DUTCH VOLUNTARY DISCLOSURE SCHEME INCOME TAX

www.taxand.nl DUTCH VOLUNTARY DISCLOSURE SCHEME INCOME TAX Important notice: no penalty imposed until July 1, 2014 On September 2, 2013 a new tax decree on the Dutch voluntary disclosure scheme was issued by State Secretary of Finance, Mr. Frans Weekers. Under this new decree the applicable penalty of 30% is no longer imposed if a tax payer discloses information about unreported foreign assets (i.e. a foreign bank account) before July 1, 2014. This possibly also applies to voluntary disclosures that are submitted before September, 2 2013, but only if the penalty assessment has not been irrevocably imposed. However, even if the penalty assessment is irrevocable,(ex officio) reduction of the penalty might remain possible. This depends on the commitments and clauses that have been agreed with the Tax Authorities in a settlement agreement. Moreover, a Dutch court recently ruled in favour of a tax payer who challenged an imposed penalty assessment on the basis of EU law. From July 1, 2014 until July 1, 2015 a penalty of 30% will be applicable again. As of July 1, 2015 the Dutch voluntary disclosure scheme will be tightened and the penalty of 30% will be doubled to 60% of the tax due. Questions & Answers This document comprises the most common questions and answers regarding the Dutch voluntary disclosure scheme in relation to income tax. Taxand Nederland B.V. Piet Heinkade 133 1019 GM Amsterdam Tel. +31 61.274.43.39 P.O. Box 16886 1001 RJ Amsterdam

QUESTIONS [Click on the questions to go directly to the answers] 1. VOLUNTARY DISCLOSURE IN GENERAL... 3 1.1. Who can benefit from this question & answer document? 3 1.2. What usually happens if the Tax Authorities discover that I have filed an incorrect/incomplete tax return (i.e. if I am 'caught') 4 1.3. What is the statute of limitation for imposing an additional tax assessment? 4 1.4. What is the maximum fine/punsihment that will be imposed if I am 'caught' by the Tax Authorities? 4 1.5. Can additional assessments, interest on tax due and high fines be avoided? 4 1.6. What does the voluntary disclosure scheme entail? 5 1.7. What is the financial impact of voluntary disclosure? 5 1.8. What is the maximum fine that can be imposed under the voluntary disclosure scheme? 5 1.9. Is there a time limit for voluntary disclosure? 6 1.10. How do I apply the voluntary disclosure scheme and what are the conditions? 6 1.11. What information and data are necessary for application of the voluntary disclosure scheme? 6 1.12. What is the Tax Authorities' stance regarding the settlement of a voluntary disclosure request? 7 2. SPECIFIC QUESTIONS REGARDING VOLUNTARY DISCLOSURE... 7 2.1. Can I make an anonymous voluntary disclosure? 7 2.2. Can I make voluntary disclosure alone or must 'accessories' also make disclosure? 7 2.3. Are authorised signatories of account holders also approached or included in the investigation carried out by the Tax Authorities on voluntary disclosure? 8 2.4. If I am 'caught', can I still benefit from voluntary disclosure? 8

2.5. Is there a real chance that I will be caught, despite foreign bank secrecy? 8 2.6. Am I allowed to file a voluntary disclosure if I derived the funds from illegal acitivies? 9 2.7. How are assets allocated to a foreign trust or company (SPF, Stiftung, Anstalt) dealt with? 9 2.8. If funds have been held on a foreign bank account for more than 12 years, is the source of such funds no longer queried? 9 2.9. Must I transfer my foreign assets to the Netherlands after voluntary disclosure? 9 3. ASSISTANCE BY TAXAND NETHERLANDS RE: VOLUNTARY DISCLOSURE PROCESS... 9 3.1. Can Taxand Netherlands assist me if I decide to make voluntary disclosure/apply the voluntary disclosure scheme? 9 3.2. What is the advantage of being assisted by an attorney at law (instead of a tax advisor or accountant)? 10 3.3. What does the assistance provided by Taxand Netherlands entail? 10 3.4. How much time is involved? 10 3.5. Why does Taxand Netherlands not assist anonymous taxpayers who come forward? 10 3.6. Can Taxand Netherlands assist me even if I am 'caught'? 10 3.7. Can I contact Taxand Netherlands without obligation? 11 1. VOLUNTARY DISCLOSURE IN GENERAL 1.1. Who can benefit from this question & answer document? All Dutch tax payers that need information on the consequences and possible solutions ensuing from the filing of an incorrect income tax return because specific income or assets were erroneously or intentionally not declared. For example: an undeclared foreign bank account. In this Q&A document we address mainly situations relating to foreign undeclared assets because this is a 'hot' topic of the Dutch Tax Authorities and the fines imposed in this respect can be substantial. 3/11

