On 27 March 2017, the Netherlands released a document concerning the Dutch tax ruling practice under the Freedom of Information Act. I made this request to the Dutch Ministry of Finance in January of this year.
The term ‘ruling’ is generally used in cases where prior certainty is provided on the levy of corporation tax in the form of Advance Pricing Agreements (APAs) and Advance Tax Rulings (ATRs). The document, which was prepared by civil servants of the Ministry of Finance in January 2015, describes the most common forms of APAs and ATRs.
Crucially, the document requests the Undersecretary for Finance for confirmation that the Dutch tax authorities should continue to issue APAs and ATRs. This is against the backdrop of the ongoing debate on international tax planning.
The note covers APAs and ATRs on intermediate holding companies (‘letterbox companies’), the tax position of non-resident taxpayers, the qualification of hybrid financial instruments and hybrid entities, CV/BV structures, informal capital, principal-agent structures, financing and royalty-activities, attribution of profit to a permanent establishment and re-invoicing. All of the above are used by multinationals for tax planning purposes, though it should be noted that some of these points have been rendered moot following the introduction of new EU anti-abuse measures.
It is the first time that a document is published that provides a comprehensive overview of the Dutch ruling policy. However the document raises two important questions:
- Which forms of rulings remain largely unaffected by the BEPS proposals?
- Should the Dutch tax authorities continue to issue these rulings bearing in mind that the main purpose of the BEPS project is countering tax avoidance?