In the last two weeks, two major advertising firms, Omnicom from the United States and Publicis from France, merged to become the largest advertising company in the world. Where is their head office located? The Netherlands.

This newly formed giant followed the merged Italian Fiat Industrial and American tractor manufacturer CNH Global, who also set up their head office in the Netherlands. Prior to that, a further five large multinationals have recently elected to have Dutch headquarters.

Why the Netherlands?

According to De Brauw Blackstone Westbroek, the law firm responsible for supervising the Omnicom/Publicis merger, there are valid business, political and legal reasons to set up headquarters here. Primarily, however, it is that the Netherlands is seen as neutral territory.

"Suppose a German and a French company merged," said Paul Cronheim, a partner in the law firm. "If the If the parent company is in Germany, the French might come to perceive that the Germans have become the boss. And vice versa. That might make a country like the Netherlands and attractive option to set up in."

He also said that Dutch corporate law is very flexible when structuring governance models, which offers companies many opportunities in how they choose to set up their company.

Who benefits?

Although companies may have their head office here, that doesn’t mean they employ very many people in the Netherlands itself, or pay a considerable amount of tax. Many multinationals actually use the Netherlands as a tax haven.

For some multinationals, however, even Dutch taxes are too high. Chemicals company LyondellBasell recently moved their tax office out of their Rotterdam head office to London, in order to switch to paying British taxes. Now, LyondellBasell currently employs only five people in the Netherlands.

The argument goes, however, that having international companies in the Netherlands is still good advertising for the Netherlands. Just the presence of multinational companies can mean more opportunities to create activities that could provide more jobs in the Netherlands.

As it is, there is still a whole service industry of lawyers, tax consultants and accountants needed to service these headquarters: LyondellBasell alone paid 2,3 million dollars to accounting firm PwC in 2012.

The Ministry of Finance, however, is fairly straightforward on the matter. "The importance of the establishment of this type of "top holding" company is difficult to say without further definition," said a spokesman. "It is important to know which features [of the company] are moving to the Netherlands; only that can ensure that the Netherlands is able to tax more."

The overall expectation is that these recent moves are the beginning of trend which will see more multinationals setting up their business in the Netherlands. Whether that is good news for those parts of the economy beyond the legal and accounting fields is yet to be seen.

Source: Financieele Dagblad