Companies engaged in undesirable tax planning can apply for individual support if they satisfy two tax-related conditions concerning business location and transactions.
The Dutch government has said that it will not provide COVID-19 support to companies that engage in “undesirable” tax planning.
The June 19 announcement states: “The government decided today that companies engaged in undesirable tax planning can apply for individual support only if they satisfy two tax-related conditions concerning business location and transactions.”
The two conditions pertain to business location and transactions.
First, companies must not be based in a low-tax jurisdiction, that is, in countries with a corporate tax rate of under nine percent and countries on the EU blacklist. There are currently 24 countries in this category.
Secondly, companies must not make payments to a country where the tax rate is too low. The Dutch establishments of the company seeking assistance must not pay interest or royalties to group entities in low-tax countries or countries on the EU blacklist, the government noted.
The business location condition also applies to subsidiaries and shareholdings and to the direct shareholders of the company seeking assistance. This condition only applies to shareholders owning over 10% of the company’s shares. It does not apply where a company carries out real operations at subsidiaries in low-tax countries, the government noted.
“Since a company that gets into difficulties as a result of the coronavirus crisis may need help fast, it can still obtain support if it agrees to satisfy the conditions within 12 months. The support package will include specific agreements on this,” the government added.
State Secretary for Finance, Hans Vijlbrief, said: “Big companies facing difficulties as a result of the coronavirus crisis are eligible for government support if they make an important contribution to Dutch society. But at a time like this, it would be inappropriate to ask for taxpayers’ money while avoiding paying tax. That’s why individual businesses will have to meet certain conditions.”
The author is Alex Hunter, Editor, TP News. He oversees and updates the publication and also regularly writes news stories about transfer pricing and international tax law. Alex is reachable at editor@transferpricingnews.com