By Jian-Cheng Ku (Legal Director, DLA Piper Nederland N.V.) and Jeroen Swart, (Tax Adviser, DLA Piper Nederland N.V.)
On February 18, 2018, the Dutch State Secretary of Finance announced that it will revise the Dutch tax ruling practice in light of results from a review conducted to examine if Dutch tax rulings met Dutch procedural requirements. Over 4,000 Dutch tax rulings were reviewed.
Current practice and review
A tax ruling provides Dutch taxpayers with the opportunity to obtain advance certainty on the tax consequences of proposed legal transactions. Taxpayers and the tax authorities are able to avoid potential disputes through tax rulings, which provide upfront assurance. The Dutch tax ruling practice is considered an important pillar of the Dutch business climate.
The Dutch tax authorities reviewed 4,462 Dutch tax rulings with international elements to determine if the rulings met Dutch procedural requirements. Most of the rulings were decided by the Dutch APA/ATR-team, a department specialized in tax rulings. The Dutch tax authorities concluded that almost all rulings issued by the Dutch APA/ATR-team met the procedural requirements. For rulings not issued by the Dutch APA/ATR-team, the Dutch tax authorities concluded that 72 of these do not meet the procedural requirements. Five of these rulings are (potentially) incorrect.
Revision of the Dutch tax ruling practice
The outcome of the review, together with European guidelines on issuing tax rulings and Dutch policy choices, has led to the decision to revise the current Dutch tax ruling practice. The State Secretary of Finance has also decided to further centralize the coordination for the issuance of all Dutch tax rulings with international elements. This should streamline the process of issuing rulings, ensuring better quality and consistency.
The Government remains in favour of providing advance certainty and settling disputes between taxpayers and the Dutch tax authorities upfront. Companies conducting commercial activities in the Netherlands should, therefore, not be adversely affected by the decision. However, in light of the OECD’s base erosion and profit shifting project, the State Secretary of Finance will not issue Dutch tax rulings to companies that do not have sufficient (economic) substance in the Netherlands. Accordingly, an extension of the Dutch substance requirements is also under consideration.
The Dutch State Secretary of Finance intends to revise the Dutch tax ruling practice by January 1, 2019.