Netherlands: Trends I Netherlands Moves Away From Fiscal Offshore Industry

The Netherlands is slowly but surely steering away from facilitating the use of its corporate income tax system by companies that are set up merely to obtain tax benefits. These companies, which often do not actually carry out activities in the Netherlands, have contributed to the perception among policy makers – and the public in general – of the Netherlands being a 'quasi-tax haven'. What are the international driving forces behind the policy change that is taking place in the Netherlands and what impact will they have on the Dutch tax system during 2017 and beyond? While the Dutch tax system will continue to benefit businesses that create employment in the Netherlands while also operating internationally, those who are setting up shop in the Netherlands purely for tax purposes will find it increasingly difficult to obtain the benefits that have been commonplace.

For many years, the Netherlands very skilfully managed to perform a successful balancing act in the field of international taxation. It managed to create a corporate income tax system that was able to efficiently raise considerable amounts of revenue from Netherlands-based enterprises, including not only many SMEs that are critical for new employment and are often at the forefront of successful new R&D, but also a surprisingly large number of MNEs that are headquartered in the Netherlands. Simultaneously, the Dutch system allowed – some may say sponsored – the creation of a very successful fiscal offshore industry, resulting in the formation of tens of thousands of 'letterbox companies'.

This dual position also produced some downsides. As an offshore centre, the Netherlands has clearly been surpassed by Luxembourg where until very recently, in the absence of a meaningful domestic enterprise sector, free reign could be given to the needs and desires of the local offshore industry without jeopardising the revenue from Luxembourg groups. At the same time, there are strong indications that the impact of the offshore industry on the reputation of the Netherlands may have weakened the Dutch negotiating position, both when discussing new double taxation agreements and in international tax forums.

Signs indicate that this situation is going to change. Like any political development, changes in official tax policies are not one-dimensional, but there is a strong trend towards a tax policy with a greater focus on the attractiveness of the Netherlands both for new inbound investments of established MNEs and innovative SMEs while simultaneously signalling that the days of the Netherlands as a quasi-tax haven are over. The reasons behind these changes in policy are many, but a key role is played by the altered global perception towards aggressive tax avoidance.

With this in mind, we believe that three tax themes – harmonisation, transparency and anti-abuse measures – will dominate the tax scene in 2017 and beyond. 

Increased transparency appears not only in the form of new rule making, such as country-by-country reporting and the EU and OECD initiatives to exchange information on advance tax rulings, but also in the increasing trend among MNEs to be more transparent about their internal tax policies.

Many of the aggressive tax planning techniques widely used by MNEs have been facilitated by the lack of harmonisation between national tax systems. While commercial accounting rules have been strongly harmonised (IFRS or US GAAP) this development has been largely absent in the tax field, principally because national legislators have been unwilling to yield power in this area. Particularly for smaller countries and economies, this presumed fiscal autonomy in practice merely results in a race to the bottom. As a result of political and social pressures, national governments and law makers now seem more prepared to transfer power in the taxation area than they were in the past. Examples include the agreement on the multilateral convention implementing the treaty-related aspects of the OECD/G20 BEPS project in tax treaties around the world, and the adoption of the Anti-Tax Avoidance Directive in the EU. More harmonisation initiatives are pending; in particular, the CCCTB proposals and the proposals to extend the anti-hybrid mismatch rules adopted in the EU to third country relations.

Anti-abuse measures
Countering abuse has been a key driving force in the move towards more transparency and harmonisation. ATAD I and ATAD II essentially shut down most of the tax planning techniques that had been commonplace over the last several decades, at least in the EU. Avoiding base erosion through interest payments on regular debt instruments and by using hybrid instruments plays a central role in the anti-abuse initiatives. But interestingly, base erosion through royalty payments is not specifically addressed, other than in the area of transfer pricing.

Some of these legislative initiatives are discussed in further detail below.


In July 2016, the EU's Economic and Financial Affairs Council (ECOFIN) reached agreement on the Anti-Tax Avoidance Directive (ATAD I). ATAD I requires EU member states to implement some of the recommendations from the OECD/G20 BEPS project and certain other anti-avoidance measures  in domestic law: (i) interest limitation, (ii) controlled foreign companies (CFCs), (iii) general anti-abuse rule (GAAR), (iv) intra-EU hybrid mismatches and (v) exit taxation. More information on this directive can be found here.

