Another favorable tax regime for investments is the Dutch Exempt Investment Institution (“EII”), applicable as from 1 August 2007. Under this regime, there is complete exemption from corporate income tax and dividend withholding tax (comparable with the Luxembourg SICAV). There are no minimum distribution requirements, nor are there any restrictions with regard to the types of shareholders and gearing ratios. Insofar, the EII differs from the FII regime. Unlike the FII however, the EII is not eligible for tax treaty benefits.

For a particular fund to be eligible for the EII status the EII needs to:

• Have a specific legal form, i.e. (domestically) an NV or an open fund for mutual account, or (foreign) a comparable entity incorporated or formed under:
  • the laws of an EU Member State, the Netherlands Antilles or Aruba; or
  • a country with which the Netherlands has a double tax treaty that includes a non-discrimination clause.
• Aim for risk diversification and have at least two shareholders or unit holders.
• The shares/units need to be repurchasable or redeemable out of EII’s assets.
• Consist exclusively of financial instruments (which includes equities, bonds, derivatives and bank balances), but also cash-settled derivative contracts for commodities, emission licenses, inflation rates or other economic statistics. Direct investments in real estate are not eligible for the EII status (note that an EII cannot invest in Dutch real estate through a tax transparent partnership).