Name and language
The Netherlands. Official name: Koninkrijk der Nederlanden (Kingdom of the Netherlands). The Netherlands is divided in 12 provinces. Language: Dutch. One province has its own official language; Frysian.
Political Structure
The Kingdom consists of the Netherlands and the Netherlands Antilles. Both are governed by Dutch law. The Netherlands is a constitutional monarchy, the head of state is Queen Beatrix. The government type of the Netherlands is a parliamentary democracy, it is based on the principles of ministerial responsibility and parliamentary government. The national government comprises three main institutions: the Monarch, the Council of Ministers, and the States General. There also are local governments.
The Dutch parliament is bicameral, it consists of the First Chamber and the Second Chamber. The Second Chamber, which is composed of 150 members, is by far the most important of the two houses. It alone has the right to initiate legislation and amend bills submitted by the Council of Ministers. It shares with the First Chamber the right to question ministers and state secretaries. The First Chamber is composed of 75 members elected for 4-year terms by the 12 provincial legislatures.
It cannot initiate or amend legislation, but its approval of bills passed by the Second Chamber is required before bills become law.
Currency, monetary control and inward investment
The currency of the Netherlands is the Euro. There are no general laws restricting inward investment into the Netherlands and no exchange controls prohibiting the remittance of capital or income overseas.
Normal business structures
A single individual may carry on business as a sole trader. A sole trader is the only owner of a business, though there may be employees. Income tax is paid on profits made. Sole traders can be personally liable for business obligations, as can their spouses. Several persons can carry on business in partnership, in which case they can be liable for business (financial) obligations individually and spouses can also be liable, though a marriage contract can limit liability. Those who like the relative flexibility of a partnership but prefer the protection of private limited liability, may incorporate a privatelimited liability company; a B.V. (Besloten Vennootschap). A B.V. is considered to be a legal entity, which limits the risks to the owner(s). Shareholders are only liable for their own capital contribution. To start a private company (BV), at least €18,000 in paid-in capital (not necessarily cash) is required. Shares are allocated based on the capital, and for tax purposes, any person holding more than five percent of shares has a “substantial interest” in the company and is liable for taxes on capital gains or dividends paid. The Dutch B.V. is the most frequently used legal entity by foreign investors. Another type of business structure is the Public Limited Liability Corporation (Naamloze Vennootschap, N.V.)An N.V. is owned by shareholders and shares may be traded on the public stock market, though shares are not held in any private person’s name. Therefore owners may choose to remain unidentified. N.V.’s may only be formed if it has at least €45,000 in paid-in capital.
Company information and proof of incorporation in a foreign country (if applicable) must be filed annually with the Chamber of Commerce (Kamer van Koophandel, KvK).
Dutch company law does in essence not make a difference between Dutch nationals and foreigners. Companies created under foreign law are in general (certain government linked lines of business excepted) free to operate in the Netherlands, can be party to a contract, can participate in partnerships, can conclude a joint venture, or establish a legal entity, etc.
Real Property
The following types of property rights can be acquired in the Netherlands:
- Absolute ownership; an unqualified title to property and the unquestioned right to immediate and unconditional possession thereof,
- Rights of superficies (the right to maintain property on someone else’s land),
- Apartment rights (condominium) ; Condominium ownership refers to any block of apartments or multi-unit development in which the owner of each individual unit holds an exclusive title to the unit coupled with an collective interest in the undivided common parts such as stairs lifts or grounds. So, the owner of a condominium unit holds absolute title to the individual unit combined with a collective interest in the undivided common parts and
- Rights of leasehold. Rights of leasehold – long leases (usually around 50 or 100 years, but they can also be perpetual) are a very common way of holding property owned by, for example, a municipality (the municipality of Amsterdam holds a lot of rights of leasehold). Leasehold rights may be transferred or mortgaged.
There are no restrictions on foreigners buying property either for their own use or as an investment.
Immigration
European Economic Area Nationals can enter the Netherlands in reliance on the rights of free movement of workers and of freedom of establishment that their country’s membership of the European Union or the European Economic Area gives them. Swiss nationals enjoy a similar right as a result of the EC-Swiss Confederation Agreement on the Free Movement of Persons.
