NETHERLANDS Law and Practice Contributed by: Jimmie van der Zwaan, Rob Langeveldt, Vasisthà Parmessar and Willem Koeleman, Borgen Tax
In decree Stcrt No 2015/47457, further guidance was provided with regard to the contents of transfer pric - ing documentation. This concerns the contents of the master file, local file and the CbCR. The requirements are applicable for fiscal years starting 1 January 2016 onwards. With these documentation requirements, the Netherlands implemented the outcome of Action Plan 13 of the OECD BEPS project commissioned by the G20. In 2023, a decree on rulings with an international char - acter was published. This decree, among other things, ensures that in situations where there is a so-called tri - angular case in a bilateral or multilateral APA, a critical assumption can be included that takes into account transfer pricing adjustments from countries that are not involved in the bilateral or multilateral APA. Furthermore, a decree concerning MAPs published in 2020 includes the adoption of a minimum international standard for dispute resolution in Action Plan 14 of the OECD BEPS project. The latest Dutch TP Decree (Stcrt No 2022, 16685) was published on 1 July 2022. The most significant adjustments in the decree are Section 2 on govern - ment support measures, Section 6 on intragroup services, and Section 9 on financial transactions. Furthermore, there are some textual changes in the terminology in order to align with the OECD TP Guide - lines and Dutch law and regulation. There is also an updated decree regarding Article 8bd of the DCITA, which provides further guidance on this article with regard to practical matters. Lastly, the Netherlands has implemented Pillar 2 leg - islation and acknowledged the implementation of Pil - lar One legislation. See 9.4 Impact of BEPS 2.0 for further discussion. Transfer Pricing Mismatches Legislation As of 1 January 2022, new legislation in the Nether - lands addresses transfer pricing mismatches through Articles 8ba, 8bb, 8bc, 8bd, and 35 of the DCITA. This legislation is aimed at eliminating transfer pricing mismatches that result from differences in the foreign
application of the arm’s length principle, which can lead to double non-taxation. Previously, the Netherlands applied the arm’s length principle under Article 8b of the DCITA. The foreign treatment of transactions was generally irrelevant to Dutch tax positions, although, since mid-2019, it has not been possible to obtain tax rulings when inter - national mismatches lead to tax benefits. However, these limitations on rulings did not affect positions declared in corporate income tax returns without a ruling. The amended Articles mean that it is no longer pos - sible to deduct additional costs or to incur additional depreciation on an asset in the Netherlands if the actual commercial price was different (lower in the case of depreciation or costs incurred, and higher in the case of income) and the tax adjustment is not fol - lowed in the involved foreign jurisdiction; ie, there is no pick-up. The transfer pricing mismatches legislation, therefore applies where a tax to commercial difference is considered that exists because of a different foreign application of the arm’s length principle in a transac - tion. The legislation targets, among other things, so- called informal capital or deemed dividend structures. Examples Two main examples are summarised below. • A Dutch company obtains a loan from a foreign- affiliated company with an agreed interest rate of 0%. An arm’s length interest rate would be 5%. Based on previous Dutch legislation (or the DCITA) the arm’s length interest rate should be deducted for tax purposes. With the current legislation, the possibility of deduction depends on whether the foreign legislation requires a corresponding adjust - ment; ie, including the arm’s length interest of 5% as taxable income. If this is not the case, the 5% interest may no longer be deducted in the Nether - lands. Conversely, this also applies to loans from a Dutch company to a foreign affiliate – where the arm’s length interest is higher than the commercial interest charged, the foreign affiliate will be able to deduct the arm’s length interest for tax purposes. • A Dutch company acquires an asset (eg, an intan - gible asset) for a price of 75, while an arm’s length
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