1.2. What usually happens if the Tax Authorities discover that I have filed an incorrect/incomplete tax return (i.e. if I am 'caught') If you are caught, in other words, if the Tax Authorities discover that you have filed an incomplete or incorrect return (e.g. by not declaring foreign assets) the Tax Authorities are in principle allowed to impose an additional tax assessment for the amount of the unpaid tax. Interest on tax due (up to 1 January 2013, interest on underpaid tax) must also be paid because of late payment. In addition, high fines can be imposed. If undeclared foreign assets are discovered by the tax Authorities, a much higher fine can be imposed than the fine applicable under the Dutch voluntary disclosure scheme. This higher fine can mount up to 300% of the tax due. Moreover, depending on the situation, you could be prosecuted. 1.3. What is the statute of limitation for imposing an additional tax assessment? The general rule is that there is an additional tax assessment period of 5 years excluding any possible deferment obtained for the filing of a tax return. This means that the Tax Authorities can, in principle, impose an additional tax assessment for income tax due for the past 5 years, excluding any possible deferment obtained. Accordingly, the period can actually be longer than 5 years. There is an exception to the general rule for assets held abroad (profits/return) and equity (shares/bonds). Assessments may be imposed for the past 12 years (excluding any possible deferment obtained) for tax still due on foreign income and foreign assets, provided the Tax Authorities have no knowledge of the existence of assets held abroad. An exception has been made for inheritance tax. There are no time limits (the additional assessment period is thus indefinite) with respect to inheritance tax on foreign undeclared assets. 1.4. What is the maximum fine/punsihment that will be imposed if I am 'caught' by the Tax Authorities? If the Tax Authorities discover that you have filed an incomplete tax return and you have failed to inform the Tax Authorities accordingly: the maximum fine, on discovery of an incomplete return or a return that has not been filed at all (box I and box II) is 100%. Example: if 20,000 is claimed in additional taxes, then the maximum fine is also 20,000; the maximum fine, on discovery of the undeclared assets, such as a foreign bank account (box III) is 300% of the tax still due. For example: if 20,000 is claimed in additional taxes, then the maximum fine is 60,000; you can, in the worst case, be prosecuted. 1.5. Can additional assessments, interest on tax due and high fines be avoided? Additional tax assessments and interest on tax due up to the time the assessment is made cannot be avoided. Additional tax assessments and interest on tax due, depending on the information and data submitted and your negotiating position, can possibly be limited under the voluntary disclosure scheme.

High fines can be limited and in specific instances even avoided under the voluntary disclosure scheme. Our experience is that the Tax Authorities are favourably disposed towards those who make voluntary disclosure and strive to ensure speedy settlement. 1.6. What does the voluntary disclosure scheme entail? The voluntary disclosure scheme means that the Tax Authorities will not impose a fine (on disclosure within 2 years) or a much lower fine (on disclosure after 2 years) if you spontaneously and voluntarily file an income tax return in writing for tax that must still be paid on previously undeclared income or assets (or if you still provide complete information in that respect). On September 2, 2013 a new tax decree on the Dutch voluntary disclosure scheme was issued by State Secretary of Finance, Mr. Frans Weekers. Under this new decree the applicable penalty of 30% is no longer imposed if a tax payer discloses information about unreported foreign assets (i.e. a foreign bank account) before July 1, 2014. We kindly refer to the important notice before. 1.7. What is the financial impact of voluntary disclosure? The costs of voluntary disclosure depend strongly on the amount of undeclared income and assets and the source of such assets. income (salary/profit/results) are taxed at a progressive rate (op to 52%) whilst savings/investments are taxed effectively at a rate of 1.2% (30% tax on a notional return of 4%); there could also be wealth tax and possible other taxes, depending on the source of the income (e.g. inheritance tax can be due if it concerns an unreported inheritance; and interest and fines can be imposed on the total tax due. 1.8. What is the maximum fine that can be imposed under the voluntary disclosure scheme? You will not be fined if you make disclosure within two years after filing the incorrect/incomplete tax return. Should you make disclosure after two years a fine of 30% will be imposed (instead of 100% or 300%) of the income tax still to be paid. An example: if an additional assessment is imposed of 20,000 then the maximum fine is 6,000 (instead of 20,000 or even 60,000). On September 2, 2013 a new tax decree on the Dutch voluntary disclosure scheme was issued by State Secretary of Finance, Mr. Frans Weekers. Under this new decree the applicable penalty of 30% is no longer imposed if a tax payer discloses information about unreported foreign assets (i.e. a foreign bank account) before July 1, 2014. We kindly refer to the important notice before. 5/11

