NETHERLANDS Law and Practice Contributed by: Michael Molenaars, Jeroen Smits, Reinout de Boer and Rogier van der Struijk, Stibbe
most double taxation treaties and elaborated on in the OECD’s Transfer Pricing Guidelines, as amended under BEPS. Therefore, transactions between affiliat - ed companies should be at arm’s length, while proper documentation should be available to substantiate the arm’s length nature of the transactions. 4.5 Challenges to Related-Party Limited Risk Distribution Arrangements Where a remuneration is based on a certain (limited risk) profile, the Dutch tax authorities scrutinise wheth - er the services and risks of that company do indeed match the remuneration. For example, if a limited-risk distributor has, in fact, a stock risk, the remuneration should be increased to reflect coverage of that risk. 4.6 Local Transfer Pricing Rules and OECD Standards The Netherlands generally follows the OECD’s Trans - fer Pricing Guidelines. 4.7 Transfer Pricing Disputes and Mutual Agreement Procedures International transfer pricing disputes are, in some cases, resolved through a MAP process. At the begin - ning of 2024, there were 747 MAPs outstanding, 198 of which were international transfer pricing disputes. In 2024, 377 MAPs were closed, 109 of which were international transfer pricing disputes. There is no data with respect to international transfer pricing disputes being resolved through double taxation treaties. The view of the State Secretary for Finance is that double taxation resulting from transfer pricing adjust - ments is an outcome that is not desired. Therefore, the taxpayer may file a request to start a MAP with the competent authority if the taxpayer expects that double taxation will take place due to (proposed) transfer pricing adjustments. The request should, in principle, be filed within three years after the tax - payer has knowledge about the (proposed) transfer pricing adjustment and should contain the required information (eg, information about the taxpayer, the relevant tax periods, the other state(s) involved, etc). If the request is accepted, the competent authority consults with the competent authority of the other rel - evant state. The taxpayer will receive updates from the
Dutch competent authority regarding its status. The Netherlands aims to initiate a MAP at an early stage. In practice, the Dutch tax authorities perform audits during which the transfer pricing methodology applied by a Dutch company is also reviewed for many years. 5. Taxation of Non-Local Corporations 5.1 Compensating Adjustments Generally speaking, if a transfer pricing claim is set - tled, the Dutch tax authorities act in accordance with the settlement. Hence, if a downward adjustment of the Dutch income has been agreed, it will in principle be allowed. However, since 1 January 2022, legisla - tion has been in force targeting mismatches resulting from the application of the arm’s length principle. The legislation aims to render the arm’s length principle ineffective in cross-border situations and will, in that respect, deny the deduction of arm’s length expenses, to the extent that the corresponding income is not included in the basis of a local profit tax at the level of the recipient. 5.2 Local Branches and Local Subsidiaries Local branches (permanent establishments (PEs) in fiscal terms) are generally taxed on the basis of the same rules and principles as subsidiaries of non-local corporations. However, due to the fundamental dif - ference between a PE and a legal entity, in practice, differences may occur. 5.3 Capital Gains of Non-Residents Dutch tax law includes so-called substantial share - holding rules that enable taxation of capital gains on shareholdings realised by non-residents of the Neth - erlands in the case of abuse. Based on the current domestic tax rules, capital gains are taxable if a share - holder holds an interest of at least 5% of the capital in a Dutch BV with its main purpose, or one of its main purposes, being to avoid personal income tax. In this case, the structure should be considered arti - ficial, having not been created for legitimate business reasons that reflect economic reality. In a case where the shareholder is resident in a coun - try with which the Netherlands has concluded a dou -
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