On June 28, 2019, the Dutch State Secretary of Finance published the final decree on the Dutch tax ruling practice pertaining to tax rulings relating to cross-border structures. The decree entered into force on July 1, 2019.
The Dutch tax ruling practice (including Advance Tax Rulings and Advance Pricing Agreements) is one of the attractive features that the Netherlands offers to international investors, as it provides greater certainty with respect to cross-border transactions.
In relation to changes in the international tax landscape, the State Secretary announced an update of the tax ruling practice last year. These updates are covered in the decree and support the Dutch government’s aim to (i) strengthen the tax ruling practice, and (ii) continue to issue meaningful rulings to companies that have the required substance in the Netherlands. In addition, the State Secretary recently announced other initiatives, including the appointment of a committee of experts that will focus on the fair taxation of multinational enterprises.
The updates in the decree are focused on the content of rulings, the ruling application process and transparency. The decree is consistent with the draft decree that was published on April 23, 2019. For more details about these measures, read our previous alerts covering the State Secretary’s announcement to update the Dutch international tax ruling practice by imposing stricter requirements for the issuance of tax rulings and the publication of the draft decree.
The Dutch tax ruling practice has a long and well-established history of being investor-friendly. The Dutch tax authorities generally take a cooperative position with taxpayers and support the idea of giving upfront certainty to taxpayers (e.g. in the form of an ATR or APA). In 2018, almost 90% of the ruling requests resulted in a positive ruling being issued.
The Netherlands is well-known for having a stable, transparent and business-minded government. The implementation of the decree does not signify a change in this investor-friendly approach. The State Secretary has repeatedly noted that it is the aim of the Dutch government to ensure that the Netherlands remains an attractive jurisdiction for investments involving real economic activities. The implementation of the decree supports the Dutch government’s aim to prevent abusive situations where taxpayers use the Netherlands as a so-called conduit jurisdiction for directing funds and assets to tax havens.1
It should be kept in mind that tax rulings are not mandatory, but that they give companies certainty about the taxation of a particular business or transaction under Dutch tax law. However, it should be noted that simply because a taxpayer is not able to obtain a tax ruling after implementation of the decree, it does not mean that the taxpayer’s tax structure/transaction is not consistent with Dutch tax legislation.
1 In this respect reference is made to the State Secretary’s answers to questions raised in the Dutch House of Representatives regarding the impact of the judgements of the European Court of Justice in the so-called "Danish cases" (C-115/16, C-116/16, C-117/16, C-118/16, C-119/16 and C-299/16).
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