Issue 73 - 28th June, 2012

Legal Eagle Manish Bahl
Facilitating Indo-Dutch business
Based in the Netherlands, Manish Bahl is a dual Dutch and UK registered lawyer and a member of Eversheds’ dedicated India Business Group. Specialised in commercial, competition, EU and corporate law with strong transactional experience in a wide variety of sectors, Manish regularly advises on Dutch-Indian, UK-Dutch and other international projects and transactions, and also heads up Eversheds’ specialist India Desk in the Netherlands. Manish talks to team Connect about his India related practice in the Netherlands, the India Desk and its advisory activities and why the Netherlands continues to attract the attention of Indian companies.

What is the role of and motivation behind your India related practice in the Netherlands and the India Desk?
The role is to help Indian companies set up operations in the Netherlands. Similarly, it assists Dutch/European companies in India. For Dutch companies going to India, the focus is on helping them get connected through to Indian legal and other partners and to help project manage their relationships there.
The Netherlands is the second largest European (FDI) investor in India; so there is a lot of movement between the Netherlands and India, inbound. The Netherlands incorporated companies are the fifth largest investor group in India. Likewise, the Netherlands continues to be a major recipient of Indian direct investment. Large Indian corporates such as Cognizant, Infosys, Kirloskar, NIIT, ONGC, Tata Steel, TCS and Wipro have a presence in the Netherlands and have been followed by a number of smaller Indian companies. According to the Netherlands Foreign Investment Agency, in early 2012 there were over 160 establishments of Indian companies in the Netherlands.
Given the high degree of movement between the two countries, there is a pressing need for services offered by my practice. The cultures are so different. The way that the Dutch conduct business for example is entirely different than how it is done in India. The India Desk can help to bridge that gap. Besides, my Indian background and experience in the past of advising on European deals helps a great deal.
What services are popularly used by Indian companies setting up in the Netherlands?
Services that are popularly extended to Indian companies include - corporate match making, advising them on their acquisitions, on incorporating a Dutch entity, on their commercial agreements with Dutch counter-parties, regulation and government affairs and dealing with regulators in the Netherlands on their behalf.
What according to you are some reasons for the Netherlands attracting the interest of Indian companies?
Historically, due to its taxation rules, the Netherlands has been a preferred location for the establishment of holding and financing structures. Thousands of multinationals currently use Dutch intermediate holding companies in their corporate structures (i.e., whereby a Dutch holding company owns shares in operating companies in various jurisdictions) to protect their investments in a profitable and tax-efficient manner. Dutch companies are relatively easy to incorporate and maintain and can also offer extra layers of protection to non-residents, both for new and existing investments. Further, the Netherlands has 98 taxation treaties in place, including with India, which contain important incentives such as avoidance of double taxation.
Bilateral investment treaties (BITs) are another reason that makes the Netherlands very attractive. Companies incorporated in the Netherlands can benefit from the protections provided by these treaties. The rules are directly enforceable by the Dutch investing entities and cover protections such as fair compensation (in case of improper annulment of a contract or expropriation) and providing for an effective legal remedy.
Therefore, if a Dutch incorporated intermediate company invests on behalf of its Indian parent in any country with which the Netherlands has a BIT (currently almost 100), the full range of possibilities and protection is likely to be available to the Dutch company in the event of a dispute. On the inbound side, it is becoming increasingly common for investors in India (investing through a Dutch entity) to invoke the Netherlands–India BIT if disputes arise.
The Dutch tax regime is very attractive for Indian and foreign investors. Key benefits include the possibility of tax-free dividend income distributed from foreign subsidiaries and the absence of withholding tax on interest and royalties. Advance tax rulings and pricing agreements can be obtained from the Dutch tax authority and has proved to be a very reliable tool for prospective tax planning.
The current Dutch corporate income tax (CIT) rate of 20-25% is below the EU average. Companies qualifying for the “Dutch innovation box”, benefit from an effective CIT rate of 5%, which includes all net income (capital gains) from eligible innovative developments including income from patents, R&D innovations, software etc. In addition, there is a 100% participation exemption, which (if the applicable conditions are met) results in all dividends and capital gains arising from a qualifying (non-passive) shareholding being exempt from Dutch CIT. This makes it possible to sell shares in foreign subsidiaries to third parties with no capital gains tax. There are also tax incentives/additional reductions, e.g. loss compensation, group relief, R&D activities, energy investment allowance, financing with hybrid loans, asset protection by use of a foundation and a favorable tax regime for foreign skilled expats (30% of income not taxable).
The Netherlands also has a ready market for Indian investors. Both technology and non-tech companies have a ready market to do business in.
The Netherlands is a forward-looking country. It is an open place to do business in. The infrastructure is very good. So when Indian companies are based in Holland, they can go anywhere from here and it makes it easier for them to do business. The Netherlands is a member of the European Union (EU) so that helps with the internal market. Products and services of Indian companies can travel freely to other EU countries.
Soft factors such as its high standard of living and the fact that most Dutch people speak English also makes the Netherlands attractive to Indian investors.
What is the M&A scenario looking like in 2012?
Well, it is slow, but slow for everyone. Indian companies are aggressive on this count, yet cautious at the same time, primarily owing to the general global climate.
Despite the current economic scenario, there are sectors that continue to witness high interest such as energy, renewable, infrastructure, and pharma, sectors where things that are and will be always needed. Further, given the current buyer’s market in respect of acquisitions, it is a great time and opportunity to pick up good deals.
What is the status of the faith of the investors from Europe in the India story?
Dutch/European investors view India as a huge market and as an important one. But they do wish to also see some stability and certainty in India. Regardless, India will continue to be a big market for European investors, no matter what! The best of India is the world’s best and that is very important. The fact that in India you have such a large educated workforce and a desire to excel, a desire to make things happen, is going to ensure that the faith in India will not be lost.
Manish can be reached at: +31 6 14481198
manishbahl@eversheds.nl &
manishbahl78@gmail.com
Editor’s note: The views expressed in this interview are the personal views of the interviewee and are purely informative in nature. The interviewee does not guarantee the accuracy or currency of the data included in this article and accepts no responsibility for any consequences of their use. The interviewee does not purport to give any legal or other advice.
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