NETHERLANDS Law and Practice Contributed by: Michael Molenaars, Jeroen Smits, Reinout de Boer and Rogier van der Struijk, Stibbe
9.6 Hybrid Instruments and BEPS Implementation
Over the last decade, members of parliament have raised their concerns on a regular basis regarding the attitude of multinational corporations and their sup - posed unwillingness to contribute their fair share. This is, for example, also reflected in the notifications made by the Dutch government for the application of the MLI, which reflect the Dutch position to apply nearly all anti-abuse measures included in the MLI and the negotiation position of the Netherlands in reaching an agreement on the side-by-side package as the Netherlands considered it important to safeguard the original objectives of Pillar Two. 9.4 Competitive Tax Policy Objectives The Netherlands has a competitive tax policy, driven by the fact that the Dutch economy relies for a large part on foreign markets, as the domestic market is relatively small. In a letter from October 2022, the Dutch government set out its (updated) international tax policy. As a starting point, the Dutch government considers it to be important that the Netherlands is not out of line with other countries when it comes to the area of taxation. Therefore, the approach of tax avoidance should be accompanied by (satisfactory) international agreements. At the same time, the Dutch government strives for a stable tax business climate in which tax legislation does not change every few years. When implement - ing new legislation for corporate entities, the Dutch government seeks to find a balance between mitigat - ing the risk of abuse by international taxpayers while avoiding unnecessary hindrance of real corporate activities. 9.5 The Competitive Tax System The Dutch government generally takes a balanced approach to each measure it employs; consideration will therefore be given to the pros and cons of exist - ing practices and their relevance for real business activities, including the accounting and legal services industries. Thus, it is difficult to say which areas are vulnerable to scrutiny, except for structures with low substance and structures that are clearly tax-driven while bearing little or no relevance to the real econ - omy. Dutch law does not restrict state aid in general with a specific rule, except for the state aid rules as laid down in EU law.
The BEPS and ATAD proposals addressing hybrid instruments have been implemented by the Dutch government and as such are included in Dutch tax law and/or Dutch double taxation treaties. 9.7 Interest Deductibility and Territorial Tax Regime The Netherlands has no territorial tax regime. As a starting point, it taxes resident (corporate) taxpayers on their worldwide income, subject to the application of double taxation treaties and unilateral rules for relief for double taxation. It is difficult to make a general prediction as to the impact of the interest limitation rules for Dutch tax - payers, as this is to a large extent fact-driven, while the Netherlands already has a range of interest limita - tion rules. In recent case law of the Dutch Supreme Court, multiple examples can be found in which the deductibility of interest on intra-group loans is denied in acquisition structures. 9.8 Controlled Foreign Corporation Reform A cornerstone of Dutch international policy for dec - ades has been to avoid economic double (including juridical double) taxation within corporate structures, which is why the Netherlands has exempted dividend income received from foreign group companies (under the so-called participation exemption regime). Fur - thermore, the Netherlands has so far been advocating the principle of so-called capital import neutrality, by which a resident state should exempt foreign-sourced income from taxation to allow its corporations to make foreign investments on a level playing field (in terms of taxation). The Netherlands therefore used to be reluctant to let go of its position to exempt foreign income. However, as part of the implementation of ATAD, CFC rules were introduced in the Netherlands on 1 January 2019. See 9.1 Adoption of BEPS Recommendations . 9.9 Anti-Avoidance Rules The Netherlands favours (as reflected in the Dutch notification to Article 7 of the MLI) a principal purpose test as opposed to a limitation on benefits provision,
368 CHAMBERS.COM
Powered by FlippingBook