NETHERLANDS Law and Practice Contributed by: Friederike Henke, Ingrid Cools, Philip ter Burg, IJsbrand Uljée, Suzan van de Kam and Epke Spijkerman, BUREN
trolled foreign companies (CFC) legislation, exit taxa - tion and the non-resident corporate income tax rules (see 5.2 Taxes Applicable to Businesses ). Furthermore, there are various Dutch dividend with - holding tax rules targeting tax evasion, such as anti- dividend stripping rules and certain other anti-abuse rules (see 5.2 Taxes Applicable to Businesses ). Finally, Dutch tax law includes an unwritten general anti-abuse rule (fraus legis). Some of these anti-eva - sion rules are listed below. Limitation of Interest Deduction Rules – Anti-Tax Base Erosion Rules Under the Dutch anti-tax base erosion rules, the deduction of interest expenses (including currency results and other costs) is limited to related party loans that have been used to finance: • profit distributions or repayments of capital to related parties; • capital contributions to related parties; or • the acquisition of certain share interests. There are, however, exceptions under which the inter - est deduction limitation rule does not apply (eg, if the loan and the transaction are based primarily on busi - ness reasons). CFC Legislation Under the CFC rules, undistributed “tainted” (passive) income derived from subsidiaries or permanent estab - lishments that are tax resident in certain blacklisted jurisdictions (ie, the jurisdictions referred to in 5.2 Taxes Applicable to Businesses under “Conditional Withholding Tax”) is, in principle, annually included in the taxable basis of the Dutch taxpayer (subject to certain conditions). Only interests of 50% in direct or indirect subsidiaries or permanent establishments of Dutch taxpayers together with related companies are targeted. Exit Taxation If Dutch resident corporate taxpayers transfer their tax residencies to other jurisdictions or transfer assets to non-Dutch permanent establishments, the assets and liabilities must be stated at fair market value. Any
gains (ie, hidden reserves, goodwill and/or currency exchange gains) will, in principle, be subject to cor - porate income tax. Under certain conditions, it is pos - sible to apply an extended payment deadline. General Anti-Abuse Rule (Fraus Legis) Under the legal concept of fraus legis, transactions can be eliminated for Dutch tax purposes or replaced by other transactions. Fraus legis can be applied if the Dutch tax authorities prove that the sole or predomi - nant motive for a transaction is tax avoidance, and that the envisaged tax consequences of a transaction conflict with the purposes and rationale of the relevant law. As per 1 January 2025, the General Anti-Abuse Rule (GAAR) from the first EU anti-tax avoidance Directive (ATAD1) has been incorporated into Dutch tax law on request from the European Commission. The interpretation of the GAAR is similar to fraus legis and it is not intended to make any substantial changes to the current legal practice. Anti-Hybrid Rules Dutch tax law includes anti-hybrid rules implementing the amended Anti-Tax Avoidance Directive (ATAD2). These rules include limitation of deduction rules under which hybrid mismatches between “associ - ated enterprises”, head offices and their permanent establishments or between two or more permanent establishments of an entity and mismatches under a so-called “structured arrangement” are neutralised. A hybrid mismatch is generally present if there is a double deduction of costs or a deduction of costs without inclusion of the corresponding benefit. These rules apply for the following hybrid mismatches. • Hybrid entity mismatches – an entity is treated as non-transparent in one jurisdiction and transparent in another jurisdiction. • Hybrid financial instruments – an instrument that includes debt and equity is treated as non- transparent in one jurisdiction and transparent in another jurisdiction. • Hybrid financial transfers – an arrangement to transfer a financial instrument causes a hybrid mismatch. • Imported hybrid mismatches – a hybrid mismatch situation between parties in non-EU jurisdictions is
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