NETHERLANDS Law and Practice Contributed by: Jimmie van der Zwaan, Rob Langeveldt, Vasisthà Parmessar and Willem Koeleman, Borgen Tax
Supreme Court 25 November 2011, No 08/05323 The Supreme Court ruled that if the interest rate on a loan between related parties was not determined in accordance with the arm’s length principle, an interest rate that complies with this principle must be used to calculate the taxable profit. If it is not possible to find an interest rate for which a third party would be will - ing to provide the loan under the same conditions and the loan thus de facto becomes a profit-sharing loan, the loan will be labelled non-businesslike (onzakelijk). Such a loan cannot be depreciated for tax purposes. Court of Appeal’s Gravenhage 13 March 2020, No 17/00714, V-N 2020/25.9 The taxpayer operates an entrepreneurial zinc smelter, being part of an international group. In 2010, it was decided to transfer the group headquarters to Swit - zerland, accompanied by a gradual transfer of func - tions amongst which was central procurement. At some point the taxpayer qualified its Dutch activities as toll manufacturing while the tax authorities took the position that more high-value-adding functions were still involved. The Court of Appeal ruled that the profit-split method should be considered an appropri - ate method to determine the compensation for the business restructuring and therefore agreed with addi - tional assessments imposed by the tax authorities. After the decision of the Court of Appeal, partly in favour of the taxpayer, the parties settled on the arm’s length amount for the compensation. Supreme Court 17 April 2025, No 22/01909, V-N 2025/19.5 The taxpayer in this case produces fertilisers and sells the excess production to a group company. The Transfer Pricing issue revolves around the applied cost-plus mark-up applied on the excess produc - tion. The mark-up applied is 5%, which is not in line with the group’s master file that mentions a mark- up of 39%. The Supreme Court follows the Court of Appeal’s judgment that these agreements would not have been reached between third parties and that it is not possible to make the agreements business-like. As such, the agreements constituted sham transac - tions, merely focussed on shifting profits without transferring functions and risks. Against this back - ground, the Supreme Court rules that the mark-up
from the group’s master file should be considered an at arm’s length remuneration.
15. Foreign Payment Restrictions 15.1 Restrictions on Outbound Payments Relating to Uncontrolled Transactions There are no restrictions on outbound payments relat - ed to uncontrolled transactions. 15.2 Restrictions on Outbound Payments Relating to Controlled Transactions There are no restrictions on outbound payments related to controlled transactions. However, as per 2021, Dutch tax law includes a new conditional with - holding tax of 25.8% on intra-group interest, royalty and dividend payments to entities in selected low-tax jurisdictions. 15.3 Effects of Other Countries’ Legal Restrictions There are no specific domestic rules regarding the effects of other countries’ legal restrictions. 16. Transparency and Confidentiality 16.1 Publication of Information on APAs or Transfer Pricing Audit Outcomes A summary will be published for each APA with an international character. This summary will include a brief explanation of the facts and circumstances and – as far as is relevant – of the main conclusions from transfer pricing reports or other documents, an analy - sis of the requested tax ruling based on the relevant laws and regulations, and the conclusion on the basis of which the APA was granted. A summary will also be published when the ruling request did not result in a ruling. The summary will then include an explanation of why the ruling was not concluded. The summary will be anonymised in such a way that it cannot be traced back to an individual taxpayer.
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