NETHERLANDS Law and Practice Contributed by: Jimmie van der Zwaan, Rob Langeveldt, Vasisthà Parmessar and Willem Koeleman, Borgen Tax
3.3 Hierarchy of Methods There is no strict hierarchy of methods in the Neth - erlands. However, if comparable market prices are available, the CUP method may be the most direct and most reliable way of determining the transfer price and may therefore be preferable to the other methods. The CUP method is often applied to determine inter - est rates or commodity prices. Since a CUP is often unavailable due to a lack of sufficiently comparable data, in practice the TNMM is the most frequently used transfer pricing method. 3.4 Ranges and Statistical Measures The DTA recognises that in some cases, an exact transfer price cannot be determined and that transfer pricing is not an exact science. It is common in prac - tice to apply the median of a benchmark of identi - fied comparables for the pricing of transactions. One would only use the lower quartile or upper quartile of the range if economic arguments supported this position. In establishing the range, a distinction must be made between accurate and less accurate comparables. When the comparables possess a high degree of comparability, then the range is composed of all these quantities. When less accurate comparables are used because of a lack of more appropriate ones, it may be necessary to increase the reliability of the compara - bles with the aid of statistical methods. An example is the “interquartile range” approach. Once the range has been established, it is necessary to assess whether the fee for the transaction under review falls within the established range. If the fee falls within the range, no adjustment should be made. If the fee falls outside the range and the taxpayer is unable to explain the deviation with sufficient documentation, an adjustment may be necessary. In the Netherlands, the 25-75 interquartile range is generally accepted. 3.5 Comparability Adjustments The Netherlands requires comparability adjustments if necessary. The Netherlands follows the OECD TP Guidelines and applies the OECD approved methods. In paragraphs 3.47 and following, the comparability
adjustments are discussed. Paragraph 3.50 elabo - rates that comparability adjustments should only be considered if they are expected to increase the reli - ability of the results of a benchmark study.
4. Intangibles 4.1 Notable Rules
According to the state secretary of finance the value of intangible assets can be calculated by determining the arm’s length remuneration for the least complex entities, based on the resale price method, the cost- plus method or the TNMM method. The residual profit should then be divided between the entities perform - ing the entrepreneurial functions, in relation to the IP. Depending on the facts and circumstances, the vari - ous development, enhancement, maintenance, pro - tection and exploitation (DEMPE) functions will have to be weighed in relation to their relative importance. In general, the development and enhancement func - tions will be given greater weight in assessing the rela - tive contributions to the value of the intangible asset concerned. The TP Decree also covers the purchase of shares in an unrelated company followed by a business restruc - turing and the determination of a fee for the use of intangible assets. If the value of the transferred intan - gible assets is determined, the value of the intangible assets for both the seller and buyer should be consid - ered, thus applying the two-sided approach. 4.2 Hard-to-Value Intangibles It is possible that there are large deviations between the actuals after an IP transaction and the five-year forecasts that formed the basis for the price determi - nation at the time of the transaction. In that case, the DTA may retrospectively reassess the transfer price that was determined at the time of the transaction, according to the TP Decree. This can only happen if these deviations (which must be of more than 20%) cannot be explained by new facts and circumstances.
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