WHY INVEST IN HOLLAND? Personal Income Tax

WHY INVEST IN HOLLAND? Personal Income Tax

Introduction Netherlands Foreign Investment Agency (NFIA) The NFIA (Netherlands Foreign Investment Agency) is an operational unit of the Dutch Ministry of Economic Affairs. The NFIA helps and advises foreign companies on the establishment, rolling out and/or expansion of their international activities in the Netherlands. The NFIA was established more than 35 years ago, and has since then supported thousands of companies from all over the world in the establishment or expansion of their international activities in the Netherlands. Besides its headquarters in The Hague, the NFIA has its own offices in the United Kingdom, Turkey, North America, Asia, the Middle East and Brazil. Additionally, the NFIA works together with Dutch embassies, consulates-general, and other organizations representing the Dutch government abroad, as well as with a broad network of domestic partners. Please be sure to stay in touch with your NFIA representative in order to keep up to date with any changes in the information which may occur over time and to visit your regional NFIA website for the latest news on business and investment opportunities in the Netherlands (all NFIA website addresses can be found on www.nfia.nl). The information contained in these fact sheets has been compiled with great care by the Netherlands Foreign Investment Agency and is accurate to the best of its knowledge at the time of compilation. However, this document is provided for informational purposes only and no rights can be de rive d from it. Com pile d on 23 Apr 20 15.

WHY INVEST IN HOLLAND? Table of contents Personal Income Tax Withholding taxes Income Tax 2015 Deductible items Levy rebates The 30% Tax-free Allowance Part of the income to which the allowance applies Method of calculation Ruling and pension Extra-territorial costs International school fees Relocation expenses/moving allowance Period of validity of the 30% tax-free allowance Conditions for qualifying Changes as of 1 January 2012 Specific expertise Recruited from abroad Wage tax-withholding agent Application procedure Resident or (deemed) non-resident taxpayer status Taxable income Taxable income from work and home Box 1: taxable income from work and home Box 2: Taxable income from substantial interest Box 3: Income from savings and investments Joint income and deductible items Tax Rates 2015 Income tax and national insurance contributions Tax rate for income from substantial interest Tax rate for income from savings and investments Taxation of Savings Income Taxation of Stock Options Options granted after 1 January 2005 Previous regime - options granted before 1 January 2005 1 Taxation at the date of grant or date of vesting Percentages for determining the taxable value: Example Option exercise price does not equal fair market value of the share on the date of taxation Example Capital gains within 3 years after date of grant are also taxed Example 2 Taxation at the moment of exercise Taxation of Non-residents Taxation of excessive remunerations and lucrative stakes Severance payments Pension entitlements Lucrative stakes 1 1 1 1 1 3 3 3 3 3 3 4 4 4 4 4 5 5 5 5 6 6 6 6 6 7 8 8 8 8 9 10 10 10 10 10 11 11 11 11 12 12 13 14 14 14 14

