Hi,
No, if Germany takes Holland it gets only the 2 IPC for Holland (IPC’s are lost to the bank), the DEI immediately taken over by FEC. But only the Income, not the troops. So the dutch infantry on the DEI can only defend. The dutch navy is, like all Dutch countries allied with UK (incl. Canada, South Africa, Anzac, FEC) and France since the beginnig of the game. Is not really historical accurate, I know.
So Japan is forced to attack the Dutch DEI or Germany gets a problem with Holland home Guard.