NYX Nyse Euronext

The plans by Deutsche Boerse AG (DB1.XE) and NYSE Euronext (NYX) to incorporate their combined group in the Netherlands, should their merger be finalized, would make the mega exchange the latest example of a major multinational to settle here, attracted by the country's tolerant tax regime.

Deutsche Boerse and fellow exchange operator NYSE Euronext on Tuesday said they had reached agreement on a deal that will create the world's largest financial-exchange group. Deutsche Boerse shareholders will own about 60% of the company, while NYSE Euronext holders will have the rest.

Although the headquarters will remain in New York and near Frankfurt, the combined entity will be placed under a newly formed holding company that will be registered in the Netherlands, the companies said.

"The new company will generate most of its income in Europe, so it makes sense to incorporate the group here," a person familiar with the matter said.

To use Amsterdam as a legal base is something both boards felt comfortable with, the person added. "The Netherlands has a long history as a home-base for international companies."

The new group will join a string of international corporations, ranging from European Aeronautic Defence & Space Co NV (EADS) and STMicroelectronics NV (STM), that are registered in the Netherlands but who have their headquarters elsewhere.

The companies are partly drawn by the country's attractive tax regime.

While Dutch citizens have one of the highest income taxes in Europe, corporations based in the Low Country get a more favorable treatment. Earlier this year, business services firm KPMG ranked the Netherlands' tax regime as the most attractive in Europe for businesses.

Corporate taxes are among the lowest in Europe, and international companies use their legal home base in the Netherlands to channel financial flows in order to reduce the amount of tax they have to pay in other countries.

Intertrust Group, a company that offers trust services, says the Dutch system offers "ample possibilities of deducting expenses from gross income and a favorable treatment of losses," according to its website.

Moreover, Intertrust hails the "unique Dutch concept" of the "participation exemption," through which benefits such as dividends, capital gains on shareholdings, and profits from a foreign branch are exempt from corporate income tax.

In Germany, Ulrich Hocker, manager-in-chief at Deutsche Schutzvereinigung fuer Wertpapierbesitz, or DSW, a retail shareholder association, cited the proposed exchange group's incorporation plans, saying the fact that the holding company will be registered in the Netherlands "raises questions whether ... taxes in Germany are so high."

The favorable fiscal environment has also attracted wealthy celebrities, ranging from athletes to rock bands like U2 and the Rolling Stones, who have set up holdings which are known as "mailbox companies" in the Netherlands.

-By Maarten van Tartwijk; Dow Jones Newswires; +31 20 571 5201; maarten.vantartwijk@dowjones.com

(Ulrike Dauer in Frankfurt contributed to this article.)

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