Personal Income Tax Individuals resident in the Netherlands are liable to personal income tax on their worldwide income. Income tax is a tax on an individual's income, which is levied as one sum together with an individual's national social security contributions. Non-residents are also liable to personal income tax on certain elements of income derived from Dutch sources, including income from employment within the Netherlands (subject to the terms of any appropriate double-taxation agreement). A number of companies (partially) pay their employees in the form of stock options or through a bonus scheme. These stock options and bonus payments are subject to income tax. Withholding taxes In general, the wage withholding tax constitutes a prepayment of personal income tax. All employers in the Netherlands, including the (for Dutch wage tax purposes deemed) permanent establishments of foreign employers, are required to withhold this tax from payments to their employees and remit it to the tax collector periodically. The tax is levied on the taxable employment income of non-resident as well as resident employees. The withholding rates are progressive and in principle similar to the personal income tax rates. If the tax withheld exceeds the final amount of personal income tax payable, resident taxpayers may request a refund of the excess tax payments. A request for a refund must be accompanied by a completed tax return. A nonresident is not entitled to a refund, but under some circumstances excess withholding tax is nevertheless reimbursed if a tax return has been filed. An income tax refund will only be paid out if the refund amounts to at least EUR 14. Further, in case a (non) resident individual receives an invitation to file a Dutch income tax return, this individual is obligated to file the return before 1April of the year following the tax year it concerns. There is a possibility to extend the filing deadline. A payable income tax is only payable in case the payable income tax is at least EUR 45. Income T ax 2015 For the income tax, there are three different taxable incomes, each of which falls into a box. Each box has its own tax rate: Box 1: taxable income from work and home (progressive rate up to 52% ) Box 2: taxable income from substantial shareholding (fixed rate of 25% ) Box 3: taxable income from savings and investments (fixed rate of 30% ) Each form of income is taxed in one box only. There can in essence never be double taxation. If the income in one box is negative, this cannot be set off against a positive income in another box. However, it is in general possible to set the negative amount off against a positive income in the same box in past or future years. Deductible items Deductible items directly related to income in one box reduce the income in that box. There are also deductible items that are not directly related to particular income (for example, alimony, medical expenses, and study costs). Together these deductible items are called the personal deduction. This personal deduction can be subtracted from the income in Box 1. If the personal deduction cannot wholly be deducted from the income in Box 1, the remainder will be deducted from the income from savings and investment (Box 3). If there is still a portion of the personal deduction left over, this can then be deducted from the income from substantial interest (Box 2). Interest on debts (a personal loan or consumer credit) is not deductible. However, debts can be deducted from the assets in Box 3. The amount by which the income in Box 3 is calculated will be lower as a result. There is a threshold for debts: the first EUR 3,000 (EUR 6,00 if the taxpayer has a partner during 2015) cannot be deducted from the assets Levy rebates Levy rebates are in effect a discount on the amount of tax to be paid. The levy rebate comprises a general rebate for everyone, together with a number of supplementary rebates, depending on personal circumstances. The general levy rebate for taxpayers up to 65 years (plus 3 months) of age is income dependent and amounts to EUR 2,203 (maximum amount) per year and for taxpayers over 65 (plus 3 months), EUR 1,123 (maximum amount). The general levy rebate may be increased by one or more of the following maximum rebates, provided one meets the corresponding requirements: Up to 65 years (plus 3 months) 65 years (plus 3 months) and older Personal Income Tax Page 1 of 15

Work bonus 1,119 Employment rebate (lower income) 2,220 1,132 Employment rebate (higher income) 184 94 Combination tax rebate (income dependent) 2,152 1,090 Young disabled rebate 715 Old-age tax rebate 1,042 Single old-age tax rebate 433 Levy rebate for early retirement 61 Life course rebate 207 Rebate certain social/cultural/venture capital investments (from exemption box3) 0.7% 0.7% Personal Income Tax Page 2 of 15

The 30% Tax-free Allowance The Netherlands has a special tax regime for expatriates, the so-called 30% ruling, which provides a substantial income-tax exemption (up to 30% ) for a period of up to 96 months. This is viewed as a reimbursement of the extra costs involved in living abroad. In addition, the employer may reimburse certain costs tax free. This includes international school fees, relocation expenses and a moving allowance up to a certain limit. Part of the income to which the allowance applies According to the rules, the employer may grant the employee a tax-free allowance up to a maximum of 30% of his taxable remuneration package. The State Secretary of Finance clarified the term remuneration as 'wage from current employment.' This means that incidental and flexible forms of income such as bonus payments and stock options are also included. Termination and pension payments, however, are excluded. Method of calculation Under the regulation, a split between the taxable and the non-taxable parts has to be made in the employment contract itself. In other words, the 30% tax-free allowance must be granted separately from the employee's salary. For example, if the gross annual salary is EUR 100,000, it is no longer allowed to pay out EUR 30,000 tax-free and subject the remainder to tax. The employment contract must state a salary of EUR 70,000, with an additional taxfree allowance of EUR 30,000. In most cases a standard wording is used to state this in either the employment contract or a separate appendix to the contract. For employees with net salary contracts and irregular payments, it is difficult to determine exactly the non-taxable part of 30% on a monthly basis. It is therefore allowed to determine and pay the exact tax-free reimbursement on a calendar basis. Ruling and pension It is not possible for an employee to build up pension rights under a qualifying plan in the Netherlands (and social security benefits) regarding the tax-free allowance. This has an effect on employees who had a pensionable base equal to their full gross salary. Employees who have been granted the 30% ruling may only build up pension rights on the taxable part of their salary. In case this is unwanted, there is way to avoid this, although some legal formalities and special documents are required to be set-up by the employer. Extra-territorial costs The 30% -ruling is a practical solution for the employer to tax-free reimburse all individual costs linked to the employee's additional higher costs for working in the Netherlands compared to their home country, the so-called extra-territorial costs (instead of keeping all receipts of the actual costs claimed by the employee). In a special Decree by the Dutch State Secretary, a further explanation of which costs, allowances and benefits in kind typically reimbursed or provided to expatriates, qualify as extraterritorial costs and which costs do not qualify. In case an employee who was hired or assigned from abroad to work in the Netherlands and the 30% -ruling was not obtained, it is possible to tax-free reimburse the actual extra-territorial costs to this employee. In case the 30% -ruling was granted to an employee, all extra-territorial costs, reimbursed in addition to the maximum tax-free 30% -allowance, will be taxable and the 30% -ruling can be applied on these costs,. Effectively, only 70% of additionally reimbursed costs are taxable. International school fees Under the 30% ruling, the employee may receive an additional tax-free reimbursement of the fees paid for children to attend an international school. A school is regarded as an international school when: The education is based on a foreign school system, and The school in principle only accepts children of foreign employees. On the other hand, school fees paid personally by the employee are not deductible in the Dutch personal income tax computation. Therefore, from an employee point of view, it is advisable to have the employer reimburse the employee for school fees paid. In case the employer wishes to do this on a cost neutral basis,the salary of the employee can be reduced with the amount of the reimbursement by amending the described remuneration package in the employment contract (e.g. with an appendix to the employment contract). The 30% Tax-free Allowance Page 3 of 15

