UK and International Tax news
Netherlands Competent Authority Agreement On Closed FGRs
Wednesday 22nd September 2010
The UK and the Netherlands have reached a mutual agreement regarding the application of the Convention between the two countries for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to taxes on income and on capital gains and the related Protocol signed on 26 September 2008 to investors in closed funds for mutual account “fonds voor gemene rekening” (closed FGRs).
The Agreement applies to closed FGRs formed in conformity with the Decree of 11 January 2007, CPP2006/1870M, Dutch. Gov. Gaz. No 15, 2007.
A closed FGR can act as a pooled investment vehicle for the assets of pension funds and other investors and the closed FGR invests these assets on behalf of those investors.
The competent authorities of the Netherlands and the United Kingdom have agreed that a closed FGR is fiscally transparent. All income and gains derived by the fund from the fund assets are allocated to the investors in the closed FGR in proportion to their participations in the fund.
A closed FGR established in the Netherlands which receives income arising in the UK may itself, represented by its fund manager or its depository, in lieu of and instead of the investors in the closed FGR, claim the benefits of an agreement for the avoidance of double taxation to which the UK is a party and which is applicable to those investors on behalf of those investors in the closed FGR.
Such claims may be subject to enquiry and, where requested, a fund manager or depository shall provide relevant information which may include a schedule of investors and allocated income relevant to a claim.
A closed FGR may not make a claim for benefits on behalf of any investor in the closed FGR if the investor has itself made a claim for benefits in respect of the same income. If a closed FGR intends to make a claim for benefits on behalf of an investor, the fund manager or its depositary should clearly communicate this to the investor to avoid duplicate claims in respect of the same income.
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