Q&A: foreign investment issues for project companies in Netherlands

Foreign investment issues

What restrictions, fees and taxes exist on foreign investment in or ownership of a project and related companies? Do the restrictions also apply to foreign investors or creditors in the event of foreclosure on the project and related companies? Are there any bilateral investment treaties with key nation states or other international treaties that may afford relief from such restrictions? Would such activities require registration with any government authority?

Generally, no restrictions, fees and taxes exist on foreign investment in, or ownership of a project and related companies exists in the Netherlands. Foreign investors are in principle not subject to less favourable regulations than domestic investors. The project itself can be subject to tax and foreign investors can become taxpayers for this (with reporting obligations). In certain instances, foreign investors may be subject to tax for share participations of 5 per cent or more in Dutch companies.

However, investments that pose a risk to national security or involve vital businesses may be subject to a reporting obligation and restrictions may be imposed.

Certain changes of control, for example, investments, mergers and acquisitions, in companies that are part of vital infrastructure (ie, the electricity, gas and telecommunications sectors) are subject to an obligation to notify the Bureau for Verification of Investments. Following the notification, the Bureau for Verification will assess whether the investment entails a risk for national security. The Bureau for Verification may decide to conduct an in-depth investigation, after which it may decide to allow the investment to proceed but to impose restrictions, or to prohibit the investment altogether.

There is a legislative proposal that is intended to provide a safety net for investments that are not made in the electricity, gas, telecommunications (and defence) sectors, but which may nevertheless pose a risk to national security because they involve vital companies. For such other investments, the legislative proposal also provides for a reporting obligation and the possibility of imposing restrictions. The legislative proposal has passed the legislative process but has not yet entered into force at the time of writing. Once implemented, the legislative proposal will have retroactive effect to 8 September 2020. The retroactive effect, however, only applies if an instruction is given to file a report and therefore does not include an active reporting obligation.

What restrictions, fees and taxes exist on insurance policies over project assets provided or guaranteed by foreign insurance companies? May such policies be payable to foreign secured creditors?

A foreign insurance company that provides insurance services in the Netherlands requires a licence from the Dutch Central Bank and must comply with the Dutch regulatory law requirement unless the foreign insurance company can rely on EU passport rights or other applicable exceptions or exemptions.

An insurance premium tax of 21 per cent applies for insurance where the insured risk is situated in the Netherlands. The insurance premium tax is charged on the premiums but also on the remuneration for services rendered that are related to the insurance, if any. Certain types of insurance are exempt from the insurance premium tax.

What restrictions exist on bringing in foreign workers, technicians or executives to work on a project?

The deployment of foreign personnel (employees or self-employed) may be subject to restrictions due to Dutch immigration law. The Dutch Foreign Nationals Employment Act (WAV) has a very broad scope and also applies to project-based work. Although personnel from within the EU and Liechtenstein, Norway, Iceland and Switzerland can be deployed without a visa, residence permit or work permit, foreign nationals from other countries can only stay and perform work in the Netherlands under certain conditions. The WAV and other regulations in this area are complex and contain special rules for several foreign categories of employees and situations, such as highly skilled migrants, blue card holders, intra-group employment and work for less than 90 days.

What restrictions exist on the importation of project equipment?

If a product or product type has already been admitted in another EU member state, the Dutch government may not prohibit its sale in the Netherlands. This also applies if the product has been made according to technical standards that differ from Dutch standards (the so-called mutual recognition). The Dutch government may only prohibit an EU product if consumer protection or environmental issues arise.

As regards goods from outside the EU, importation of project equipment may be subject to import licensing requirements and common custom tariffs that apply across the EU. In addition, any importation should comply with applicable safety, health and environmental requirements. International sanctions may also restrict importation of project equipment.

What laws exist regarding the nationalisation or expropriation of project companies and assets? Are any forms of investment specially protected (from nationalisation or expropriation)?

Property rights are in principle inviolable under Dutch law. However, pursuant to the Dutch Nationalisation Act, the Dutch government may expropriate land for reasons of public interest, provided the property owners are fully compensated. The most common reason for expropriation is spatial planning. The Dutch Nationalisation Act applies, regardless of the type of investment.