Relocation expenses/moving allowance The costs of moving as well as the costs related to the transport of the household effects as part of the acceptance of the employment or a secondment within the current employment are not considered extraterritorial costs as a result whereof these costs can - to a certain extent - be reimbursed tax free. The actual removal costs itself can be reimbursed, increased with a maximum amount of EUR 7,750. Period of validity of the 30% tax-f ree allowance The exemption is available for a period of 8 years (96 months). The new rules stipulate that continuously the tax authorities can request the employer to demonstrate that the employee still meets the conditions. In case the employee does not meet the conditions anymore, the 30% -ruling can no longer be used. This will be corrected retro-actively in time (if required). In case the employment in the Netherlands has stopped, the 30% -ruling will stop automatically at the same moment. As such, on any payments made after that moment the 30% -ruling cannot be applied anymore. The duration of any previous stay or previous period of employment in the Netherlands reduces the maximum grant period of 8 years. However, such a reduction of the maximum period will not take place if the expatriate has not (or only very limited periods) stayed or worked in the Netherlands during a 25 years preceding his most recent arrival date in the Netherlands. Conditions f or qualif ying In order to qualify for the 30% ruling, the following conditions must be met: The employer must make a reasonable case that the employee possesses specific expertise that is not available or scarce on the Dutch labour market; The employee (board members and supervisory board members also qualify for the 30% ruling) must be recruited from abroad; The employer must be a Dutch wage tax-withholding agent. If the employee has a Dutch resident employer (Dutch corporation or branch of a foreign corporation) this condition is usually met. If the employee has a foreign based employer which has no taxable presence in the Netherlands, it will be required that the employer has one or more employees working in the Netherlands, carries out payroll administration in the Netherlands, and has registered as a withholding tax agent with the tax inspector. In addition, the employer and employee have added specific wording in the employment contract, under which the 30% ruling, once granted, can actually be implemented (this also implicates that the employee is aware that the 30% ruling reduces his gross salary). Changes as of 1 January 2012 As of 1 January 2012 the qualifying rules for 30% -ruling have changed. The following amendments have taken place regarding this: The maximum grant period of the 30% -ruling is reduced to 8 years (used to be 10 years); Instead of based on one's personal specific expertise (combination of education, experience and specialised skills), the requirement to evidence that an employee has specific expertise will be based on a minimum taxable employment income (salary); Employees living within a 150 kilometres radius form the Dutch border, can no longer apply for the 30% - ruling; University doctorates living in the Netherlands and starting their employment activities in the Netherlands within 1 year after obtaining their PhD are exempt from the general requirement to be assigned/hired from abroad to obtain the 30% -ruling; In case an employee does not fulfill the conditions at a certain moment during the grant period, the 30% -ruling will be no longer available as of that moment. The Dutch tax authorities may find out in a later stage that this was the case and will then retroactively collect the payable wage withholding tax by issuing an additional wage tax assessment. Transitional rules apply to employees with employments started in the Netherlands before 1 January 2012 and who already obtained the 30% -ruling. Specific expertise To evidence that an employee has specific expertise is based on a minimum taxable employment income level. This The 30% Tax-free Allowance Page 4 of 15