1.9. Is there a time limit for voluntary disclosure? There are two time limits: 1) the time limit within which voluntary disclosure can be made; 2) the time limit whereby no fine is imposed on voluntary disclosure. 1: Voluntary disclosure can only be made before you know or suspect that the Tax Authorities will discover incorrectly filed tax returns and unreported assets. You are in time if: The Inspector has not asked you any questions about your return/undeclared assets; The Inspector has not yet announced that a tax audit will be performed, during which inaccuracies in the tax return(s)/undeclared assets can be discovered; An investigator from the Fiscal Intelligence Service has not informed you that you are being investigated in relation to the tax returns/undeclared assets. If you know or suspect that the Tax Authorities are aware or will become aware of your previous incorrect/incomplete tax returns, you will not be allowed to make voluntary disclosure and you will then, in principle, not be eligible for moderated fines. However, please note that if you cooperate fully anyway, the Tax Authorities in principle is willing to facilitate a smooth settlement and possibly also moderate the fine. 2: If you make disclosure within 2 years, after you have filed the incomplete/incorrect tax return(s), no fine will be imposed. After those 2 years you are liable for a fine of 30%. On September 2, 2013 a new tax decree on the Dutch voluntary disclosure scheme was issued by State Secretary of Finance, Mr. Frans Weekers. Under this new decree the applicable penalty of 30% is no longer imposed if a tax payer discloses information about unreported foreign assets (i.e. a foreign bank account) before July 1, 2014. We kindly refer to the important notice before. 1.10. How do I apply the voluntary disclosure scheme and what are the conditions? You may apply the voluntary disclosure scheme by making a spontaneous and voluntary full declaration of unreported income and assets, or by still providing information, data or pointers in respect of the unreported assets. Spontaneously and voluntarily means that you disclose information before you know or suspect that the Tax Authorities are aware or will become aware of your earlier incorrect/incomplete tax return. You are in time if: The Inspector did not ask you questions about your tax return/undeclared assets; The Inspector has not yet announced that a tax audit will be performed, during which inaccuracies in the tax return(s)/undeclared assets can be discovered; An investigator from the Fiscal Intelligence Service has not informed you that you are being investigated in relation to the tax returns/undeclared assets. 1.11. What information and data are necessary for application of the voluntary disclosure scheme? Information on all unreported income and assets must be provided. Examples of foreign assets are:

