On 3 March 2017, the Dutch Central Bank (De Nederlandsche Bank or DNB) published a Q&A that provides more clarity with respect to the exception for international holding companies to the20% bonus cap of the Dutch Financial Undertakings Financial Policy Act (Wet beloningsbeleid financiële ondernemingen or Wbfo) as included in article 1:121(5) of the Dutch Financial Markets Supervision Act (Wet op het financieel toezicht or FMSA). Prior to DNB’s explanation, itwas unclear whether foreign financial undertakings that envisage to set up (branch) offices in the Netherlands, were able to apply this exception of the 20% bonus cap. DNB has now confirmed the possibilities.
Further to that, on 20 February 2017, the Dutch Minister of Finance responded to parliamentary questions related to circumvention of the Wbfo in light of Brexit. Please find below an overview of the relevant statements by DNB and the Dutch Minister of Finance and the implications.
Dutch 20% bonus cap
In general, the 20% bonus cap applies to all persons working under the responsibility of (i) a financial undertaking, as defined in FMSA, regardless of whether such financial undertaking has its official seat in the Netherlands and (ii) a Dutch branch of a financial undertaking with its official seat outside the Netherlands which is required to have a licence for a branch in the Netherlands pursuant to the FMSA (not being a bank or an investment firm to which article 92 – 96 of CRD IV apply). A financial undertaking is defined in the FMSA and includes among other things a bank, an investment firm but also an insurance company. We note that the 20% bonus cap does not apply to branches located in the Netherlands of financial undertakings which are governed by the remuneration rules of article 92 – 96 of CRD IV (being, in short, banks or investment firms as defined in CRD IV).
International holding exception
For staff working under the responsibility of an international holding company of a group whose activities consist mainly of the offering of financial services or financial products with its official seat in the Netherlands, a bonus cap of 100% applies provided that (i) within a period of five consecutive years at least during at least three (not necessarily consecutive) years, (ii) at least 75% of all staff belonging to such international holding company and its subsidiaries work at least 50% of all hours worked outside the Netherlands, as included in article 1:121(5) FMSA. This exception only applies to staff working at the international holding company: it does, in principle, not apply to staff working at subsidiaries.
More clarity by DNB
Up to now, it was unclear how this exception and its implications should be interpreted in light of Brexit. At this stage, DNB has provided more clarity, considering the following:
- The Dutch international holding company does not need to be the holding company of the worldwide group. It is sufficient if the holding company is the top holding company within the European Economic Area (EEA).
- It is not necessary that the Dutch holding company holds a licence pursuant to the FMSA.
- The five-year period starts prior to the moment of application of the exception. The exception can be applied if within such period of five consecutive years prior to incorporation of the international holding company in the Netherlands, at least 75% of all staff belonging to such international holding company has worked outside the Netherlands for at least three years. This period of three years does not commence after the incorporation of the international holding company in the Netherlands.
DNB does not explain whether the five-year period should be assessed on the basis of the legal predecessor of the international holding company or if this is to be assessed on the basis of the business conducted by such international holding company.
Dutch Minister comments on the Dutch bonus cap and Brexit
On 20 February 2017, the Dutch Minister of Finance responded to parliamentary questions related to circumvention of remuneration policies in light of Brexit. The Minister stressed that:
- for staff predominantly (at least 50% of their time) working outside the Netherlands an individual bonus cap of 100% applies; and
- for staff predominantly (at least 50% of their time) working outside the EEA, an individual bonus cap of 200% may apply, subject to shareholder approval and the procedure pursuant to CRD IV.
The Minister stated clearly in his response that the Wbfo applies in a similar way to all financial undertakings with an official seat in the Netherlands, including the exemptions and conditions. In addition, the Minister does not intend to amend the Wbfo to make it more attractive for financial undertakings to relocate (part of) their activities to the Netherlands.