level is set at EUR 35,000 (including the tax free 30% allowance this means a minimum gross employment income of EUR 50,000). For masters (MSc) and doctorates (PhD) younger than 30 years, a lower minimum salary level is required: EUR 26,605 (gross EUR 38,007). For scientists and researchers no minimum salary level requirement is applicable. For all employees the general rule remains applicable that their specific expertise is not available or scarce on the Dutch labour market. Recruited from abroad In principle, the employee must be recruited from abroad. An exception to this requirement is made if the employee changes from one domestic employer to another, provided that the employee still meets the other conditions of the ruling in his new employment and that the new employment is accepted within three months after the termination of the old employment. Wage tax-withholding agent In the following situations, there is a Dutch withholding agent for wage-tax purposes: The employee is employed by a Dutch company (e.g. on the payroll of a BV, NV or any other Dutch corporate entity); The employee is employed by a foreign company, that has a (deemed) permanent establishment in the Netherlands; The employee is employed by a foreign company that does not have a (deemed) permanent establishment in the Netherlands, but the Dutch tax inspector considers the foreign employer a wage tax-withholding agent upon notification by the foreign company. In order to make optimal use of the 30% ruling, it is necessary that all the employee's remuneration items taxable in the Netherlands (including items that are paid from abroad, such as bonuses) are taken into account in the Dutch payroll administration. Application procedure The application for the 30% exemption should be filed within four months of the date of the employee's arrival in the Netherlands or start of his Dutch employment activities. If the application is not filed within four months, the 30% ruling becomes effective as of the first day of the month subsequent to the month in which the application has been filed. The request, jointly made by the employee and the appropriate wage tax-withholding agent, must be filed with the tax authorities in Heerlen. Belastingdienst Limburg/kantoor Buitenland Unit A BKB3/30% Postbus 2865, 6401 DJ Heerlen Phone: +31 (0)55 5385385 The State Secretary of Finance allows the 30% tax-free allowance to be applied in the salary administration before the ruling has actually been granted. If the ruling is not granted, no taxation of the allowance will take place if the wage-withholding agent can prove that it still concerns a reimbursement of extraterritorial costs, or if the reimbursement is paid back immediately by the employee. Resident or (deemed) non-resident taxpayer status The Income Tax Act allows the Ministry of Finance to set rules to grant an employee, who is a resident taxpayer of the Netherlands, the right to choose to be treated as a "deemed non-resident" for the entire 8-year period of the ruling for Box 2 and Box 3 taxations. As a consequence, the employee is subject to Dutch tax on specific sources of income and wealth only (e.g. worldwide employment income, Dutch real estate). Under the 30% ruling, the choice to be treated as a deemed non-resident can be made from year to year (i.e. it is possible to elect to be treated as a deemed non-resident in the first year and in the subsequent year as a resident taxpayer). Also, the employee is entitled to personal deductions in Box 1 (such as for mortgage interest and alimony payments) even if the election for deemed non-residency has been made. The guidance on the 30% ruling states that the choice to be treated as a deemed non-resident can be made when filing the annual Dutch income tax return for the tax year in which the employee is requesting deemed nonresident status. The 30% Tax-free Allowance Page 5 of 15

