New tax ruling policy
The Secretary of Finance recently sent a letter to parliament setting out the government’s new tax ruling policy as of 1 July 2019 (key changes summarised below).
These measures should not affect the possibility to obtain rulings for investments in Netherlands targets or investments in multinational groups with a material operational presence in the Netherlands. It may be more difficult to obtain a ruling in the Netherlands in situations where the Netherlands presence of a group is limited to holding and/or financing entities. The main types of tax rulings that will be affected by these new measures are advance pricing agreements on (conduit) financing and royalty activities without a material operational presence in the Netherlands.
For parties applying for a tax ruling, we would recommend to not only discuss the ruling itself with the tax authorities but also the (anonymised) summary that will be published after the ruling is granted, in order to ensure that the summary will not lead to any sensitive information becoming public.
The key changes:
- Economic nexus required: the relevant group will need to have an ‘economic nexus’ with the Netherlands to be able to obtain a tax ruling. ‘Economic nexus’ means that the group needs to have material operational activities in the Netherlands, but there is no further guidance yet on the exact scope of such activities.
- No intention for (non-Netherlands) tax avoidance or reduction: if the main purpose of the applicant is to reduce (withholding or other) taxes within or outside of the Netherlands, the authorities will not provide a ruling.
- Maximum term of 5 years: in exceptional cases this may be extended to 10 years.
- Publication of anonymised summaries: the authorities will publish anonymised summaries of all (cross-border) tax rulings and will publish annual reports on the rulings that have been issued.