Agreement with the United States on fiscal security for funds and investors
The Dutch government has concluded an agreement with the United States (US) on the fiscal aspects of the so-called closed-end common fund, a Dutch investment vehicle.
This Competent Authority Agreement provides fiscal clarity for this structure that allows for the pooling of assets, also referred to as asset pooling. The main purpose of asset pooling is the increase of returns and risk diversification. By pooling assets in closed-end common funds financial institutions can realise considerable cost savings for investors. The agreement was signed by the competent US authorities and the Netherlands on 21 May 2012. This agreement came into force on that same day.
The closed-end common fund is used as an investment vehicle by national and foreign pension funds and other investors. It has been agreed with the US that the US will follow the fiscal qualification of the Netherlands. In so far as Dutch residents participate in the closed-end common fund, the closed-end common fund is considered as being fiscally transparent. This means that the fund itself is in no way subject to taxation in the Netherlands. This avoids that as a result of their participation in the fund the participants will be confronted with an additional levying of taxes compared to the situation in which they themselves would have invested in the US directly. The agreement in particular concerns funds with different kinds of investors. The agreement is an extension of the agreement concluded with the US for pension funds in 2007. The fiscal security in advance is important for the financial sector in the Netherlands. As a result new and existing investment funds can attract investors, which is advantageous for the competitive position of the Dutch financial sector.
The Netherlands currently has concluded agreements with Canada, the United Kingdom, Denmark, Norway and the US with regard to the fiscal treatment of closed-end common funds. A provision in the newly concluded tax treaty has been agreed with Germany.