Taxable income There are three different types of taxable income, brought together in three boxes: Box 1: taxable income from work and home; Box 2: taxable income from substantial interest; Box 3: taxable income from savings and investments; T axable income from work and home Wages or salary, pension and social security benefits are types of income that are taxable in box 1. From wages or salary received, the cost of commuting to and from work using public transport can be deducted under certain conditions. Deduction of other employment expenses is no longer possible, not even for a fixed amount (certain costs can however be tax exempt reimbursed by the employer). Profit from an enterprise, earnings from other work and notional rental value for owner-occupiers are also taxed in box 1. Earnings from other work include all income from unsalaried work and income that is not profit from an enterprise. The notional rental value for owner-occupiers is a percentage of the value of one's home, as established by the local authority under the Valuation of Immovable Property Act. The notional rental value for owner-occupiers only applies to the home that is the main residence. Second homes and other immovable property will be taxed under box 3. The interest and costs of a mortgage or other type of loan that is paid for the purchase, maintenance or improvement of a home which functions as main residence are deductible. These costs can be deducted for a maximum period of 30 years. Box 1: taxable income from work and home Income Wages, pension, social security benefit, company car Profits from an enterprise Earnings from other work Negative expenses for income provisions (surrender of life annuities etc) Regular payments (e.g. alimony) Notional rental value for owner occupiers Deductible items Commuting deduction for public transport Deductible items for owner-occupied dwelling Expenses for income provisions in case of future pension shortfall (life annuity premiums) Personal deduction Alimony and other maintenance obligations Medical expenses and other exceptional expenses Weekend expenses for handicapped children Study costs Expenses for protected or listed buildings Remission of loans to starting entrepreneurs (only applicable for loans before 1 January 2011) Deductible donations Box 2: T axable income f rom substantial interest One has a substantial interest if he or she, possibly together with his/her partner from whom one is not permanently separated and some other close relatives, holds at least 5% of a private limited liability company or a public limited liability company. In this situation the income belongs in box 2. Box 3: Income f rom savings and investments Taxable income Page 6 of 15

Assets - the value of holdings minus debts - belong in box 3. Tax is only paid if the assets represent a value of more than EUR 21,330 (for married couples/fiscal partners upon request EUR 42,660 jointly). As of 2012, when having minor children this amount is no longer increased. Debts not incurred for the purchase, maintenance or improvement of a home can be deducted from the assets in box 3. This may include personal loans, continuous credit, or a mortgage that has not been used for the owner-occupied dwelling. Certain holdings are always disregarded. They don't have to be included in the value of the holdings. The most important are: The owner-occupied dwelling and any endowment insurance linked to this; Forests, nature reserves, real estate that is part of an by law appointed rural estate, Things for personal use; Objects of an artistic and scientific nature that are not kept as an investment; Annuity insurance of which the premiums are deductible in box 1; Investments in environmental friendly funds as appointed by Ministerial Decree) up to EUR 56,928 per person (for married couples/fiscal partners upon request EUR 113,856 jointly); Capital derived from a live insurance policy concluded before 14 September 1999 to the amount of EUR 123,428 per person (for married couples/fiscal partners upon request EUR 246,856 jointly); Cash to the amount of EUR 517(for married couples/fiscal partners upon request EUR 1,034 jointly). Joint income and deductible items Partners pay tax individually as far as possible. Therefore, tax is paid on one's own income and one can only use one's own deductible items. However, some income and deductible items are joint. Joint income and deductible items can be divided between the partners based on personal circumstances. Partners can mutually agree who gets taxed for which portion. This applies to: the balance of the notional rental value for owner-occupiers and the deductible items from the owneroccupied dwelling; income from substantial interest; holdings and debts in box 3; the following items that come under the personal deduction: expenses for weekend visits by handicapped children aged 21 years or older; medical expenses and other exceptional expenses; donations educational expenses expenses for protected or listed buildings. Taxable income Page 7 of 15

Tax Rates 2015 The tax rate for income from work and home is a rising scale with four 'brackets'. As a result, relatively more tax is paid as one's income increases. Income tax and national insurance contributions Bracket taxable income from work and home Up to EUR 19,822 EUR 19,822 to EUR 33,589 EUR 19,823 to EUR 33,857 Up to 65 years (plus 3 months*) old 36.5% tax & contributions 42% tax & contributions Income tax and national insurance contributions 65 years (plus 3 months) and older (born in 1946) 18.6% - 35% % tax & contributions 24.10% 40.5% % tax & contributions 33,590 to EUR 57,585 42% tax 42% tax EUR 33,858 to EUR 57,585 65 years (plus 3 month) and older (born before 1 January 1946) 18.6% % tax & contributions 24.10% tax & contributions 42% tax EUR 57,586 or more 52% tax 52% tax 52% tax *In 2014 the retirement age as defined in the Old Age Pension Act (in Dutch: Algemene Ouderdomswet; abbreviated in Dutch: AOW) increases to 65 years and 3 months. The age will further increase in the coming years. Various facilities in the Personal Income Tax Act and other acts will increase with this age as well. T ax rate for income from substantial interest There is a fixed rate of 25% for income from substantial interest. T ax rate for income from savings and investments A standard 4% rate of return on the average value of the assets over the course of the tax year is calculated. The result of this calculation is defined as income from assets. One is charged 30% on this calculated income. The effective tax rate is thus 1.2% over the value of the assets as per 1 January of the representative calendar year. Tax Rates 2015 Page 8 of 15

