. Different VAT rules and VAT rates 4.

21 4. Indirect Tax / EU VAT EU Member States in which VAT should be paid 2. Identify your customer 3. Different VAT rules and VAT rates 4. Different invoicing rules and time of supply rules 5. B2C MOSS and B2B OSS 6. Non-tax aspects, e.g. pricing and ERP and is a member of KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. 21

22 Summary Why The Netherlands? 1. Tax system made for international business 2. Pro-active tax authorities supporting foreign investment 3. Tax incentives 5% effective tax rate for income from patents and software 4. Favorable VAT treatment for digital economy and is a member of KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. 22

Willem Jan Paardekooper Partner - International Corporate Tax +31 (0) 88 909 1471 paardekooper.willemjan@kpmg.com kpmg.com/socialmedia kpmg.

com The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity.

24 Willem Jan Paardekooper Partner - International Corporate Tax +31 (0) paardekooper.willemjan@kpmg.com kpmg.com/socialmedia kpmg.com/app Andy van Esdonk Senior Manager - Indirect Tax / EU VAT +31 (0) vanesdonk.andy@kpmg.com The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Produced by Create Graphics/Document number: CRT055748A

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