Dutch foundations find favour in wealth industry boost

Date: 16 Oct 2018

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The Dutch private wealth market has found itself in favour as an increasing number of families from civil law countries worldwide look to consolidate their assets into Dutch foundations.

With global regulatory trends driving many UHNW families to both simplify their wealth structures and move them into reputable jurisdictions, advisers in the Netherlands have reported a significant increase in demand.

Philip van Hilten, a partner with the law firm AKD and an adviser on family governance through his own business No More Worries, says: “These trends probably started four years ago and are now gaining momentum. Last year we were seeing a lot of activity, but that was mild compared to today. Now it is in the minds of most educated HNW clients to seek a stable, solid, proven structure for their family assets. For civil code countries, the Dutch foundation is proving to be the most wanted entity that meets the requirements on almost all points and that families are putting forward.”

The Dutch foundation was first made famous back in the eighties, when Swedish billionaire and IKEA founder Ingvar Kamprad set up Stichting INGKA Foundation. Today, it is one of the largest charitable foundations in the world and owns the holding company that controls the flatpack business empire. The structure has gained in popularity ever since, with van Hilten saying a third of his clients opting for the structure now hail from Continental Europe – including fast-growing markets like France, Germany and Spain – with the remainder coming from the Middle East, Latin America and China. Around 1 in 10 clients are Dutch nationals.

Pieter van Onzenoort, a civil law notary and member of the private wealth practice at the law firm Loyens & Loeff, says: “The Netherlands is still, of course, not a large centre for wealth planning, but international work for private clients is becoming more and more important. There is a tendency to move away from all sorts of legal entities and other structures for holding assets towards more straightforward and tax-transparent arrangements.”

The budget announced by the Dutch government in September included plans to implement the EU Anti-Tax Avoidance Directive in January 2019, impacting family-owned businesses that invest in low-tax jurisdictions and introducing a conditional withholding tax on dividend distributions to those jurisdictions.

Rick van der Velden, a tax adviser to Dutch and family-owned business at Loyens & Loeff, adds: “We see more use of family funds as well as families pooling assets into a structure, such as a foundation, from which family investments can be made. These foundations will often have their own officers who manage the assets on behalf of the family. Historically our focus is on Dutch families and Dutch-based HNWIs, but due to the strong and reliable Dutch legal system, we see more international families looking here as a neutral jurisdiction in which to hold certain parts of their wealth.”

Nathalie Idsinga, partner and tax adviser at private client firm Arcagna, works primarily with wealthy private clients based in Amsterdam and Rotterdam, where wealth is often generated in small businesses, including on the thriving start-up scene. Idsinga says: “We see a lot of the babyboomers transferring their wealth to the next generation, with all the questions associated with that. We also see a lot more international aspects, as families become cross-border; we see families looking at trust-like structures to preserve their wealth for more than one generation; and we see a lot more questions about philanthropic strategies.”

The Dutch wealth industry remains slight, but the country’s service providers report that it is growing on several fronts.