Taxation of Savings Income The Council Directive 2003/48/EC of 3 June 2003 on taxation of savings income in the form of interest payments has been implemented in Dutch tax law. The Directive came into effect per 1 July 2005. The aim of the Directive is to enable savings income, in the form of interest payments made in one Member State to "beneficial owners" - who are individual residents for tax purposes in another Member State - to be made subject to effective taxation in accordance with the laws of the latter Member State. Thus instead of the levy of withholding tax on interest by the Member State the payments are made from, the income is subject to tax in the Member State the recipient resides. To achieve this, the Directive prescribes an automatic exchange of (banking) information between Member States concerning interest payments to be carried out by paying agents in their territory. The paying agent - defined as an entity established in a Member State that pays interest in the course of its business (e.g. a bank or financial institution) - must report to the competent authority of the Member State where it is established a minimum amount of information, such as the identity and residence of the beneficial owner, the name and address of the paying agent, the account number of the beneficial owner or, when there is none, identification of the debt claim giving rise to the interest, and information concerning the interest payment. The competent authority of the Member State of the paying agent must communicate - at least once per year - the information referred to above to the competent authority of the Member State of residence of the beneficial owner (the recipient of the interest). The savings Directive is extended to certain relevant third countries (like Switzerland) and associated dependent areas (like Aruba and The Netherlands Antilles). Taxation of Savings Income Page 9 of 15

Taxation of Stock Options Under Dutch law granting stock options to employees can trigger a taxable event. At this taxable moment the remuneration is subject to income tax under box 1 (income from employment). As per 1 January 2005, the rules for taxation of employee stock options changed in the sense that employee stock options will only be taxable at the date of exercise. It is no longer possible for employees to choose the moment upon which the stock options will become taxable. These rules apply to employee stock options granted after 1 January 2005 and to options that are still fully conditional on that date. For unconditional options granted before this date - or options that became unconditional before this date - the old regime still applies. Options granted af ter 1 January 2005 Stock options granted after 1 January 2005 will always be taxable at the date such options are exercised or alienated. The taxable gain arising at exercise is the difference between the fair market value of the underlying shares at exercise minus the option exercise price. The Dutch employer - as a withholding tax agent for wage tax purposes - should then calculate wage tax and employee insurance premiums over the actual benefit realised at the moment the options are either exercised or alienated. If the employee had to pay a certain amount for the option, the employer may deduct this amount when calculating the benefit. This regime thus also applies to stock options that are still fully conditional in 1 January 2005. Options that have already been partly taxed in principle remain under the previous regime. From the moment the employee has exercised the stock options, the stocks obtained will be taxed as income from savings and investments. A standard 4% rate of return on the average assets over the course of one year is calculated. The result of this calculation is defined as 'income from assets'. One is charged 30% on this calculated income. The assets will be considered twice every year, on 1 January and 31 December. For corporate income tax purposes the deduction of options granted to employees on own shares is abolished. Options granted prior to 24th of May 2006 in principle continue to fall under the old regime, meaning that the corporate taxpayer will be entitled to claim a deduction for the costs in connection with the option plan. Previous regime - options granted bef ore 1 January 2005 Under the previous regime, employees in the Netherlands could choose between 2 moments upon which the stock options become taxable: 1. taxation at the date of grant or date of vesting 2. taxation at the moment the options are exercised Taxation could be avoided only when the employee elected to defer taxation until the moment of exercise, but the actual exercise of the stock options never took place. The previous regime still applies to unconditional options granted before 1 January 2005 and options that became unconditional per that per that date, if at that moment the employer included the options in the employees' remuneration. An unconditional stock option grant is defined as a grant of an option that is not subject to any conditions precedent to the employee's right to exercise the option, other than the mere passage of time. A conditional stock option is generally any stock option that does not qualify as an unconditional stock option. Most American stock options, for example, are considered conditional stock options due to the requirement that the employee continues to be employed by the employer in order for the employee to vest in the options. 1 Taxation at the date of grant or date of vesting If the employee did not choose to defer taxation until the moment of exercise, unconditional stock options were taxed at the date of grant, i.e. the moment the employee received the stock options, while conditional options were taxed at the date of vesting, i.e. the moment the condition is fulfilled. The taxable value is equal to the possible intrinsic value of the stock options plus the expectancy value. The intrinsic value is equal to the difference between the fair market value at the date of grant/vesting and the option price. The expectancy value depends on the exercise period of the stock options and is determined according to the following table: Percentages for determining the taxable value: Exercise Period Percentage Exercise Period Percentage 1 year 4% 7 years 26% Taxation of Stock Options Page 10 of 15