foreign bank accounts; investments held abroad; entitlement to the assets in trusts (SPF, Stiftung, Anstalt); foreign immovable property (for example, a holiday house). To apply the voluntary disclosure scheme and file a correct and complete income tax return and subsequently determine the tax due, complete information and data must be provided. In principle, all bank statements of unreported bank accounts/foreign bank accounts, and statements of assets and liabilities for the past 12 years, are required. It is usually difficult to retrieve data that is older than 10 years, certainly when it relates to data from abroad. In our experience, the data relating to the missing 2 years can usually be determined in consultation with the Tax Inspector. Please note: if the correct or requested information is not submitted or submitted incorrectly, the Tax Authorities may impose estimated assessments. The burden of proof is then also reversed and increased. This means that, if you hold the view that the additional assessment is too high, you are obliged to convincingly prove what should be the correct (lower) amount. 1.12. What is the Tax Authorities' stance regarding the settlement of a voluntary disclosure request? In our experience, the stance of the Tax Authorities is to settle the voluntary disclosure request in the most practical manner possible. That is why it is important that all relevant documents are submitted in one overview and that the position taken in respect of deposits, withdrawals, amount of the assets, the source tax to be calculated, other deductions and the income enjoyed (prior to the year 2001), is clear and arguable. The Tax Authorities are, in most cases, prepared to take a pragmatic stance with respect to the missing data. If the factual situation is clear and there is no reason for doubt, the Tax Authorities will usually fill in the details relating to the oldest years according to what is reasonable and fair. 2. SPECIFIC QUESTIONS REGARDING VOLUNTARY DISCLOSURE 2.1. Can I make an anonymous voluntary disclosure? No, that is not possible. Voluntary disclosure requires full disclosure. The Tax Authorities make no arrangements with anonymous taxpayers. This means that you must always provide the Tax Authorities with your name. 2.2. Can I make voluntary disclosure alone or must 'accessories' also make disclosure? Sole voluntary disclosure is permissible. The voluntary disclosure scheme is personal. However, we always advise 'accessories' to make a voluntary disclosure at the same 7/11

time. This means that others (family members/accessories), cannot benefit from your voluntary disclosure if they do not disclose information about their unreported assets at the same time, while you are obliged to make full disclosure. For example: an heir of a foreign bank account decides to make voluntary disclosure. The heir has a brother who is co-heir of the foreign bank account. If the heir decides to make a voluntary disclosure, he must make full disclosure. This means that in principle he is obliged to provide the Tax Authorities with his brother's name. From the time that the Tax Authorities are aware of the brother's name, the brother might not be able to apply for the voluntary disclosure scheme, unless the brother and the heir made simultaneous voluntary disclosure. As soon as the Tax Authorities become aware of the brother's existence, there is a very real chance that a tax audit will be performed by Tax Authorities and, consequently, also a real chance that additional assessments and high fines will be imposed. If you decide to make voluntary disclosure we advise you to inform others accordingly (family members/accessories) and advise to declare the unreported assets at the same time. 2.3. Are authorised signatories of account holders also approached or included in the investigation carried out by the Tax Authorities on voluntary disclosure? Full disclosure is required on voluntary disclosure. The Tax Authorities will check the facts presented in relation to credibility and plausibility. Further investigation into the account holders is then, in principle, not necessary. 2.4. If I am 'caught', can I still benefit from voluntary disclosure? No, if you are caught, you are not longer allowed to invoke the voluntary disclosure scheme. It might, in some cases, be possible to limit the fine. This depends, among other things, on how you cooperate with the investigation carried out by the Tax Authorities. 2.5. Is there a real chance that I will be caught, despite foreign bank secrecy? Yes. In our experience, the possibilities for the Tax Authorities to discover foreign undeclared assets is ever-increasing. The hunt for hidden assets is a worldwide trend. More and more, the tax authorities from various countries are combining forces to track down undeclared assets. This cooperation is strengthened by regulations laid down in tax treaties and European Directives governing the provision of information but also by agreements specifically addressing the exchange of tax information (the so-called TIEA's). The new law on the exchange of information within the EU took effect on 1 January 2013. The new law has also considerably widened the investigative powers of the Dutch Tax Authorities. The current far-reaching international cooperation makes it almost impossible to maintain bank secrecy. Moreover, investigation and the combating of fraud is one of the Tax Authorities priorities in these difficult economic times.

