In an attempt to stem the outflow of Dutch investment institutions to other countries and to boost the Netherlands' image for new funds, the Dutch Ministry of Finance has announced a legislative proposal introducing a new exempt tax regime for investment funds. The bill also aims to relax the requirements for the existing tax facilities for investment institutions. This move is part of a larger scheme by the Dutch government to improve the Dutch tax climate for foreign investors, including the abolishment of the Dutch capital duty as per 1 January 2006, the proposed overhaul of the Corporate Income Tax Act and a proposed reduction of the dividend withholding tax rate to 15%. The main features of the new tax regime for investment funds include a full exemption from corporate income tax, as well as an exemption from dividend withholding tax on profit distributions. This article considers the merits of the proposed legislation and its possibilities in promoting the Netherlands as an attractive locale for investment institutions.