NETHERLANDS Law and Practice Contributed by: Michael Molenaars, Jeroen Smits, Reinout de Boer and Rogier van der Struijk, Stibbe
7. Anti-Avoidance Provisions 7.1 Overarching Provisions
9. BEPS 9.1 Adoption of BEPS Recommendations Some of the developments most relevant to Dutch taxpayers that have taken place since the outcomes of the BEPS Project are set out below. Dividend Income Deductibility Following the amendment of the PSD to counter abuse, the Dutch participation exemption regime was amended, as a result of which, broadly speaking, dividend income is no longer exempt from the Dutch corporate income tax base if the dividend is deduct - ible at the level of the entity distributing the dividend. ATAD To adopt ATAD, the Netherlands implemented the earnings stripping rule on 1 January 2019, and also implemented a CFC regime. In addition, as of 1 Janu - ary 2020, the Netherlands implemented ATAD 2 in its domestic legislation containing anti-abuse rules to avoid hybrid mismatches. Furthermore, as of 1 Janu - ary 2025, the Netherlands has also implemented the GAAR into its domestic tax law. Earnings stripping rules The earnings stripping rules of EBITDA were further tightened from 2022 onwards as the deduction of the balance of interest amounts was limited to the high - est of 24.5% (2026) of the adjusted profit or EUR1 million. The Dutch earnings stripping rules are more restrictive than required under ATAD, which prescribes a threshold of 30% or EUR3 million. The Dutch gov - ernment has investigated the implementation of a budget-neutral deduction on equity, accompanied by the tightening of the Dutch earnings stripping rules, in order to achieve a more balanced tax treatment of capital (equity) and debt. The Dutch government con - cluded that the unilateral introduction of a deduction on equity is not desirable in respect of tax avoidance and that it should therefore wait for the multilateral introduction of a deduction on equity. CFC regime Under the Dutch CFC regime, in certain cases, undis - tributed passive income (eg, interest, royalties, divi - dends, capital gains on shares) derived by a CFC will be subject to corporate income tax. A foreign entity
Apart from specific anti-abuse rules, the Dutch Supreme Court has developed the doctrine of abuse of law (fraus legis) as a general anti-abuse rule. Under this rule, transactions can be ignored or recharacter - ised for tax purposes if the transaction is predomi - nantly driven by tax reasons and not driven by com - mercial considerations while the object and purpose of the law are being breached. So far, the Supreme Court has been reluctant to apply the doctrine in cas - es where a tax treaty is applicable. As part of the implementation of ATAD, the legislature did originally state that the doctrine of abuse of law (fraus legis) is very similar to the general anti-abuse rule included in the directive, so that effectively no additional provision has to be included in Dutch law in this respect. However, as part of the Tax Plan 2025 and at the request of the European Commission, the General Anti-Abuse Rule (GAAR) has now been codi - fied into Dutch corporate income tax legislation. The statutory implementation of the GAAR is not intended to effect any material change in the Dutch fraus legis doctrine, nor does it aim to affect any other (Dutch) taxes or the currently existing special anti-abuse pro - visions. The Netherlands has no periodic routine audit cycle. Tax audits are typically carried out at the discretion of the tax authorities, but some companies (eg, those active in the oil and gas industry) are typically audit - ed on a regular basis. Tax audits are extraordinary in the sense that the Dutch tax inspector, upon the filing of the corporate tax return, has the opportunity to scrutinise the filed tax return, raise questions, ask for additional information and, if necessary, make an adjustment upon issuing a final assessment. Provid - ed certain conditions are met, the tax authorities may also impose additional tax assessments on taxpayers. 8. Audit Cycles 8.1 Regular Routine Audit Cycle
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