2.6. Am I allowed to file a voluntary disclosure if I derived the funds from illegal acitivies? Yes, you may. The voluntary disclosure scheme also applies in this respect. You must, however, bear in mind that there could be a question of a criminal offence, such as: infringement of the Opium Act; tax fraud; forgery of documents; money laundering etc. with respect to funds that can possibly be traced back to illegal activities The Tax Authorities will not, on the basis of the voluntary disclosure scheme, report tax fraud to Public Prosecution Service. They will, however, inform the Public Prosecutor of other possible (criminal) offences. 2.7. How are assets allocated to a foreign trust or company (SPF, Stiftung, Anstalt) dealt with? This depends on how the Netherlands qualify the trust or company. And this is precisely one of the biggest bottlenecks. The Dutch Tax Authorities do not automatically assume a foreign qualification. With effect from 1 January 2010 assets placed in a trust are always imputed to the contributor. The position as far as companies are concerned is vague. If the company is deemed transparent, this implies that the ultimate beneficiaries of the assets are included in the taxation. If the company is deemed non-transparent, taxation at the level of the trust or the company is possible. An assessment of the company is required to determine the exact tax consequences. 2.8. If funds have been held on a foreign bank account for more than 12 years, is the source of such funds no longer queried? No. The Tax Authorities can also request information or data on the events occurring outside the recovery period (additional assessment) of 12 years. For instance, to gain insight into past affairs, such as an estate divided among the heirs. 2.9. Must I transfer my foreign assets to the Netherlands after voluntary disclosure? No, that is not necessary. Your may still hold your assets on your foreign bank account after the voluntary disclosure. However, you will be obliged to declare your assets in all tax returns filed after the voluntary disclosure. 3. ASSISTANCE BY TAXAND Netherlands RE: VOLUNTARY DISCLOSURE PROCESS 3.1. Can Taxand Netherlands assist me if I decide to make voluntary disclosure/apply the voluntary disclosure scheme? Yes, gladly. The tax lawyers of Taxand Netherlands have extensive experience in assisting taxpayers who wish to invoke the voluntary disclosure scheme. To make optimum use of the voluntary disclosure scheme it is important that disclosure is done with due care. We will assist you throughout the whole process. Please contact us for more information without any obligation. 9/11

3.2. What is the advantage of being assisted by an attorney at law (instead of a tax advisor or accountant)? Attorneys at law are bound by a duty of confidentiality which means that we keep your affairs confidential. This applies to the introductory meeting and the whole voluntary disclosure process. This is not the case for tax advisors and accountants. Tax advisors have a duty to report under the Money Laundering and Terrorist Financing (Prevention) Act when assisting on a voluntary disclosure process (this does not include the introductory meeting). Attorneys at law, on the other hand, are explicitly bound to secrecy by a ruling given by the Disciplinary Appeals Tribunal and by invoking their lawyer-client privilege. Taxand Netherlands employes tax advisors as well as attorneys at law. 3.3. What does the assistance provided by Taxand Netherlands entail? After the introductory meeting we will assist you throughout the voluntary disclosure process. We will collate the necessary documentation, make a tax calculation and negotiate with the Tax Authorities. If you are an entrepreneur, our assistance will ensure that your business will continue to operate uninterruptedly. If you are a private individual, you can rest easy in the knowledge that your foreign assets will be declared properly so that you are able to dispose of them as you wish after voluntary disclosure has taken place. 3.4. How much time is involved? The length of the voluntary disclosure process depends on the specific situation. The most straightforward situation can be settled within 2 months while more complex situations can take up to one year. How information and data is submitted to the Tax Authorities can affect the duration of the voluntary disclosure process. If the information is provided quickly, completely and clearly, this could shorten the time involved considerably. 3.5. Why does Taxand Netherlands not assist anonymous taxpayers who come forward? We do not assist anonymous taxpayers who come forward because voluntary disclosure requires full disclosure. The Tax Authorities make no arrangements with anonymous taxpayers. This means that the Tax Authorities will not consult with us if we do not give them your name in advance. We will instead receive a standard letter from the Tax Authorities explaining the voluntary disclosure scheme and requesting that your name be made known. 3.6. Can Taxand Netherlands assist me even if I am 'caught'? Yes, we can. As attorneys at law / tax advisors we can assist you if you have not used the voluntary disclosure scheme and the Tax Authorities discover that your tax return was incorrectly filed (for example because the Tax Authorities discovered your hidden assets).

In addition to our knowledge of substantive tax law, we are skilled in tax and criminal proceedings. This means that you will have the best possible defence and we will properly coordinate any possible proceedings ensuing from discovery. 3.7. Can I contact Taxand Netherlands without obligation? Yes. For more information without any obligation, please contact: Frans Duynstee (frans.duynstee@taxand.nl / +31 65.588.46.82) or Abdelmajid Ettafahi (abdelmajid.ettafahi@taxand.nl / +31 61.274.43.39. Taxand Netherlands Piet Heinkade 133 P.O. Box 16886, 1001 RJ Amsterdam, The Netherlands I: www.taxand.nl 11/11