2 years 8% 8 years 29% 3 years 12% 9 years 32% 4 years 16% 10 years 35% 5 years 20% 15 years 45% 6 years 23% 20 years or more 50% If the stock option has no intrinsic value, the taxable income will equal only the expectancy value. Example Employer (XYZ) grants an unconditional stock option to an employee to acquire 100 shares of XYX stock with an option price of EUR 10, which is also the fair market value of the stock at the date of grant. The exercise period is 5 years and the option is not traded on a securities exchange. The option will be taxed at the date of grant and the income will be 20% of EUR 1,000 = EUR 200, as shown in the above table. Option exercise price does not equal fair market value of the share on the date of taxation If the stock option has an intrinsic value at the date of taxation, the following formula is used to determine the taxable income: TI= P x FMV P = IV + EV; P is at least 4 IV = [(FMV - OP) /FMV x 100]; IV can be negative EV= [(4.5-0.1 x ET) x ET] - [(0.09-0.002 x ET) x IV x ET]; for application of this formula EV is at least nil. TI = taxable income P = percentage (but must be at least 4) FMV = fair market value at the date of taxation IV = intrinsic value at the date of taxation EV= expectancy value OP = option exercise price ET = remaining exercise period on the date of taxation Example Employer XYZ grants an option to its employee to purchase 400 shares of XYZ stock at EUR15, the market price at the date of grant. The employee may exercise 25% of the option at each annual anniversary of the grant date over the next four years (100 shares per year), provided the employee remains employed by the company at each respective vesting date. The options are exercisable within 10 years of the grant date. The stock price of XYZ stock is EUR 20 at the end of year 1. No income is reported at the date of grant. However, the employee must report the intrinsic value of the stock option as income at the first vesting date: (20-15) / 20 x 100 = 25 plus the expectancy value calculated as follows: [(4.5-0.1 x 9) x 9] - [(0.09-0.002 x 9) x 25 x 9] = 32.4-16.2 = 16.2 The total percentage is therefore: 25 + 16 = 41 The taxable income to be reported equals: (100 x 20 x 41% ) = 820 The employer and/or the employee are entitled to challenge the outcome of the formula. If they can prove that the real economic value of the option is lower than appears from the formula, then the lower value may be applied. Capital gains within 3 years after date of grant are also taxed In case of exercising the stock options within 3 years after the grant date, the employee must report a deemed gain from the exercise. The gain is the difference between the fair market value of the underlying share and the option exercise price. The capital gain is considered income from employment. No special capital gains tax rate applies on this amount; the normal progressive income tax rates apply. Taxation of Stock Options Page 11 of 15