Otherwise, those who are not Dutch citizens are generally subject to immigration control and required to leave, to enter or to remain in the Netherlands.
The Netherlands have experienced sustained growth over the past several years partly due to its favourable position within Europe and its flexible labour force.
Taxation
Income tax is a tax on the annual income of individuals which is levied at a progressive rate. Personal circumstances are, however, taken into account and certain expenses are deductible. There is a personal allowance (by tax credits) dependent on individual circumstances.
The Netherlands has a system of personal income tax known as the ‘box system’. This box system works as follows. There are three boxes of income each with their own tax rate, one of which is progressive (Box 1) and two of which are fixed (Boxes 2 and 3). If the income in a box is negative it cannot be offset against positive income in another box.
The boxes are:
- Box 1: Taxable income from work and home (only the main residence)
- Box 2: Taxable income from substantial interests in companies with limited liability (usually BV or NV)
- Box 3: Income from savings and investment
Corporate tax is payable by corporations in The Netherlands (resident taxpayers) and by certain corporations not established in The Netherlands which receive income from sources in The Netherlands (non-resident taxpayers). The term corporation includes companies whose capital consists of shares, co-operatives and other legal entities which conduct business. The main types of corporations, as referred to in the Corporation Tax Act, are the joint stock company with limited liability (NV) and the closed company with limited liability (BV).
The corporate income tax rates for 2009 are: taxable profit up to EUR 40,000: 20%, taxable profit between EUR 40,000-200,000: 23.5% and taxable profit above EUR 200,000: 25.5%
Note that the different rates apply to bands of income rather than to the profit of the company as a whole. So a company with a taxable profit of EUR 250,000 would be taxed at 20% on the first EUR 40,000, 23.5% on the next EUR 160,000 and 25.5% on EUR 50,000.
The Inheritance Tax Act provides for two forms of taxes, gift tax and inheritance tax. In general, these taxes are payable by the person receiving a donation or an inheritance. There are several exemptions for both gift tax and inheritance tax depending on the circumstances. The rates are the same for both taxes and depend on the value of what is received and the degree of the relationship. There is a minimum rate of 5% and a maximum rate of 68%. The Government has announced that it will introduce a tax bill to amend inheritance tax. One of the goals is to simplify the tax and to reduce tax rates.
Furthermore, there are three rates of VAT (value added tax) in the Netherlands:
- the standard rate of 19%;
- a reduced rate of 6% which mainly applies to food, books, newspapers and drugs;
- the zero rate which is mainly applied to goods and services involved in international trade so that goods can be exported free of VAT.
The courts
The Netherlands is divided into 19 districts, each with its own court. Each district court is made up of a maximum of five sectors, which always include the administrative law, civil law, criminal law and sub-district law sector. Appeals against judgements passed by the district court in civil and criminal law cases can be lodged at the competent Court of Appeal (there are five Courts of Appeal in total); appeals against administrative law judgements at the competent specialised administrative law tribunal – the Administrative Jurisdiction Division of the Council of State, the Central Appeals Tribunal or the Trade and Industry Appeals Tribunal, also known as Administrative High Court for Trade and Industry, depending on the type of case. Appeals in cassation in civil, criminal and tax law cases are lodged at the Supreme Court of the Netherlands.
Economy
From an early economy based on fishing and commerce, the western areas of the Netherlands later developed shipbuilding, diamond cutting, and industries manufacturing cocoa, chocolate, gin, and liqueurs from raw materials provided by overseas areas.
The Industrial Revolution, less dramatic in the Netherlands than in Great Britain and Germany, did not begin on a large scale until the Limburg coalfields were developed in the late 19th century.
The Depression of the 1930s and the devastation of World War II left the nation impoverished by 1945, but recovery and expansion of trade and industry proceeded rapidly after 1950 through closer economic ties within the Benelux Economic Union composed of Belgium, Luxembourg, and the Netherlands, and the European Economic Community (EEC), nowadays called the European Union (EU).