NETHERLANDS Law and Practice Contributed by: Michael Molenaars, Jeroen Smits, Reinout de Boer and Rogier van der Struijk, Stibbe
qualifies as a CFC if the Dutch taxpayer directly, or together with related companies, has an interest of more than 50%, provided that the entity is a tax resi - dent in a low-tax jurisdiction (statutory rate of less than 9%) or a state included on the EU list of non-co- operative jurisdictions. Undistributed passive income derived by a CFC that is a tax resident of a jurisdiction mentioned on the list can be excluded from Dutch taxation if: (i) the CFC’s income usually consists of 70% or more non-passive income; (ii) the CFC quali - fies as a financial undertaking; or (iii) the CFC carries out meaningful economic activity. A list of substance elements has been published to determine whether a CFC carries out a meaningful economic activity. If all of the substance elements are met, the meaning - ful economic activity test is deemed to be satisfied unless the Dutch tax inspector can prove that this is not the case. See 6.6 The Substance of Non-Local Affiliates . GAAR The Netherlands initially opted not to incorporate the GAAR into the Dutch Corporate Income Tax Act, as the Dutch State Secretary for Finance considered the GAAR to be sufficiently embedded in Dutch tax law through the fraus legis doctrine. However, at the request of the European Commission, the Nether - lands formally codified the GAAR into Dutch corporate income tax legislation, effective as of 1 January 2025. MLI The Netherlands has signed and ratified the MLI that includes the BEPS measures that require amend - ment of (Dutch) bilateral double taxation treaties. The Netherlands has taken the position that all material provisions of the MLI should be included in the Dutch double taxation treaties, except for the so-called sav - ings clause included in Article 11 of the MLI. As such, a general anti-abuse provision (in most cases, the so- called principal purpose test) should likely be included in many Dutch double taxation treaties, as well as a range of specific anti-abuse rules. Transfer Pricing Anti-Mismatch Rules As of 1 January 2022, the Netherlands implemented so-called transfer pricing anti-mismatch rules that in short aim to avoid situations in which there is a deduc - tion (eg, in a foreign jurisdiction) without an inclusion
of income in the Netherlands, or contrarily, a deduc - tion of income on the Netherlands without a “pick-up” of income in the foreign jurisdiction. Country-by-Country Reporting and Exchange of Information A law has been enacted to meet the obligations of the Netherlands in respect of country-by-country report - ing (BEPS Action 13). A law has been enacted to meet the obligations of the Netherlands in respect of the automatic exchange of rulings. Furthermore, the Dutch innovation box regime has been amended to align it with BEPS Action 5 (countering harmful tax practices). Interest and/or Royalty Conduits, and Withholding Tax Applies on Royalties, Interest and Dividends Further enhancement of the substance requirements for interest and/or royalty conduit companies has been introduced, due to which, information is automatically exchanged with the respective foreign tax authorities in the case of interest and/or royalty conduit compa - nies not meeting these enhanced substance require - ments (eg, a minimum of EUR100,000 salary expens - es and the availability of a properly equipped office space for at least 24 months). As from 1 January 2021, a conditional withholding tax applies on royalties, interest and (as of 1 January 2024) dividends paid to group companies in low-tax jurisdictions, to hybrid entities or in certain abusive situations. Safe Harbours, Economic Nexus, Permanent Establishments and Opknippen The minimum substance requirements no longer func - tion as a safe harbour. The Dutch practice regarding international tax rulings was revised on 1 July 2019. To obtain an international tax ruling from the Dutch tax authorities, among other things, a sufficient “economic nexus” with the Neth - erlands is required. The national definition of a PE has been brought in line with the 2017 OECD Model Tax Convention (which reflects the BEPS outcomes).
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