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The most profitable group of people, also called Jinling. Jin Ling is "white collar" derived term used to refer to also refer to the owners of wealth, such as managers of large enterprises, large brokers, such as the big bosses, especially the business sector, economic management sector, the financial sector. Money is the "Gold-collar" feature, with "gold" summarize.
CHANGE IN DUTCH TAXATION OF CARRIED INTEREST SCHEMES On May 13 draft legislation was put forward to Dutch Parliament by the Ministry of Finance, in which a remarkable change is proposed regarding the taxation of carried interest schemes. These schemes are referred to as “lucrative interests” throughout the draft legislation, which terminology is used in this note. Based on this proposed legislation, EUR 99 million and from the second An example any income out of a lucrative interest class EUR 1 million has been placed InvestCo has two classes of share. will be taxed to income tax at the with the private equity firm. Top The first class is entitled to 30 percent moment of actual receipt of the management of the private equity cumulative preferential dividend per income by the participant at a rate of firm and (the group of) InvestCo year. The second class is 52 percent. The income is not (“Top Management”) holds in total subordinated to the first class, but is classified as income from 20 percent of the second class of entitled to the surplus profit. From the employment, but as income from shares, which required an investment first class EUR 86 million has been other activities. The reason for this is of EUR 200,000. The other 80 placed with the private equity firm that in practice it is not only percent of the second class of shares and EUR 4 million with Top employees who participate in carried is held by the private equity firm. Management. From the second class interest schemes. EUR 10 million has been placed with InvestCo makes no dividend the private equity firm. Top To be a lucrative interest, the interest distribution in the first year and a Management has financed its shares must be issued as a reward for labour dividend distribution of EUR 40 as to 90 percent with a 5 percent activities of the holder of such million in the second year. Given the interest bearing loan provided for by interest. Such holder can be a person above, the first class of shares is the private equity firm. involved with a private equity firm or entitled to a dividend of EUR 19.8 a manager or employee who receives million for these first two years and InvestCo makes no dividend such interest in order to incentivise the second class of shares is entitled distribution in the first year and a him to achieve certain targets. to a dividend of EUR 20.2 million, of dividend distribution of EUR 36 which 20 percent is paid to Top million in the second year. The first The lucrative interest can take one of Management. The investment of Top class of share is entitled to the full four forms. Management of EUR 200,000 dividend distribution. Top therefore yields EUR 4,040,000 in the Management is entitled to part of this 1. The first form concerns second year. This EUR 4,040,000 is dividend, being EUR 1.6 million shares of a certain class that are taxable income for Top Management (4/90 of EUR 36 million). Interest subordinated to other classes of and is taxed at 52 percent. If wages paid by Top Management amounts to shares and the subordinated class tax has already been levied at the EUR 360.000 over the first two years. accounts for no more than 10 percent moment of placing the shares, this Their investment of EUR 400,000 of the total share capital. will be taken into account. yields net EUR 1,240,000 in the second year. This EUR 1,240,000 is An example 2. The second form concerns taxable income for Top Management An acquisition vehicle (“InvestCo”) shares of a certain class that are and is taxed at 52 percent. has two classes of share. The first entitled to a preferential dividend of class is entitled to 10 percent at least 15 percent per year. 3. The third form concerns cumulative preferential dividend. The profit sharing loans of which the yield second class is subordinated to the is to some extent dependent (at least first class, but is entitled to the 15 percent) on the realization of surplus profit. From the first class management - or shareholder-targets, such as profit, turn-over, cost Indirectly held lucrative interests be valued on the opening balance reductions, acquisition of additional It does not make any difference in sheet that is used to determine the finance sources, etc. determining whether or not there is a taxable income derived from this lucrative interest whether this interest interest. Valuation takes place at An example is held directly or indirectly, for historical cost price plus any tax that Top management of (the group of) example through a company in which was levied in connection with InvestCo holds a receivable on (a the manager holds an interest of at obtaining the interest. holding company of) the private least 5 percent. However, if such a equity firm. Profit-dependent interest company immediately distributes any Commencing date is paid on the receivable that can profits (that remain after corporate tax It is proposed that the new legislation reach up to 40 percent per year. The (rate of 25.5 percent)) to the manager, will be in place by January 1, 2009. interest is taxable income for top such dividend distributions are taxed management of (the group of) at 25 percent and not 52 percent, Further questions InvestCo and is taxed at 52 percent, resulting in an effective combined tax For any further questions please assuming that the underlying burden of just over 44 percent. contact our Tax Partners Roderik intention of this scheme is to reward Bouwman and Boris Emmerig or our the top management for its efforts. Non-resident tax payers Corporate Partners Richard Fens and For non-resident tax payers the Barbara van Hussen. Their contact 4. The fourth and final form of income out of a lucrative interest is details are as follows. lucrative interest concerns property considered to be Dutch taxable rights that economically resemble or income for the purposes of the Dutch Tax are comparable to the above Income Tax Act. The draft legislation Roderik Bouwman mentioned shares or receivables or is not explicit with respect to the T: +31 20 541 96 72 other rights of which the value is to application of tax treaties in this firstname.lastname@example.org some extent dependent from the respect. The fact that lucrative realization of management targets or interests are meant as a reward for Boris Emmerig shareholder targets. Good leaver/bad activities carried out in the T: +31 20 541 96 41 leaver regulations in employment Netherlands does not email@example.com agreements, as well as ratchets, necessarily mean that the relevant reverse ratchets and dilution shares treaty would allocate the right to levy Corporate may fall within the scope of this tax to the Netherlands and not to the Richard Fens category. Any income out this fourth country of residence. This is T: +31 20 541 99 02 form is taxed to income tax at a rate something that needs to be sorted out firstname.lastname@example.org 52 percent. in the specific cases. Barbara van Hussen Administrative obligations Existing carried interest schemes T: +31 20 541 98 62 Holders of a lucrative interest need to The draft legislation stipulates that email@example.com keep a balance sheet on which their existing carried interest schemes can lucrative interest is initially placed fall within the scope of the showing its historical cost price plus regulations for lucrative interests as any tax that was levied in connection of January 1, 2009, and there are no with obtaining the lucrative interest. grandfather rules available. The existing carried interest will need to DLA Piper Nederland N.V. is part of DLA Piper, a global legal services organisation. For further information please visit our website: www.dlapiper.nl Switchboard +31 20 541 98 88
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