Dutch asset pooling vehicle
The Dutch Finance Department has endorsed a Fund for Joint Account(FJA) as a tax-transparent vehicle for international asset pooling, it has confirmed.
This ‘Fonds voor Gemene Rekening’ is meant to compete with the Irish Common Contractual Fund, or CCF, and the Fonds Commune de Placement, or FCP, in Luxembourg, it said.
The FJA fund will enable pension funds to benefit from advantages such as improved corporate governance, cost reduction, performance improvement and VAT advantages.
“Pension funds which participate in asset pooling, demand a tax-transparent vehicle. As a result of the tax transparency of the pooling vehicle, the income will be earned by the pension fund. Therefore, any domestic or international tax privileges available to pension funds, should apply directly to the income,” partner Martin Vink of consultancy PricewaterhouseCoopers explained.
“For Dutch tax purposes, transparency of the Fund for Joint Account can be achieved by making the transfer of participation, subject to the approval of all other investors, and allowing the transfer of participations only to the fund itself,” he added.
According to Vink, the second option enables the fund to hold redeemed participations available for resale to other investors. “The Fund for Joint Account can be regarded as tax transparent in at least as many countries as the CCF and the FCP,” Vink said.
The decision of the treasury also addresses the tax transparency of umbrella funds, set up by fund managers in order to provide a broad variety of investment categories, Vink noted. “The Finance Ministry will, upon request of a fund manager, negotiate with treaty countries on the tax transparency of the fund,” a treasury spokesman added.
The FJA will neither be subject to any other taxes in the Netherlands, such as subscription tax, nor withholding taxes on income distributions. The Netherlands has abolished company capital duty as of January 2006.