The employee will not be taxed twice on the same benefit. The gain realized could be reduced by the amount that was previously taxed. If the stock options are exercised more than 3 years after the grant date, the capital gain will not be taxed as income. Example Employer (XYZ) grants an unconditional stock option to an employee to acquire 100 shares of XYX stock with an option price of EUR 10, which is also the fair market value of the stock at the date of grant. The exercise period is 5 years and the option is not traded on a securities exchange. The employee exercises the option two years after the date of grant, when the stock has a fair market value of EUR 15 per share. Since the exercise occurs within three years of the date of grant, the employee must report a deemed gain from the exercise of EUR 1,500 -EUR 1,000 = EUR 500, reduced by the income reported at the date of grant (EUR 200). The additional taxable income is therefore EUR 500 - EUR 200 = EUR 300. 2 Taxation at the moment of exercise The employee could also elect to defer taxation on the expectancy value as well as the intrinsic value until the exercise of the stock options. This means that no income tax will arise before exercise, provided that the option exercise price is not less than the fair market value of the share at the date of grant. If the exercise price of the option at the grant date is lower than the fair market value of the underlying shares, tax on this value is imposed at the moment the options are vested. The income to be reported at exercise is the difference between the fair market value of the underlying shares at exercise minus the option exercise price. In order to make this election (between taxation at the date of grant/vesting and taxation at exercise), the employer and the electing employee had to make a joint statement to the competent wage tax inspector that the employee has made the election. The election had to be made before the first date of vesting and applies to all future vesting as well. Taxation of Stock Options Page 12 of 15

Taxation of Non-residents Non-resident individuals are subject to personal income tax on income from certain Dutch sources, including income from employment within the Netherlands. Furthermore, non-resident individuals are subject to tax on income from real estate situated in the Netherlands and income derived from substantial shareholdings in a Dutch corporation, provided that the interest exceeds 5% of the shares. In principle non-resident individuals, owning assets in the Netherlands that do not form part of a business or qualify as real property, are in most cases not taxed on interest and dividends received from the Netherlands. A non-resident taxpayer earning taxable Dutch source income can opt for the status of resident taxpayer if this for whatever reason is beneficial. Usually this is done to qualify for personal allowances and deduction of certain expenses that are generally not allowed for non-resident taxpayers (such as mortgage interest deduction regarding owned foreign property being the principal place of residence). Special rules apply to certain categories of taxpayers like for instance sportsmen or artists. In all cases, reference should be made to the double taxation agreement between the Netherlands and the individual's country of residence, as certain agreements deviate from the general rule. Taxation of Non-residents Page 13 of 15

Taxation of excessive remunerations and lucrative stakes The bill, presented in May 2008, relating to the taxation of excessive remuneration payments for top executives which also focuses on the taxation of "lucrative stakes" entered into force as of 1 January 2009. The bill included three concrete measures regarding excessive qualifying severance payment plans and pension plans and carriedinterest payments. Two additional employer's levies are introduced for employees whose salaries exceed EUR 519,000 per annum, which aim to limit severance payments and pension build-up. Severance payments For employees earning over EUR 519,000, an employer's tax, in the form of a deemed final levy of 30%, will be imposed on a fictional calculation of a surplus if the salary (including severance payments) of an employee in the year of dismissal and in the preceding year exceeds the salary of two years before dismissal. Moreover, the employee will be normally taxed on the severance payment (i.e. wage tax levy at the progressive rates up to 52% ). Pension entitlements For employees earning over EUR 519,000, in situations where pension entitlements are still being accrued based on a final salary plan, an employer's tax, in the form of a deemed final levy of 15%, will be imposed on a fixed back service premium.. This additional levy would not become due if other pension schemes are used such as average salary scheme or available premium scheme. Lucrative stakes Lucrative stakes, including carried interest structures are taxed differently as of 1 January 2009. Previously, remunerations paid to private equity managers that would qualify as lucrative shares (including carried interest), were usually qualified as box 3 income being subject to tax at an effective rate of 1.2%. The income would however qualify as box 2 income, subject to tax at a flat rate of 25%, in case the private equity held a substantial interest (owning 5% or more of the shares in the paying company). As of 1 January 2009, the full return generated from lucrative stakes will be taxed as income from other employment (box 1) at the progressive rates (up to 52% ) if the steak is held directly. If the tax payer holds the lucrative steak indirectly - through a company in which he holds a substantial interest - he has the option to elect for taxation against the flat rate of 25% of box 2, provided that at least 95% of the income from the lucrative steak is distributed by the company to the taxpayer in the year of realisation. A lucrative stake is defined as a share, receivable or similar economic rights (e.g. carried interest) granted to a taxpayer with the intention to form a remuneration for services (to be) rendered by that person to the (affiliated) issuing company. It is noted that it is not possible to apply the 30% -ruling on income derived from lucrative stakes. Taxation of excessive remunerations and lucrative stakes Page 14 of 15

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