RPT-ANALYSIS-NYSE-Deutsche Dutch move highlights tax incentives

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                                      RPT-ANALYSIS-NYSE-Deutsche Dutch move
                                      highlights tax incentives
                                      Wednesday February 23, 2011 06:00:12 PM GMT

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                                      By Kim Dixon and Dena Aubin                                                             Country Area Number
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                                      WASHINGTON/NEW YORK, Feb 22 (Reuters) - Deutsche Boerse and                                                          -
                                      NYSE Euronext's move to set up a Dutch holding company, despite few
                                      links to the Netherlands, highlight Holland's attractive tax laws in the
                                      starkly variable international tax system.

                                      A Netherlands-based holding company will take over both companies as
                                      part of Deutsche Boerse's $10.2 billion takeover of NYSE Euronext,
                                      announced last week.

                                      If the deal is cleared, the new exchange joins Ikea, LyondellBasell and other firms that chose to locate in Holland, where
                                      foreign firms are largely not taxed on profits made abroad.

                                      The move comes as U.S. policymakers mull a revamp of the corporate tax code, amid business complaints that the system
                                      ties their hands in competing against foreign-based rivals.

                                      Republican lawmakers have argued the complicated tax system in the United States drives business and jobs overseas.

                                      The exchanges would not comment on whether favorable tax treatment was a driving factor in the decision, though tax
                                      policies likely played a role, tax attorneys said.

                                      "Taxes are clearly a part of a decision," to locate a holding company in the Netherlands, said Sang Kim, a partner at DLA
                                      Piper who was not commenting on the specific deal. "Invariably capital moves across borders."

                                      Netherlands' corporate tax rate is about 26 percent, far below the U.S. statutory rate of 35 percent, among the highest in the
                                      developed world. It is close to Germany's 30 percent rate and in line with an average of industrialized nations.

                                      It is Holland's laws excluding foreign profits from tax and its extensive network of tax treaties with their peers, which let
                                      companies avoid double taxation, that give it an edge.

                                      Netherlands ranked third after Mexico and Canada in tax burden for business in a 2010 KPMG study that looked at 10
                                      countries across the world, taking into account income, sales, property and other taxes. The U.S. ranked sixth.

                                      A key difference between the United States and most of the rest of the world is that the U.S. taxes all income wherever it is
                                      earned. Most other countries tax income earned only within their borders, a system known as territorial.

                                      On Thursday, a top U.S. Treasury department official said moving to a territorial system will be part of the corporate tax
                                      overhaul debate, which may take years. ((See:))

                                      CENTER OF COMMERCE

                                      It is unclear whether a revamping of the U.S. system would alter incentives in the current system.

                                      Holland joins Hong Kong and other small countries that establish themselves as business-friendly places to locate.

                                      "They have set themselves up as a center for commerce, because they could not get that level of economic development with
                                      their own population and resources," said Daniel Berman, a Boston University professor and former Treasury department tax
                                      official. 9/29/2011
RPT-ANALYSIS-NYSE-Deutsche Dutch move highlights tax incentives                                                                                                                            Page 2 of 2

                                         In itself, the lost revenue from NYSE re-locating to the Netherlands may seem a drop in the multi-trillion dollar U.S. economy.
                                         NYSE paid $119 million in income taxes for the nine months ended Sept 30, 2010, according to their latest regulatory filing.

                                         Still, in 2010, 122 new international companies were established in the Amsterdam metropolitan area, 31 percent of them
                                         from the U.S., according to Amsterdam inbusiness, the city's foreign investment agency.

                                         The city now has more than 2,000 foreign companies, the agency said on its Web site.

                                         Under the terms of the NYSE-Deutsche Boerse deal, a holding company based in the Netherlands, will take over both

                                         Because the Dutch company is buying the two, all earnings from the group outside the United States avoid the U.S. tax
                                         system, Berman said.

                                         Under Dutch law, profits flowing in are largely exempted from the corporate income tax, and dividends flowing out are often
                                         free of taxation.

                                         An acquisition is the perfect time for a company to re-locate their headquarters, said Shan Nair, a consultant to companies
                                         looking to re-locate offshore.

                                         "There is already going to be a change in tax structure, so it is an excellent opportunity for them," Nair said.

                                         Many economists and U.S. officials agree the steep rate relative to industrialized countries and complexity of the tax code is
                                         not good for business.

                                         One key lawmaker pointed to the deal to blast the U.S. corporate tax system.

                                         "If this transaction happens, it raises the very legitimate question of whether America's anti-competitive regulatory and tax
                                         systems have played a role in having the New York Stock Exchange headquartered overseas," Senator Orrin Hatch, the top
                                         Republican on the Senate's tax writing committee, said.

                                         (c) Copyright Thomson Reuters 2011. Click For Restrictions.

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Description: Deutsche Boerse and NYSE Euronext's move to set up a Dutch holding company, despite few links to the Netherlands, highlight Holland's attractive tax laws in the starkly variable nternational tax system.