EU member states must implement this directive by 31 December 2018. Although one of the objectives of ATAD I is a coherent implementation of these anti-avoidance measures within the EU, we do not believe that this will be achieved, as ATAD I only sets minimum standards, allowing for more restrictive rules to be laid down, and contains many optional and alternative provisions. Also, the language of ATAD I lacks detail and is very much principle-based, which again leaves room for member states to deviate in their national implementation. A similar effect occurred during the implementation of the amendments to the Parent Subsidiary Directive in 2015.

Impact of ATAD I in the Netherlands

The Dutch government has indicated that it will release an ATAD I implementing bill for internet consultation in the autumn of 2017. The interest limitation rule and the CFC rule are the provisions to look out for in the consultation document. As to the interest limitation rule, the main question is whether some of the anti-base erosion measures presently contained in the Dutch corporate income tax code will also be eliminated or amended when the rule introduced. As to the CFC rule, ATAD I contains two options; the first is an approach that attributes income based on the allocation of assets, functions and risks, while the second is a more classical CFC approach that identifies specific categories of passive income for inclusion in taxable income. There are indications that the Netherlands will opt for the first approach. With respect to other provisions in ATAD I, Dutch tax law is largely compliant already, especially as the use of intra-EU hybrid mismatches has already been addressed by the amendment of the Parent Subsidiary Directive in 2015.


ATAD I does not address hybrid mismatch structures involving third countries and hybrid permanent establishments, as well as certain other hybrid structures. The European Commission published a separate proposal for a directive correcting these omissions in October 2016 (ATAD II). As for ATAD I, the proposed implementation deadline for ATAD II is 31 December 2018. No agreement has been reached on this proposal so far. It will be discussed again at an ECOFIN meeting during the Maltese presidency of the EU in the first half of 2017. This proposal would effectively end many, if not all, of the typical hybrid mismatch structures between companies in different EU member states and between companies in EU member states and companies in third countries.

Impact of ATAD II in the Netherlands

In the Dutch context, ATAD II would put an end to the well-known CV-BV structures, which are currently used by many US multinationals to optimise their non-US operations. The Dutch government has requested a postponement of the implementation date until 31 December 2023 to give the US time to implement tax reform that would end the benefits of hybrid mismatches such as those achieved through the CV-BV structure. The Dutch government has also argued that an earlier implementation would not be appropriate in view of the time needed by US multinationals to adjust their corporate structures. Without a transition period, the Dutch government fears the impact ATAD II may have on jobs created by US multinationals in the Netherlands. In our view, the link between CV-BV structures and the level of employment seems tenuous. Furthermore, a seven-year grandfathering period appears disproportionate to us. Finally, a continued use of these structures may motivate the European Commission to more actively consider possible state aid aspects of these structures.


In October 2016, following an unsuccessful first attempt in 2011, the Commission relaunched the European corporate tax base project by publishing two directives, one for the introduction of a common corporate tax base (CCTB) and one regarding a common consolidated corporate tax base (CCCTB). The CCTB aims to fully harmonise the corporate tax base within the EU and create a limited form of cross-border loss relief. It will be mandatory for large MNEs (those with group revenue exceeding EUR 750 million) and voluntary for other companies. The implementation deadline in the proposal is 31 December 2018. The Commission considers the CCTB only an intermediary step towards the CCCTB. Under the CCCTB, all European group profits are determined on a consolidated basis and allocated among EU member states on a formulary apportionment basis. The proposed implementation deadline for the CCCTB is 31 December 2020. The CCCTB proposals do not aim to harmonise corporate tax rates; like the Commission's other proposals on taxes, these require unanimous agreement in the ECOFIN.

Dutch position on CCCTB

The Dutch government has expressed serious reservations to both proposals, claiming the proposals do not help avoid aggressive corporate tax planning and will lead to very significant administrative costs. While we appreciate the hesitation of the Dutch government, it seems to us that only by introducing a fully harmonised tax system can intra-EU corporate tax avoidance be effectively prevented. Also, although the introduction of a new system will inevitably result in administrative costs, one should not underestimate the benefit to multinationals of no longer having to deal with up to 27 different national tax systems. Finally, transfer pricing disputes within the EU will not be entirely eliminated, but should be substantially reduced in a CCCTB environment. These initiatives have been widely supported by the larger EU economies, which is why we believe there is a good chance that at least the CCTB will be adopted.


