KPMG comments on the application of the Dutch participation exemption to Belgian SICAVS
This is contribution number 27 by KPMG Meijburg & Co regarding the application of the Dutch participation exemption to Belgian SICAV's
On October 25, 1995, the Undersecretary of Finance made a statement about the application of the participation exemption to Belgian SICAV's.
The Belgian SICAV is a passive investment vehicle.
According to the Undersecretary of Finance's opinion, shares in an entity which solely invests ex officio are held as a portfolio investment. Under the normal (national) provisions such a shareholding does not qualify for the participation exemption.
However, the non-portfolio requirement in Netherlands law had to be revoked as a result of the Directive. This abolition of restrictive requirements was limited to a bare minimum (i.e. virtually all restrictive requirements allowed by the Directive were revoked) and only applies in the following circumstances:
* the Netherlands holding company must hold at least 25% of the nominal paid-up capital of a company resident in another Member State;
* both the Netherlands holding company and the participation must have the legal form as mentioned in the annex to the Directive;
* the participation must be subject to tax on profits in its country of residence without an option to be exempt or without the application of "a special regime". The "special regime" requirement is not mentioned in the Directive but the Undersecretary of Finance considers this condition to be a domestic anti-abuse measure as allowed by the Directive; and
* the participation is not considered to be resident for tax purposes outside the EU for the application of a tax treaty concluded with a third State.
The only restrictive requirement allowed to be imposed by the Directive that has not been implemented whilst abolishing the "non-portfolio requirement" with respect to otherwise qualifying EU subsidiaries, was the minimum holding period.
Recently the Ministry of Finance was requested to give an opinion about the Belgian SICAV-regime, i.e. whether it is a "special regime" as meant by the implementation law summarized above.
Although investment companies with variable sharecapital are liable to corporate income tax at the normal rate, the taxable base is highly restricted (not including either retained or distributed earnings, for instance). I therefore take the view that this involves a "special regime". Consequently, the shareholding in such a company cannot be equated with a participation.
This message is most likely to be relevant for Multinational Enterprises having a Dutch holding company.
Further information can be obtained from mr Alfred GM Groenen, MCL, KPMG Meijburg & Co, Amsterdam (Netherlands); fax 31 (20) 656 1247
Keywords: Netherlands / Dutch / Europe / EC / EU / European Union / KPMG Meijburg & Co/inward investments / MNE / fringe benefits / debt-push-down / mergers & acquisitions / Antilles / passive investment company / participation exemption / Belgium / SICAV
Note: The content of this contribution is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