Besides initiating legislative action to counter corporate tax planning, the Commission has also applied the EU state aid rules for challenging corporate tax planning structures introduced by individual EU member states in recent years. This has resulted in the EUR 13 billion state aid recovery decision against Apple in Ireland, and in decisions declaring tax rulings with FIAT (Luxembourg) and Starbucks (the Netherlands) to be unlawful state aid. The respective companies and EU member states have submitted or announced appeals against these decisions to the European Court of Justice. It will take a number of years before the ECJ can reach a final decision on these cases. Further investigations into tax rulings issued to McDonald's, Amazon and Engie (all in Luxembourg) are pending, while the Commission is analysing a large number of other tax rulings issued by EU member for possible state aid connections – making it likely that we will see further action from the Commission in this area.

An interesting feature of the Apple case was the Commission's invitation to both source countries and the US to claim taxation rights on part of the relevant profits, accepting that these claims would reduce the amount of illegal state aid granted by Ireland. This is another reason to closely watch local tax authorities' actions. In response, a number of countries, including Spain, Italy and Austria, have already announced they are investigating possibilities to recoup lost tax revenues from Apple. Finally, the Commission has also challenged the Belgian excess profit regime, which is of particular importance to the Netherlands given its similarity with the informal capital rulings obtained by foreign multinationals in the Netherlands.

State aid and the Netherlands

So far, the Commission has not publicly announced further investigations into alleged state tax aid granted by the Netherlands. However, we have reason to believe that the Commission is actively exploring certain Dutch tax rulings. Some experts are already speculating that both the CV-BV structures and informal capital rulings especially may give rise to state aid concerns.


In November 2016, the OECD released the Multilateral Convention (MC). The MC seeks to implement the treaty-related measures of the OECD/G20 BEPS project into existing tax treaties between jurisdictions that are parties to the MC. Close to 100 countries participated in the negotiations. The MC covers a broad range of topics, including measures to avoid treaty shopping, provisions to deny treaty benefits in certain hybrid mismatch arrangements, and a lower threshold for permanent establishment status. The MC will enter into force once it has been signed and ratified by at least five jurisdictions; a signing ceremony is planned for June 2017. The MC will have effect if two parties to a tax convention have both elected for a specific provision of the MC to apply; for example, if Country A and Country B have both elected to implement the principal purpose test into their tax treaties, the tax treaty between country A and B will be supplemented accordingly. If the elections do not match, then no change will generally occur in their bilateral relations.

Impact of MC on Dutch tax treaties

The Dutch government has indicated that it will sign the MC in June 2017 and that it is in favour of all the measures included (except for the savings clause, which is irrelevant in the Dutch tax context). As many tax treaties as possible will be brought within the scope of the MC. As to the prevention of treaty shopping, the Netherlands will elect for the principal purpose test included in the MC to apply to Dutch tax treaties. The Dutch government has not yet indicated what choices it intends to make in connection with the other provisions of the MC. This will be revealed, on a preliminary basis, when the MC is signed in June 2017, and further elaborated after ratification.


The Netherlands levies a 15% withholding tax on dividends distributed by Dutch resident NVs and BVs. No withholding tax is generally levied on distributions made by cooperatives. The absence of withholding tax has led to widespread use of cooperatives in international tax structuring. The Dutch government has announced plans to eliminate this difference in treatment between NVs/BVs and cooperatives. This will be done by introducing a withholding tax obligation for cooperatives in respect of distributions to members holding a 5% or greater membership interest. At the same time, NVs/BVs and cooperatives will be allowed to apply withholding exemption to distributions made to 5% or larger shareholders and members who are resident of a treaty jurisdiction. The exemption will be subject to anti-abuse rules. Distributions to shareholders with interests in NVs below 5%, which includes most shareholders in publicly traded companies, and in BVs will continue to be subject to dividend withholding tax. A bill will be published for consultation in the first half of 2017. The government's intention is for the new rules to become effective on 1 January 2018.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions